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Global Public Policy

IRS releases final regs on REIT dividends, delays NMTC due dates, updates ERTC FAQs

June 26, 2020
REIT Dividend Final Regulations

The Internal Revenue Service issued final regulations on June 26 permitting a regulated investment company (RIC), such as a mutual fund or exchange-traded fund, that receives qualified REIT dividends to report those dividends to its shareholders. The final regs largely follow the “conduit treatment” in proposed regulations released in early 2019.

Section 199A of the tax code allows non-corporate taxpayers a deduction of up to 20% of qualified business income, including up to 20% of qualified REIT dividends. The regulations ensure shareholders in a mutual fund that invests in REITs get the same treatment as an individual who owns the REIT directly.

The government said it is still considering whether it’s both appropriate and practical to provide conduit treatment for qualified publicly traded partnership (PTP) income earned by a RIC.

New Markets Tax Credit

On June 12 the IRS issued Notice 2020-49, which postpones until 12/31/2020 the due dates for making investments, reinvestments, and spending on construction of real property for purposes of the New Markets Tax Credit.

Employee Retention Tax Credit

On June 20  the IRS revised some of the FAQs on the employee retention tax credit (ERTC). The following FAQs were revised:

  • Determining What Types of Governmental Orders May be Taken into Account for Purposes of the Employee Retention Credit FAQs
    • FAQ 28: What “orders from an appropriate governmental authority” may be taken into account for purposes of the Employee Retention Credit?
  • Determining When an Employer’s Trade or Business Operations are Considered to be Fully or Partially Suspended Due to a Governmental Order FAQs
    • FAQ 30: If a governmental order requires non-essential businesses to suspend operations but allows essential businesses to continue operations, is the essential business considered to have a full or partial suspension of operations?
    • FAQ 33: If a governmental order requires an employer to close its workplace, but the employer is able to continue operations comparable to its operations prior to the closure by requiring employees to telework, is the employer considered to have a suspension of operations?
    • FAQ 34: If a governmental order requires an employer to close its workplace for certain purposes, but the workplace may remain operational for limited purposes, is the employer considered to have a suspension of operations?
    • FAQ 35: Are an employer’s operations considered to be partially suspended for purposes of the Employee Retention Credit if the employer is required to reduce its operating hours by a governmental order?

Phillips Hinch

Vice President, Tax Policy