IRS does not acquiesce to Sixth Circuit's holding on split-dollar regs.
In Action on Decision 2021-2, the IRS stated its nonacquiescence to the holding in Machacek, 906 F.3d 429 (6th Cir. 2018), rev'g T.C. Memo. 2016-55, that the economic benefits of a compensatory split-dollar life insurance arrangement may be treated as a distribution with respect to stock under Sec. 301. The case concerned an S corporation's owner-employee, John Machacek Jr., whose life was insured under a policy for which the S corporation paid an annual premium. The Tax Court held, and the IRS argued before the Sixth Circuit, that payments must be taken into account according to their character and that payments that arise from an employer-employee relationship, like those in Machacek, are compensation, not distributions subject to Sec. 301. However, in reversing the Tax Court, the Sixth Circuit focused on Regs. Sec. 1.301-1(q)(1)(i), which states that the provision of economic benefits by a corporation to its shareholder pursuant to a split-dollar insurance arrangement is treated as a distribution of property to a shareholder, which it found rendered irrelevant arguments that the arrangement was compensatory.
COBRA premium assistance credit clarified
In Notice 2021-31, the IRS gave employers, health care plans, and insurers guidance on providing temporary premium assistance for COBRA health care continuation benefits, as provided under Section 9501 of the American Rescue Plan Act, P.L. 117-2 (ARPA), for periods of coverage beginning after April 1, 2021, and before Oct. 1, 2021, and claiming a corresponding tax credit under Sec. 6432, which was added to the Code by ARPA. An individual who is eligible due to a loss of coverage as the result of a reduction in hours or by an involuntary termination of employment (other than for gross misconduct) during the period April 1, 2021, to Sept. 30, 2021, and who elects COBRA continuation coverage becomes eligible for a temporary 100% reduction in COBRA premiums. The employer, insurer, or multiemployer plan to which the COBRA continuation premiums are payable then claims a refundable tax credit against its share of Medicare taxes for the premiums not paid by an employee due to Section 9501 of ARPA.
Bank deposit could escape tax levy by hours
In Chief Counsel Advice (CCA) 202118010, the IRS Office of Chief Counsel advised that an IRS levy on a bank account does not attach to a deposit made to the account on the same day but after the levy was made. Sec. 6332(c) provides that, upon service of a levy, a bank must surrender any deposits it then holds subject to the levy, but only after a 21-day waiting period. That delay may cause the bank to consider the closing balance on the date of the levy as the levied amount, not taking into account the exact time of the levy, the CCA stated. However, the CCA noted that Sec. 6331(b) states that a levy extends "only to property possessed and obligations existing at the time thereof " (emphasis added).
