The U.S. Treasury Department and IRS on November 8, 2018, released the 2018-2019 priority guidance plan containing guidance projects that will be the focus of efforts during the 12-month period from July 1, 2018, through June 30, 2019 (the plan year).
The priority guidance plan [PDF 123 KB] has several insurance-specific items:
Implementation of the new U.S. tax law (the “Tax Cuts and Jobs Act” (TCJA))
Insurance companies and products
Part 3 of the plan describes certain projects that have been identified as “burden reducing.”
International – Subpart F/Deferral
The focus over the next year will continue to be the implementation of the new U.S. tax law (Pub. L. No. 115-97 or the TCJA). This priority guidance plan more than doubles the number of TCJA projects overall.
Guidance under section 101 and section 1016 and new section 6050Y regarding reportable policy sales of life insurance contracts remains on the list under the implementation initiatives of the TCJA. These provisions add to the insurer’s reporting responsibilities by requiring it to identify and report seller information to the IRS.
Final regulations providing guidance regarding the discount rate and unpaid loss and salvage discount factors for years beginning in 2018 will also be welcome, as companies are currently considering how to approach their year-end processes absent specific guidance.
The IRS released an advance version of Rev. Proc. 2018-54 as guidance for taxpayers that hold investments in one or more segregated asset accounts on which variable contracts are based. The guidance and rules allow taxpayers to elect to treat certain mortgage-backed securities as having deemed issuers for purposes of the diversification requirements under section 817(h). This revenue procedure aims to create a smooth transition for taxpayers purchasing securities under the "Single Security Initiative." This guidance minimizes the risk of inadvertent noncompliance with the diversification requirement due to the reduced ability of purchasers to identify Uniform Mortgage Backed Securities issuers prior to transaction settlement.
It is also not surprising that guidance under section 954(i) is still anticipated. Several private letter rulings have been released in the past year.** These rulings approved the utilization of foreign statement reserves as the basis for determining foreign personal holding company income.
* The IRS issued proposed regulations (REG-108214-15) for the exception from passive income for certain foreign insurance sompanies on April 24, 2015.
** See PLR 201637005 (June 8, 2016); PLR 201718020 (Feb. 9, 2017); PLR 201739009 (June 30, 2017)
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