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Update On Annual Recalculation Using Amortization
As many of you know, the above subject has been one of my hot buttons for decades and I further understand the potential for divisive thinking on this issue. To that end, I would suggest, only if you are interested, to visit www.72tcalc.com and select Tech Corner and read the second article. That article represents my thinking and my thinking only so I won't repeat it here.
Two months ago I wrote the IRS requesting a new General Information Letter (not unlike the one issued in 2000) on this subject since the new Notice 2022-6 was silent on this whole issue. They called me back to day with the following news:
The Office of the Assistant General Counsel --- Tax Exempt & Governmental Plans is working on a new IRS Regulation (Think of a regulation as the top of the food chain in IRS pronouncements) on IRC §72(t). We should actually think of this a good news. Regulations typically contain a much higher level of detail than Rulings and Notices. Further, the IRS tends to not put in the work effort of issuing a Regulation unless they perceive a material need to do so.
They are very tight lipped and will not disclose or even hint at: timing, scope or content. It could come out in 60 days or not until next year although they are virtually certain that it will occur.
Another piece of good news; a retro-active IRS regulation is virtually unheard of; e.g. a new IRS regulation on IRC §72(t) might still remain silent on the subject of “annually recalculated amortization” but it would never say annual recalculation is not okay and has never been okay particularly in light of the fact the a taxpayer has no prior period corrective tools.
Lastly, Mr. Malik indicated that a private letter ruling on this issue is essentially a moot point at this time as the PLR submission rules (as found in Rev. Proc 2022-1 thru 8) basically say that taxpayer PLR requests are returned and not ruled upon by the IRS during the pendency of a “work project” that is in-progress on the same tax issue. Said another way, pay $20k today just to get $10k back from the IRS with no answer.
In light of the above, we are taking an aggressive stance on this issue and are counseling our existing clients to do the same.
William J. Stecker, CPA