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From the Hill: April 3, 2024

Tax relief legislation remains stalled with Congress in the second half of its two-week recess.
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Here’s a look at recent tax-related happenings on the Hill, including the status of tax relief legislation while Congress is in recess.

Lately on the Hill

Any visible progress on the Tax Relief for American Families and Workers Act of 2024 (Act) has stalled as Congress is in the second half of its two-week recess. Bloomberg Tax reports that before the recess began, Senate Finance Committee Chair Ron Wyden (D-OR) “predicted a grassroots campaign [during the recess] to build support for the bill.” However, any external reporting on such negotiations occurring remains to be seen.

Before the break, Senate Majority Leader Chuck Schumer (D-NY) began the process for a cloture motion–limiting debate and eliminating the filibuster–in an effort to get a final vote on the bill. If Schumer files a motion for cloture, it could mean that the Act has the support of 60 senators—possibly made up of all 48 Democrats, three independents, and at least nine Republicans willing to break from a majority of their party.

If the Act cannot pass on its own through cloture or otherwise, the Act may be attached to the Federal Aviation Administration Reauthorization Act due May 10, 2024. This is widely seen as the last flight out for its passage before the November elections when it could then be revisited during the “lame duck” session.

Noteworthy Decisions

The Tax Court changes course, holding the extinguishment provisions of the conservation easement regulations as procedurally invalid. Valley Park Ranch, LLC v. Commissioner, T.C., No. 12384-20, March 28, 2024.

Valley Park Ranch, LLC (Valley) claimed a $14.8 million charitable deduction by the donation of a conservation easement under Section 170(h). The commissioner disallowed the deduction, taking issue with the easement deed, which provided how proceeds received by Valley would be determined if the easement were terminated or extinguished by a court or by eminent domain. The commissioner contended that the deed’s extinguishment provision did not comply with the requirements under §1.170A-14(g)(6)(ii). Valley argued that the deed did satisfy the requirements of the code section and related regulations, and that the regulations violated the Administrative Procedure Act (APA).

The APA prescribes the procedures to rulemaking by the IRS. In general, the agency must give a notice of proposed rulemaking and provide a period for public comment. Any “significant comments” that can be considered to “challenge the fundamental premise” of the rules must be considered and responded to by the agency. The final regulations must include a statement of the rule’s “basis and purpose” containing the agency’s reasoning behind the rules.

The court sided with Valley, providing a very consequential ruling that several significant comments regarding the extinguishment provision of the regulations were not properly addressed in the final regulations, rendering them invalid. Notably, the ruling reverses course from the court’s holding in Oakbrook Land Holdings, LLC v. Commissioner, T.C., No. 5444-13, May 12, 2020, where the court upheld the extinguishment provision of the regulations. The court will no longer follow the Oakbrook decision.

The Supreme Court hears arguments concerning whether life insurance proceeds received by a company should be included for estate valuation purposes. Connelly v. United States, No. 23-146.

The Supreme Court heard oral arguments in the case of Thomas Connelly, the executor of his brother Michael Connelly’s estate. The matter to be decided is whether proceeds received by a corporation from a life insurance policy held on a shareholder should be offset by the obligation to redeem the deceased shareholder’s stock for purposes of valuing the estate. The Eighth Circuit previously held that the life insurance proceeds should be included in the value of the estate, not reduced by the redemption obligation.

Connelly, as the executor and sole remaining shareholder of the company, values the company at $3.86 million at the time of his brother’s passing. The government disagrees with the valuation because it does not include $3 million of life insurance proceeds received by the company, valuing the company at $6.86 million. Connelly reasons that the life insurance proceeds should be offset by the liability the company has to redeem the deceased brother’s shares, resulting in a net $0 inclusion to the valuation.

The attorney for Connelly argued, “The Internal Revenue Code and Treasury regulations provide that where the parties agree on the price to redeem a shareholder’s stock, that price will establish the value of the stock for purposes of the estate tax in certain circumstances. But where, as here, those circumstances have not been met, the value of the stock is determined by the price at which such stock would change hands between a hypothetical willing buyer and willing seller. Here, a hypothetical buyer would not treat the life insurance proceeds as increasing the value of the stock because that asset is offset by the contractual obligation to redeem shares, a preexisting corporate liability.”

Attorneys for the government countered, “A redemption obligation is not a corporate debt that reduces the corporation’s net worth or the value of the shares to be redeemed. A debt owed to creditors reduces corporate and shareholder value. A redemption obligation divides the corporate pie among existing shareholders without changing the value of their interests.”

In its rebuttal, the estate pointed out that if the valuation were to include the insurance proceeds, the redemption price of the deceased brother’s 77% ownership would be more than $5 million, far exceeding the amount of proceeds received by the insurance. “[I]n order to engage in a redemption at fair market value, the company would have to do something it would never do. [The company] would have to use some of is operating assets in order to redeem the shares.” Adding, “where most of the assets are literally bricks and mortar inventory, that is something that is completely counterfactual and would never take place in the real world.”

Other Important Developments

IRS Technical Guidance

  • Final Regulations T.D. 9990 has been issued establishing rules amending the definition of short-term, limited-duration insurance under the Public Health Service Act. In addition, it provides rules concerning the requirements for hospital or other fixed indemnity insurance as an excepted benefit in group and individual health insurance markets.
  • Proposed Regulations REG-123376-22 would amend regulations relating to the disclosure of specified return information to the Bureau of the Census.
  • Notice 2024-32 provides guidance on the eligibility of borrowers through State Supplemental Loan programs and loan size limitations under §144(b). Furthermore, guidance is provided on whether an issue of state or local bonds proceeds used to finance or refinance qualified student loans or qualified mortgage loans is a refunding issue.


  • The IRS began its annual release of the “Dirty Dozen,” a listing of common scams taxpayers may encounter. So far, the list includes:
    • IR-2024-87 warns taxpayers against scammers offering assistance setting up an online account on Taxpayers should set up their own accounts and be wary of any “helpful” third parties requesting personal information to set up the account.
    • IR-2024-85 alerts taxpayers of aggressive promoters of the Employee Retention Credit who assist in filing illegitimate claims. The IRS provides seven warning signs to watch out for, as well as the withdrawal process if taxpayers filed a questionable claim.
    • IR-2024-84 concerns phishing and smishing scams designed to steal taxpayer information. The IRS warns against email and text campaigns that pose as legitimate organizations, including the IRS, and request sensitive personal data from unsuspecting taxpayers.
  • Announcement 2024-16 provides the Advanced Pricing and Mutual Agreement (APMA) 2023 report. The Secretary of the Treasury is required annually to publicly report on advance pricing agreements and the APMA Program. The report includes information on the structure, composition, and operation of the APMA Program; statistical data; and general descriptions of the types of transactions covered, transfer pricing models used, and completion time.
  • IR-2024-82 announces further relief for individuals and businesses affected by wildfires in Maui and Hawaii counties. These taxpayers have until August 7, 2024 to file tax returns and make tax payments. The previous deadline was February 15, 2024. The relief also applies to extensions, although any extension filed between April 15 and August 7 will have to be paper filed.
  • The IRS is requesting comments concerning reporting and record-keeping requirements for excise taxes for manufacturers of sporting goods and firearms for regulations under T.D. 8043. Comments are due May 28, 2024.
  • The IRS is requesting comments on regulations under T.D. 8383 that govern disclosure of tax return information for the purposes of conducting quality or peer reviews and disclosures necessary because of the tax return preparer’s death or incapacity. Comments are due May 28, 2024.
  • The Pension Benefit Guaranty Corporation has released the variable rate premium for payment years beginning in March 2024. The interest rates are used to value vested benefits for variable rate premium purposes.

Continued Coverage of the Inflation Reduction Act (IRA)

  • Revenue Procedure 2024-19 has been released by the IRS describing the process to apply for an allocation of environmental justice solar and wind capacity limitation under the §48(e) low-income communities bonus credit program. This guidance supersedes Rev. Proc. 2023-27.

This newsletter features developing content that is subject to change at any time. It does not constitute legal or tax advice. Consult your professional advisors prior to acting on the information set forth herein.

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