On May 5, Michele Weiss, principal at Holtz, Slavett & Drabkin, will be speaking on a panel at the ABA Tax Section’s annual May meeting.  The panel will be presenting to the ABA Tax Section’s Closely Held Business Committee and will be discussing current hot topics impacting closely held businesses.

Michele will present IRS updates for syndicated conservation easements and micro-captive insurance companies.  More specifically, Michele will discuss I.R.C. § 170(h)(7) which was added to the Internal Revenue Code as part of the Secure 2.0 Act.  Section 170(h)(7) limits taxpayers’ charitable contribution claims that result from their investments in syndicated conservation easements.  Further, Michele will discuss the IRS’ recently proposed regulations to classify certain types of micro-captive insurance arrangements as listed transactions for tax reporting purposes.

Michele will also examine the Tax Court’s decision in Farhy v. Comissioner, 160 T.C. 6 (2023). This case strikes a blow at the IRS’ stepped-up efforts to enforce foreign information reporting penalties against taxpayers.  In this critical decision, the Tax Court determined that the IRS lacked the statutory authority to assess penalty charges for the petitioner’s failure to timely file IRS Form 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations.  The IRS directly charges and assesses these penalties.  The Internal Revenue Code does not provide an opportunity for taxpayers to contest these penalties through Tax Court deficiency procedures.  The holding in Farhy could also apply to penalty charges for taxpayer information reporting failures for IRS Forms 5472, 8938, 8858, 926, and 3520 (with respect to foreign gifts only and not foreign trust reporting).

Have you invested in syndicated conservation easements or micro-captive insurance arrangements? If so, you may want to consult with a tax attorney to determine how to minimize your exposure with respect to these types of transactions.

Did the IRS assess any foreign information reporting penalties against you?  If so, you may be entitled to have those penalties abated or you may be eligible for a refund of amounts paid to the IRS for penalty charges for foreign information reporting failures.

Contact Michele Weiss, principal at Holtz, Slavett & Drabkin to discuss your situation.

Michele is a former IRS Counsel attorney and former Director, Tax Controversy Services, KPMG.  She has extensive experience in representing clients before the IRS and state and local taxing authorities to resolve their tax disputes, including penalty abatement and refund claim matters, sensitive tax disclosure matters, and criminal tax matters.  You can contact Michele at 310-550-6200 or mweiss@hsdtaxlaw.com to schedule a consultation.