Page 44 - JoFA_2022

TAX MATTERS

Top 10 countries for
to its author, Nikole C. Flax, the LB&I
commissioner. “Taxpayers have told us U.S.-source income
throughout the pandemic that com-
(Billions)
munication by telephone is not always
adequate or productive,” Flax wrote. United Kingdom .................................. $154.5
The memo and news release state Japan ........................................................ $107.9
that a secure videoconference will be
Canada .................................................... $ 81.2
arranged for all LB&I taxpayers request-
France ...................................................... $ 77.6
ing one. The memo prescribes approved
videoconference platforms, which include Switzerland ............................................ $ 69.0
WebEx and Zoom for Government Luxembourg .......................................... $ 59.3
All LB&I taxpayers may (with Microsoft Teams to be phased in
videoconference with later), and related protocols for privacy China ........................................................ $ 46.1

the IRS and authentication. Ireland...................................................... $ 44.5
The LB&I Division handles domestic
Germany ................................................. $ 37.1
Pandemic-inspired method and foreign businesses with a U.S. tax Netherlands ........................................... $ 32.9
for examinations and appeals obligation that have assets of $10 million
meetings is extended. or more. It also administers the IRS’s Source: IRS Tax Statistics, Form 1042-S, Foreign
Global High Wealth and International Person’s U.S. Source Income Subject to Withholding,
tax year 2018.
All large business taxpayers and their Individual Compliance programs.
representatives may meet with IRS ■ Memo LB&I-04-0821-0011; IRS
officials by videoconference upon request, News Release IR-2021-204
the Service told its employees in the The notice requests public comments
Large Business and International (LB&I) — By Paul Bonner, a JofA senior editor. on these standards as well as eleven
Division in a memo. specific issues relating to tax-exempt
The memo, LB&I-04-0821-0011, status for LLCs, to help Treasury and
dated Sept. 3, was effective Oct. 18, when How LLCs may obtain the IRS decide whether further guidance
tax-exempt recognition
it was publicly released along with IRS is needed concerning the requirements
News Release IR-2021-204 outlining that an LLC must satisfy to be exempt
the change. Notice does not affect the status of from taxation.
The IRS generally suspended all already recognized organizations. No previous formal guidance has
in-person taxpayer examination and been issued addressing the standards for
appeals meetings in 2020 because of The IRS issued Notice 2021-56 to clarify recognition of LLCs as Sec. 501(c)(3)
the COVID-19 pandemic. Until then, the standards that a limited liability organizations. Relevant IRS regulations
taxpayers meeting with the LB&I company (LLC) must satisfy to receive a do not specifically address LLCs because
Division generally were able to do so determination letter recognizing it as tax- they were issued in 1959, prior to the
only in person or by telephone. During exempt under Sec. 501(c)(3). Generally, enactment of the first LLC statute in the
the pandemic, videoconferences were all the members of an LLC seeking tax- United States, the notice notes.
allowed for some LB&I taxpayers “who exempt status will have to be tax-exempt Notice 2021-56 does not affect the
sought more than meeting with an IRS organizations themselves or governmental status of organizations currently recog-
employee over telephone calls,” the news units. The LLC will also have to include nized as tax-exempt under Sec. 501(c)(3).
release stated. specific language in its articles of organi-
Videoconferences had been allowed zation and operating agreement. Requirements LLCs must satisfy
for some other taxpayers as well, such as In Notice 2021-56, the IRS says it will
by the Independent Office of Appeals, issue a favorable determination letter
which had been offering that option to an LLC that submits Form 1023,
in some cases since launching a pilot Application for Recognition of Exemption
program in 2017. Under Section 501(c)(3) of the Internal
According to the LB&I memo, “[t]he Revenue Code, after Oct. 21, only if — in
duration of the pandemic and uncertain addition to the general requirements
outlook regarding the immediate future” under Sec. 501(c)(3) — the LLC satisfies
promoted allowing videoconferences for the requirements that are set forth in
the division’s taxpayer meetings, according the notice.

42 | Journal of Accountancy January 2022