WASHINGTON — The Treasury Department and the Internal Revenue Service today issued Notice 2023-20PDF, which provides interim guidance for insurance companies and certain other taxpayers for the new corporate alternative minimum tax (CAMT) until the issuance of proposed regulations.

The Inflation Reduction Act of 2022 created the CAMT, which imposes a 15% minimum tax on the adjusted financial statement income of large corporations for taxable years beginning in 2023. Large corporations, including insurance companies, with average annual adjusted financial statement income exceeding $1 billion are the taxpayers generally affected by the CAMT. The Treasury Department and the IRS have issued Notice 2023-20 to provide certainty to insurance companies and certain other taxpayers.

In particular, Notice 2023-20 provides interim guidance for the determination of adjusted financial statement income as it relates to (1) variable contracts and similar contracts, (2) funds withheld reinsurance and modified coinsurance agreements, and (3) the basis of certain assets held by certain previously tax-exempt entities that received a “fresh start” basis adjustment.

Notice 2023-20 also solicits comments on the rules contained in the notice and certain other issues under consideration. The Treasury Department and the IRS recommend that such comments be submitted by April 3, 2023.

More information may be found on the Inflation Reduction Act of 2022 page.

Source: IRS-2023-30, Feb. 17, 2023

WASHINGTON — The Treasury Department and Internal Revenue Service today issued Notice 2023-13, which contains a proposed revenue procedure that would establish the Service Industry Tip Compliance Agreement (SITCA) program, a voluntary tip reporting program between the IRS and employers in various service industries. The IRS is issuing this guidance in proposed form to provide an opportunity for public comment.

The proposed SITCA program is designed to take advantage of advancements in point-of-sale, time and attendance systems, and electronic payment settlement methods to improve tip reporting compliance. The proposed program would also decrease taxpayer and IRS administrative burdens and provide more transparency and certainty to taxpayers. The proposed program includes several features:

• The monitoring of employer compliance based on actual annual tip revenue and charge tip data from an employer’s point-of-sale system, and allowance for adjustments in tipping practices from year to year.
• Participating employers demonstrate compliance with the program requirements by submitting an annual report after the close of the calendar year, which reduces the need for compliance reviews by the IRS.
• Participating employers receive protection from liability under the rules that define tips as part of an employee’s pay for calendar years in which they remain compliant with program requirements.
• Participating employers have flexibility to implement employee tip reporting policies that are best suited for their employees and their business model in accordance with the section of the tax law that requires employees to report tips to their employers.

The intent of the SITCA program is to serve as the sole tip reporting compliance program for employers in various service industries and would replace the following programs:

• Tip Rate Determination Agreement (TRDA)
• Tip Reporting Alternative Commitment (TRAC)
• Employer designed TRAC (EmTRAC)

The IRS is continuing to explore opportunities within the gaming industry and, as such, this program does not impact the existing Gaming Industry Tip Compliance Agreement (GITCA) program.

The proposed revenue procedure provides that for employers with any of these existing agreements, such agreements would remain in effect until the earlier of:

1. The employer’s acceptance into the SITCA program;
2. An IRS determination that the employer is noncompliant with the terms of their TRDA, TRAC or EmTRAC agreement; or
3. The end of the first full calendar year after the final revenue procedure is published in the Internal Revenue Bulletin.

Anyone interested in providing feedback to the proposed SITCA program should follow the instructions in the notice and reply by May 7, 2023.

Source: IRS-2023-19, Feb. 6, 2023