Tax Byte

Happy Friday, tax pros. Once again, we’re wrapping up the week by getting some of the most noteworthy tax-related developments on your radar in case, you know, you missed it.

March 31: Clean Vehicle Credit guidance – critical mineral and battery component requirements. The IRS has issued much anticipated proposed regulations (REG-120080-22) related to certain requirements that must be met for critical minerals and battery components for the new clean vehicle credit under the Inflation Reduction Act (IRA).

As the IRS notes in IR-2023-64:

• The critical mineral and battery component requirements will apply to vehicles placed in service on or after April 18, 2023, the day after the Notice of Proposed Rulemaking is issued in the Federal Register.
• New clean vehicles placed in service on or after April 18, 2023, are subject to the critical mineral and battery component requirements even if the vehicle was ordered or purchased before April 18, 2023. A vehicle’s eligibility for the new clean vehicle credit is generally based on the rules that apply as of the date a vehicle is placed in service, meaning the date the taxpayer takes delivery of the vehicle.
• Thus, a vehicle may or may not be eligible depending on whether it meets the critical mineral and battery component requirements.

Accordingly, the IRS has updated the Frequently Asked Questions (FAQs) for the clean vehicle credits related to new, previously owned and qualified commercial clean vehicles.

March 29: No basis step-up for assets of an irrevocable grantor trust not included in grantor’s estate. The IRS has issued Revenue Ruling 2023-02, which confirms the IRS’s determination that Section 1014 does not apply to “step-up” the basis of assets gifted to an irrevocable grantor trust by completed gift when such assets are not included in the gross estate of the owner of the trust for Federal estate tax purposes. Thus, even though the grantor trust’s owner is liable for Federal income tax on the trust’s income, the assets of the grantor trust are not considered as acquired or passed from a decedent by bequest, devise, inheritance, or otherwise within the meaning of section 1014(b), and therefore section 1014(a) does not apply. Ya win some, ya lose some.

March 28: Mississippi disaster relief – various tax filing and payment deadlines extended. The IRS announced this week that taxpayers in Mississippi affected by severe weather on March 24 and 25, 2023, now have until July 31, 2023, to file various individual and business tax returns and make tax payments. The current list of eligible localities is available on the Tax Relief in Disaster Situations page.

This tax relief includes and applies to:

• 2022 individual income tax returns and various business returns due on April 18.
• Eligible taxpayers will now have until July 31 to make 2022 contributions to their IRAs and health savings accounts.
• Additionally, the July 31 deadline also applies to the quarterly estimated tax payments, normally due on April 18 and June 15.
• The July 31 deadline also applies to the quarterly payroll and excise tax returns normally due on April 30, 2023.