IRS Section 50(d) Regulations
July 25, 2016On July 22, 2016 the Internal Revenue Service (IRS) published in the Federal Register a Temporary Regulation dealing with so-called Section 50(d) income generated by the Master Tenant legal structure. The Regulation is called “Income Inclusion When Lessee Treated as Having Acquired Investment Credit Property” and can be found here.
The Regulation does three things:
1.) Determines that 50(d) income is a partner, not a partnership tax liability.
2.) Prohibits a partnership basis increase for an investor taking the 50(d) income.
3.) Allows the election of acceleration of the income to the partner if the partner exits the partnership outside the five-year compliance period. In the alternative, an investor can choose to report the income over the remaining depreciation recovery period, even if it has exited the partnership after the compliance period.
The new Regulation will go in effect for projects placed in service on or after September 19, 2016.
The Historic Tax Credit Coalition asked the IRS for this guidance in December of 2014 and clarified its comments in January of 2015. Representatives of the Coalition met with the IRS in August of 2015 to discuss the guidance and the Coalition has hosted many conferences and calls to discuss issues surrounding the guidance and to inform the IRS.
The Coalition will continue a dialog with the IRS and industry representatives in the coming weeks and months over the Regulation and other issues facing the industry. The IRS has invited comments on the Temporary Regulation over the next 90 days. The Coalition is evaluating what comments it may submit.
Category: Regulations / IRS Guidance
IRS Section 50(d) Regulations
July 25, 2016On July 22, 2016 the Internal Revenue Service (IRS) published in the Federal Register a Temporary Regulation dealing with so-called Section 50(d) income generated by the Master Tenant legal structure. The Regulation is called “Income Inclusion When Lessee Treated as Having Acquired Investment Credit Property” and can be found here.
The Regulation does three things:
1.) Determines that 50(d) income is a partner, not a partnership tax liability.
2.) Prohibits a partnership basis increase for an investor taking the 50(d) income.
3.) Allows the election of acceleration of the income to the partner if the partner exits the partnership outside the five-year compliance period. In the alternative, an investor can choose to report the income over the remaining depreciation recovery period, even if it has exited the partnership after the compliance period.
The new Regulation will go in effect for projects placed in service on or after September 19, 2016.
The Historic Tax Credit Coalition asked the IRS for this guidance in December of 2014 and clarified its comments in January of 2015. Representatives of the Coalition met with the IRS in August of 2015 to discuss the guidance and the Coalition has hosted many conferences and calls to discuss issues surrounding the guidance and to inform the IRS.
The Coalition will continue a dialog with the IRS and industry representatives in the coming weeks and months over the Regulation and other issues facing the industry. The IRS has invited comments on the Temporary Regulation over the next 90 days. The Coalition is evaluating what comments it may submit.
Category: Regulations / IRS Guidance