This notice contains a proposed revenue procedure that provides for a safe harbor under which a rental real estate enterprise will be treated as a trade or business solely for purposes of section 199A of the Internal Revenue Code (Code) and §§ 1.199A–1 through 1.199A–6 of the Income Tax Regulations (Regulations) (26 CFR Part 1). To qualify for treatment as a trade or business under this safe harbor, the rental real estate enterprise must satisfy the requirements of the proposed revenue procedure. If an enterprise fails to satisfy these requirements, the rental real estate enterprise may still be treated as a trade or business for purposes of section 199A if the enterprise otherwise meets the definition of trade or business in § 1.199A–1(b)(14).

This document contains proposed regulations concerning the deduction for qualified business income under section 199A of the Internal Revenue Code (Code). The proposed regulations will affect certain individuals, partnerships, S corporations, trusts, and estates. The proposed regulations provide guidance on the treatment of previously suspended losses that constitute qualified business income. The proposed regulations also provide guidance on the determination of the section 199A deduction for taxpayers that hold interests in regulated investment companies, charitable remainder trusts, and split-interest trusts.

These proposed regulations address when tax-exempt bonds are treated as retired for purposes of § 103. To be tax-exempt under § 103, a bond issued by a State or local government must satisfy various eligibility requirements under §§ 141 through 150 at the time the bond is issued. Notice 88–130 and Notice 2008–41 describe circumstances in which a tax-exempt bond is treated as having been retired for purposes of §§ 103 and 141 through 150 and a new bond issued in its place. These notices also provide special rules for certain financial products, such as qualified tender bonds. The proposed regulations propose rules similar to those in Notice 2008–41 and include a related conforming amendment to § 1.1001–3.

This revenue procedure provides methods for calculating W–2 wages, as defined in section 199A(b)(4) and § 1.199A–2 of the Income Tax Regulations, (1) for purposes of section 199A(b)(2) of the Internal Revenue Code (Code) which, for certain taxpayers, provides a limitation based on W–2 wages to the amount of the deduction for qualified business income (QBI); and (2) for purposes of section 199A(b)(7), which, for certain specified agricultural and horticultural cooperative patrons, provides a reduction to the section 199A deduction based on W–2 wages.

This revenue procedure provides a safe harbor method of accounting for determining depreciation deductions for passenger automobiles that qualify for the 100-percent additional first year depreciation deduction under section 168(k), as amended by the Tax Cuts and Jobs Act, PL 115–97 (TCJA), and that are subject to the depreciation limitations under section 280F, as amended by the TCJA.

These final regulations implement section 965 of the Internal Revenue Code as amended by the Tax Cuts and Jobs Act, which was enacted on December 22, 2017. The final regulations affect United States persons with direct or indirect ownership interests in certain foreign corporations.

Section 199A provides that, for taxable years beginning after December 31, 2017 and before January 1, 2026, taxpayers other than C corporations may deduct 20 percent of the qualified business income from the taxpayer’s qualified trades or businesses, which can be operated through a partnership, S corporation, trust, estate, or sole proprietorship. The deduction is subject to multiple limitations based on the type of trade or business, the taxpayer’s taxable income, the amount of W–2 wages paid with respect to the qualified trade or business, and the unadjusted basis of qualified property held by the trade or business. Taxpayers other than C corporations generally may also deduct 20 percent of aggregate qualified REIT dividends and qualified publicly traded partnership income. Special rules apply to specified agricultural or horticultural cooperatives. The final regulations provide computational, definitional, and anti-abuse guidance necessary to apply these rules.