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Tuesday March 19, 2019

Bills / Cases / IRS

2016 Tax Table, Exemptions and Deductions

GiftLaw Note: In Rev. Proc. 2015-53, the IRS released 44 inflation-adjusted amounts for 2016. The increased amounts affect tax tables, exemptions, exclusions and benefit phase outs.

Rev. Proc. 2015-53; 2015-44 IRB 615

26 CFR 601.602: Tax forms and instructions.


(Also Part I, §§ 1, 23, 24, 25A, 32, 36B, 42, 45R, 55, 59, 62, 63, 68, 125, 132(f),135, 137, 146, 147, 148, 151, 213, 220, 221, 512, 513, 877, 877A, 911, 2010, 2032A, 2503, 2523, 4161, 4261, 6033, 6039F, 6323, 6334, 6601, 6651, 6652, 6695, 6698, 6699, 6721, 6722, 7430, 7702B; 1.148-5.)

Table of Contents

SECTION 1. PURPOSE

SECTION 2. CHANGES

SECTION 3. 2016 ADJUSTED ITEMS

Code Section
.01Tax Rate Tables 1(a)-(e)
.02Unearned Income of Minor Children
Taxed as if Parent's Income ("Kiddie
Tax").
1(g)
.03Adoption Credit 23
.04Child Tax Credit 24
.05Hope Scholarship, American Opportu-
nity, and Lifetime Learning Credits
25A
.06Earned Income Credit 32
.07Refundable Credit for Coverage Under
a Qualified Health Plan
36B(f)(2)(B)
.08Rehabilitation Expenditures Treated
as Separate New Building
42(e)
.09Low-Income Housing Credit 42(h)
.10Employee Health Insurance Expense of
Small Employers
45R
.11Exemption Amounts for Alternative
Minimum Tax
55
.12Alternative Minimum Tax Exemption for
a Child Subject to the "Kiddie Tax"
59(j)
.13Transportation Mainline Pipeline
Construction Industry Optional Expense
Substantiation Rules for Payments to
Employees under Accountable Plans
62(c)
.14Standard Deduction 63
.15Overall Limitation on Itemized
Deductions
68
.16Cafeteria Plans 125
.17Qualified Transportation Fringe
Benefit
132(f)
.18Income from United States Savings
Bonds for Taxpayers Who Pay
Qualified Higher Education Expenses
135
.19Adoption Assistance Programs 137
.20Private Activity Bonds Volume Cap 146(d)
.21Loan Limits on Agricultural Bonds 147(c)(2)
.22General Arbitrage Rebate Rules 148(f)
.23Safe Harbor Rules for Broker
Commissions on Guaranteed Investment
Contracts or Investments Purchased
for a Yield Restricted Defeasance
Escrow
148
.24Personal Exemption 151
.25Eligible Long-Term Care Premiums 213(d)(10)
.26Medical Savings Accounts 220
.27Interest on Education Loans 221
.28Treatment of Dues Paid to
Agricultural or Horticultural
Organizations
512(d)
.29Insubstantial Benefit Limitations
for Contributions Associated With
Charitable Fund-Raising Campaigns
513(h)
.30Expatriation to Avoid Tax 877
.31Tax Responsibilities of Expatriation 877A
.32Foreign Earned Income Exclusion 911
.33Unified Credit Against Estate Tax 2010
.34Valuation of Qualified Real Property
in Decedent's Gross Estate
2032A
.35Annual Exclusion for Gifts 2503; 2523
.36Tax on Arrow Shafts 4161
.37Passenger Air Transportation Excise
Tax
4261
.38Reporting Exception for Certain
Exempt Organizations with Non-
deductible Lobbying Expenditures
6033(e)(3)
.39Notice of Large Gifts Received
from Foreign Persons
6039F
.40Persons Against Whom a Federal Tax
Lien Is Not Valid
6323
.41Property Exempt from Levy 6334
.42Interest on a Certain Portion of
the Estate Tax Payable in Installments
6601(j)
.43Failure to File Tax Return 6651
.44Failure to File Certain Information
Returns, Registration Statements,
etc.
6652
.45Other Assessable Penalties With
Respect to the Preparation of Tax
Returns for Other Persons
6695
.46Failure to File Partnership Return 6698
.47Failure to File S Corporation Return 6699
.48Failure to File Correct Information
Returns
6721
.49Failure to Furnish Correct Payee
Statements
6722
.50Attorney Fee Awards 7430
.51Periodic Payments Received under
Qualified Long-Term Care Insurance
Contracts or under Certain Life
Insurance Contracts
7702B(d)

SECTION 4. EFFECTIVE DATE

SECTION 5. DRAFTING INFORMATION

SECTION 1. PURPOSE


This revenue procedure sets forth inflation-adjusted items for 2016.

SECTION 2. CHANGES


.01 Section 202 of the Airport and Airways Extension Act of 2015, Pub. L. 114-55, amended § 4261(k)(1)(A)(ii) of the Internal Revenue Code (which governs the period of applicability of § 4261(b)(1), (c)(1), and (c)(3)). The effect of this amendment is to temporarily extend the passenger air transportation excise taxes of $3.00 for domestic travel, $12.00 for international travel, and $6.00 for departures beginning or ending in Alaska or Hawaii. These excise taxes apply to transportation taken through March 31, 2016. After this date, the taxes and rates will expire unless Congress renews them.

.02 Section 2102 of the Small Business Jobs Act of 2010, Pub. L. 111-240, 124 Stat. 2504, provides that for each fifth calendar year beginning after 2012, the penalty under § 6721, Failure to File Correct Information Returns, and the penalty under § 6722, Failure to Furnish Correct Payee Statements, will be adjusted for inflation. Section 208 of the Tax Increase Prevention Act of 2014, Achieving a Better Life Experience (ABLE) Act, Pub. L. 113-295, 128 Stat. 4010, provides for inflation adjustments for certain Civil Penalties under the Code (§§ 6651, 6652(c), 6695, 6698, 6699, 6721, and 6722) for returns and statements required to be filed after December 31, 2014. For returns and statements required to be filed after December 31, 2015, Section 806 of the Trade Preferences Extension Act of 2015, Pub. L. 114-27, 129 Stat. 362, increased the tax penalties for failure to file correct information returns and furnish correct payee statements under §§ 6721 and 6722, respectively.

SECTION 3. 2016 ADJUSTED ITEMS


.01 Tax Rate Tables. For taxable years beginning in 2016, the tax rate tables under § 1 are as follows:

TABLE 1 -- Section 1(a) -- Married Individuals
Filing Joint Returns and Surviving Spouses

If Taxable Income Is:The Tax Is:
Not over $18,550 10% of the taxable income
Over $18,550 but
not over $75,300
$1,855 plus 15% of
the excess over $18,550
Over $75,300 but
not over $151,900
$10,367.50 plus 25% of
the excess over $75,300
Over $151,900 but
not over $231,450
$29,517.50 plus 28% of
the excess over $151,900
Over $231,450 but
not over $413,350
$51,791.50 plus 33% of
the excess over $231,450
Over $413,350 but
not over $466,950
$111,818.50 plus 35% of
the excess over $413,350
Over $466,950 $130,578.50 plus 39.6% of
the excess over $466,950

TABLE 2 -- Section 1(b) -- Heads of Households
If Taxable Income Is:The Tax Is:
Not over $13,250 10% of the taxable income
Over $13,250 but
not over $50,400
$1,325 plus 15% of
the excess over $13,250
Over $50,400 but
not over $130,150
$6,897.50 plus 25% of
the excess over $50,400
Over $130,150 but
not over $210,800
$26,835 plus 28% of
the excess over $130,150
Over $210,800 but
not over $413,350
$49,417 plus 33% of
the excess over $210,800
Over $413,350
not over $441,000
$116,258.50 plus 35% of
the excess over $413,350
Over $441,000 $125,936 plus 39.6% of
the excess over $441,000

TABLE 3 -- Section 1(c) -- Unmarried Individuals
(other than Surviving Spouses and Heads of Households)

If Taxable Income Is:The Tax Is:
Not over $9,275 10% of the taxable income
Over $9,275 but
not over $37,650
$927.50 plus 15% of
the excess over $9,275
Over $37,650 but
not over $91,150
$5,183.75 plus 25% of
the excess over $37,650
Over $91,150 but
not over $190,150
$18,558.75 plus 28% of
the excess over $91,150
Over $190,150 but
not over $413,350
$46,278.75 plus 33% of
the excess over $190,150
Over $413,350
not over $415,050
$119,934.75 plus 35% of
the excess over $413,350
Over $415,050 $120,529.75 plus 39.6% of
the excess over $415,050

TABLE 4 -- Section 1(d) -- Married Individuals
Filing Separate Returns

If Taxable Income Is:The Tax Is:
Not over $9,275 10% of the taxable income
Over $9,275 but
not over $37,650
$927.50 plus 15% of
the excess over $9,275
Over $37,650 but
not over $75,950
$5,183.75 plus 25% of
the excess over $37,650
Over $75,950 but
not over $115,725
$14,758.75 plus 28% of
the excess over $75,950
Over $115,725 but
not over $206,675
$25,895.75 plus 33% of
the excess over $115,725
Over $206,675
not over $233,475
$55,909.25 plus 35% of
the excess over $206,675
Over $233,475 $65,289.25 plus 39.6% of
the excess over $233,475

TABLE 5 -- Section 1(e) -- Estates and Trusts
If Taxable Income Is:The Tax Is:
Not over $2,550 15% of the taxable income
Over $2,550 but
not over $5,950
$382.50 plus 25% of
the excess over $2,550
Over $5,950 but
not over $9,050
$1,232.50 plus 28% of
the excess over $5,950
Over $9,050 but
not over $12,400
$2,100.50 plus 33% of
the excess over $9,050
Over $12,400 $3,206 plus 39.6% of
the excess over $12,400

.02 Unearned Income of Minor Children Taxed as if Parent's Income (the "Kiddie Tax"). For taxable years beginning in 2016, the amount in § 1(g)(4)(A)(ii)(I), which is used to reduce the net unearned income reported on the child's return that is subject to the "kiddie tax," is $1,050. This $1,050 amount is the same as the amount provided in § 63(c)(5)(A), as adjusted for inflation. The same $1,050 amount is used for purposes of § 1(g)(7) (that is, to determine whether a parent may elect to include a child's gross income in the parent's gross income and to calculate the "kiddie tax"). For example, one of the requirements for the parental election is that a child's gross income is more than the amount referenced in § 1(g)(4)(A)(ii)(I) but less than 10 times that amount; thus, a child's gross income for 2016 must be more than $1,050 but less than $10,500.

.03 Adoption Credit. For taxable years beginning in 2016, under § 23(a)(3) the credit allowed for an adoption of a child with special needs is $13,460. For taxable years beginning in 2016, under § 23(b)(1) the maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $13,460. The available adoption credit begins to phase out under § 23(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $201,920 and is completely phased out for taxpayers with modified adjusted gross income of $241,920 or more. (See section 3.19 of this revenue procedure for the adjusted items relating to adoption assistance programs.)

.04 Child Tax Credit. For taxable years beginning in 2016, the value used in § 24(d)(1)(B)(i) to determine the amount of credit under § 24 that may be refundable is $3,000.

.05 Hope Scholarship, American Opportunity, and Lifetime Learning Credits.

(1) For taxable years beginning in 2016, the Hope Scholarship Credit under § 25A(b)(1), as increased under § 25A(i) (the American Opportunity Tax Credit), is an amount equal to 100 percent of qualified tuition and related expenses not in excess of $2,000 plus 25 percent of those expenses in excess of $2,000, but not in excess of $4,000. Accordingly, the maximum Hope Scholarship Credit allowable under § 25A(b)(1) for taxable years beginning in 2016 is $2,500.

(2) For taxable years beginning in 2016, a taxpayer's modified adjusted gross income in excess of $80,000 ($160,000 for a joint return) is used to determine the reduction under § 25A(d)(2) in the amount of the Hope Scholarship Credit otherwise allowable under § 25A(a)(1). For taxable years beginning in 2016, a taxpayer's modified adjusted gross income in excess of $55,000 ($111,000 for a joint return) is used to determine the reduction under § 25A(d)(2) in the amount of the Lifetime Learning Credit otherwise allowable under § 25A(a)(2).

.06 Earned Income Credit.

(1) In general. For taxable years beginning in 2016, the following amounts are used to determine the earned income credit under § 32(b). The "earned income amount" is the amount of earned income at or above which the maximum amount of the earned income credit is allowed. The "threshold phaseout amount" is the amount of adjusted gross income (or, if greater, earned income) above which the maximum amount of the credit begins to phase out. The "completed phaseout amount" is the amount of adjusted gross income (or, if greater, earned income) at or above which no credit is allowed. The threshold phaseout amounts and the completed phaseout amounts shown in the table below for married taxpayers filing a joint return include the increase provided in § 32(b)(3)(B)(i), as adjusted for inflation for taxable years beginning in 2016.

ItemNumber of Qualifying Children
OneTwoThree
or More
None
Earned Income
Amount
$9,920$13,930$13,930 $6,610
Maximum Amount
of Credit
$3,373 $5,572 $6,269 $506
Threshold Phaseout
Amount (Single,
Surviving Spouse, or
Head of Household)
$18,190$18,190$18,190 $8,270
Completed Phaseout
Amount (Single,
Surviving Spouse, or
Head of Household)
$39,296$44,648$47,955$14,880
Threshold Phaseout
Amount (Married Filing
Jointly)
$23,740$23,740$23,740$13,820
Completed Phaseout
Amount (Married Filing
Jointly)
$44,846$50,198$53,505$20,430

The instructions for the Form 1040 series provide tables showing the amount of the earned income credit for each type of taxpayer.

(2) Excessive Investment Income. For taxable years beginning in 2016, the earned income tax credit is not allowed under § 32(i)(1) if the aggregate amount of certain investment income exceeds $3,400.

.07 Refundable Credit for Coverage Under a Qualified Health Plan. For taxable years beginning in 2016, the limitation on tax imposed under § 36B(f)(2)(B) for excess advance credit payments is determined using the following table:

If the household income
(expressed as a percent
of poverty line) is:
The limitation amount
for unmarried indivi-
duals (other than
surviving spouses and
heads of household) is:
The limitation amount
for all other tax-
payers is:
Less than 200% $300 $600
At least 200% but less
than 300%
$750 $1,500
At least 300% but less
than 400%
$1,275$2,550

.08 Rehabilitation Expenditures Treated as Separate New Building. For calendar year 2016, the per low-income unit qualified basis amount under § 42(e)(3)(A)(ii)(II) is $6,700.

.09 Low-Income Housing Credit. For calendar year 2016, the amount used under § 42(h)(3)(C)(ii) to calculate the State housing credit ceiling for the low-income housing credit is the greater of (1) $2.35 multiplied by the State population, or (2) $2,690,000.

.10 Employee Health Insurance Expense of Small Employers. For taxable years beginning in 2016, the dollar amount in effect under § 45R(d)(3)(B) is $25,900. This amount is used under § 45R(c) for limiting the small employer health insurance credit and under § 45R(d)(1)(B) for determining who is an eligible small employer for purposes of the credit.

.11 Exemption Amounts for Alternative Minimum Tax. For taxable years beginning in 2016, the exemption amounts under § 55(d)(1) are:

Joint Returns or
Surviving Spouses
$83,800
Unmarried Individuals (other than
Surviving Spouses)
$53,900
Married Individuals Filing Separate
Returns
$41,900
Estates and Trusts $23,900

For taxable years beginning in 2016, under § 55(b)(1), the excess taxable income above which the 28 percent tax rate applies is:

Married Individuals Filing Separate Returns $93,150
Joint Returns, Unmarried Individuals (other
than surviving spouses), and Estates and Trusts
$186,300

For taxable years beginning in 2016, the amounts used under § 55(d)(3) to determine the phaseout of the exemption amounts are:

Joint Returns or
Surviving Spouses
$159,700
Unmarried Individuals (other than
Surviving Spouses)
$119,700
Married Individuals Filing Separate
Returns and Estates and Trusts
$79,850

.12 Alternative Minimum Tax Exemption for a Child Subject to the "Kiddie Tax." For taxable years beginning in 2016, for a child to whom the § 1(g) "kiddie tax" applies, the exemption amount under §§ 55 and 59(j) for purposes of the alternative minimum tax under § 55 may not exceed the sum of (1) the child's earned income for the taxable year, plus (2) $7,400.

.13 Transportation Mainline Pipeline Construction Industry Optional Expense Substantiation Rules for Payments to Employees under Accountable Plans. For calendar year 2016, an eligible employer may pay certain welders and heavy equipment mechanics an amount of up to $17 per hour for rig-related expenses that are deemed substantiated under an accountable plan if paid in accordance with Rev. Proc. 2002-41, 2002-1 C.B. 1098. If the employer provides fuel or otherwise reimburses fuel expenses, up to $11 per hour is deemed substantiated if paid under Rev. Proc. 2002-41.

.14 Standard Deduction.

(1) In general. For taxable years beginning in 2016, the standard deduction amounts under § 63(c)(2) are as follows:

Filing StatusStandard Deduction
Married Individuals Filing Joint Returns
and Surviving Spouses (§ 1(a))
$12,600
Heads of Households (§ 1(b)) $9,300
Unmarried Individuals (other than Surviving
Spouses and Heads of Households) (§ 1(c))
$6,300
Married Individuals Filing Separate
Returns (§ 1(d))
$6,300

(2) Dependent. For taxable years beginning in 2016, the standard deduction amount under § 63(c)(5) for an individual who may be claimed as a dependent by another taxpayer cannot exceed the greater of (1) $1,050, or (2) the sum of $350 and the individual's earned income.

(3) Aged or blind. For taxable years beginning in 2016, the additional standard deduction amount under § 63(f) for the aged or the blind is $1,250. The additional standard deduction amount is increased to $1,550 if the individual is also unmarried and not a surviving spouse.

.15 Overall Limitation on Itemized Deductions. For taxable years beginning in 2016, the applicable amounts under § 68(b) are $311,300 in the case of a joint return or a surviving spouse, $285,350 in the case of a head of household, $259,400 in the case of an individual who is not married and who is not a surviving spouse or head of household, $155,650 in the case of a married individual filing a separate return.

.16 Cafeteria Plans. For the taxable years beginning in 2016, the dollar limitation under § 125(i) on voluntary employee salary reductions for contributions to health flexible spending arrangements is $2,550.

.17 Qualified Transportation Fringe Benefit. For taxable years beginning in 2016, the monthly limitation under § 132(f)(2)(A) regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass is $130. The monthly limitation under § 132(f)(2)(B) regarding the fringe benefit exclusion amount for qualified parking is $255.

.18 Income from United States Savings Bonds for Taxpayers Who Pay Qualified Higher Education Expenses. For taxable years beginning in 2016, the exclusion under § 135, regarding income from United States savings bonds for taxpayers who pay qualified higher education expenses, begins to phase out for modified adjusted gross income above $116,300 for joint returns and $77,550 for all other returns. The exclusion is completely phased out for modified adjusted gross income of $146,300 or more for joint returns and $92,550 or more for all other returns.

.19 Adoption Assistance Programs. For taxable years beginning in 2016, under § 137(a)(2), the amount that can be excluded from an employee's gross income for the adoption of a child with special needs is $13,460. For taxable years beginning in 2016, under § 137(b)(1) the maximum amount that can be excluded from an employee's gross income for the amounts paid or expenses incurred by an employer for qualified adoption expenses furnished pursuant to an adoption assistance program for other adoptions by the employee is $13,460. The amount excludable from an employee's gross income begins to phase out under § 137(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $201,920 and is completely phased out for taxpayers with modified adjusted gross income of $241,920 or more. (See section 3.03 of this revenue procedure for the adjusted items relating to the adoption credit.)

.20 Private Activity Bonds Volume Cap. For calendar year 2016, the amounts used under § 146(d) to calculate the State ceiling for the volume cap for private activity bonds is the greater of (1) $100 multiplied by the State population, or (2) $302,875,000.

.21 Loan Limits on Agricultural Bonds. For calendar year 2016, the loan limit amount on agricultural bonds under § 147(c)(2)(A) for first-time farmers is $520,000.

.22 General Arbitrage Rebate Rules. For bond years ending in 2016, the amount of the computation credit determined under the permission to rely on § 1.148-3(d)(4) of the proposed Income Tax Regulations is $1,650.

.23 Safe Harbor Rules for Broker Commissions on Guaranteed Investment Contracts or Investments Purchased for a Yield Restricted Defeasance Escrow. For calendar year 2016, under § 1.148-5(e)(2)(iii)(B)(1), a broker's commission or similar fee for the acquisition of a guaranteed investment contract or investments purchased for a yield restricted defeasance escrow is reasonable if (1) the amount of the fee that the issuer treats as a qualified administrative cost does not exceed the lesser of (A) $39,000, and (B) 0.2 percent of the computational base (as defined in § 1.148-5(e)(2)(iii)(B)(2)) or, if more, $4,000; and (2) the issuer does not treat more than $110,000 in brokers' commissions or similar fees as qualified administrative costs for all guaranteed investment contracts and investments for yield restricted defeasance escrows purchased with gross proceeds of the issue.

.24 Personal Exemption.

(1) For taxable years beginning in 2016, the personal exemption amount under § 151(d) is $4,050.

(2) Phaseout. For taxable years beginning in 2016, the personal exemption phases out for taxpayers with the following adjusted gross income amounts:

Filing StatusAGI -- Beginning
of Phaseout
AGI -- Completed
Phaseout
Married Individuals Filing
Joint Returns and Surviving
Spouses (§ 1(a))
$311,300$433,800
Heads of Households (§ 1(b)) $285,350$407,850
Unmarried Individuals (other
than Surviving Spouses and
Heads of Households) (§ 1(c))
$259,400$381,900
Married Individuals Filing
Separate Returns (§ 1(d))
$155,650$216,900

.25 Eligible Long-Term Care Premiums. For taxable years beginning in 2016, the limitations under § 213(d)(10), regarding eligible long-term care premiums includible in the term "medical care," are as follows:

Attained Age Before the
Close of the Taxable Year
Limitation on Premiums
40 or less $390
More than 40 but not more than 50 $730
More than 50 but not more than 60$1,460
More than 60 but not more than 70$3,900
More than 70 $4,870

.26 Medical Savings Accounts.

(1) Self-only coverage. For taxable years beginning in 2016, the term "high deductible health plan" as defined in § 220(c)(2)(A) means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,250 and not more than $3,350, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $4,450.

(2) Family coverage. For taxable years beginning in 2016, the term "high deductible health plan" means, for family coverage, a health plan that has an annual deductible that is not less than $4,450 and not more than $6,700, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $8,150.

.27 Interest on Education Loans. For taxable years beginning in 2016, the $2,500 maximum deduction for interest paid on qualified education loans under § 221 begins to phase out under § 221(b)(2)(B) for taxpayers with modified adjusted gross income in excess of $65,000 ($130,000 for joint returns), and is completely phased out for taxpayers with modified adjusted gross income of $80,000 or more ($160,000 or more for joint returns).

.28 Treatment of Dues Paid to Agricultural or Horticultural Organizations. For taxable years beginning in 2016, the limitation under § 512(d)(1), regarding the exemption of annual dues required to be paid by a member to an agricultural or horticultural organization, is $161.

.29 Insubstantial Benefit Limitations for Contributions Associated with Charitable Fund-Raising Campaigns.

(1) Low cost article. For taxable years beginning in 2016, for purposes of defining the term "unrelated trade or business" for certain exempt organizations under § 513(h)(2), "low cost articles" are articles costing $10.60 or less.

(2) Other insubstantial benefits. For taxable years beginning in 2016, under § 170, the $5, $25, and $50 guidelines in section 3 of Rev. Proc. 90-12, 1990-1 C.B. 471 (as amplified by Rev. Proc. 92-49, 1992-1 C.B. 987, and modified by Rev. Proc. 92-102, 1992-2 C.B. 579), for the value of insubstantial benefits that may be received by a donor in return for a contribution, without causing the contribution to fail to be fully deductible, are $10.60, $53, and $106, respectively.

.30 Expatriation to Avoid Tax. For calendar year 2016, under § 877A(g)(1)(A), unless an exception under § 877A(g)(1)(B) applies, an individual is a covered expatriate if the individual's "average annual net income tax" under § 877(a)(2)(A) for the five taxable years ending before the expatriation date is more than $161,000.

.31 Tax Responsibilities of Expatriation. For taxable years beginning in 2016, the amount that would be includible in the gross income of a covered expatriate by reason of § 877A(a)(1) is reduced (but not below zero) by $693,000.

.32 Foreign Earned Income Exclusion. For taxable years beginning in 2016, the foreign earned income exclusion amount under § 911(b)(2)(D)(i) is $101,300.

.33 Unified Credit Against Estate Tax. For an estate of any decedent dying in calendar year 2016, the basic exclusion amount is $5,450,000 for determining the amount of the unified credit against estate tax under § 2010.

.34 Valuation of Qualified Real Property in Decedent's Gross Estate. For an estate of a decedent dying in calendar year 2016, if the executor elects to use the special use valuation method under § 2032A for qualified real property, the aggregate decrease in the value of qualified real property resulting from electing to use § 2032A for purposes of the estate tax cannot exceed $1,110,000.

.35 Annual Exclusion for Gifts.

(1) For calendar year 2016, the first $14,000 of gifts to any person (other than gifts of future interests in property) are not included in the total amount of taxable gifts under § 2503 made during that year.

(2) For calendar year 2016, the first $148,000 of gifts to a spouse who is not a citizen of the United States (other than gifts of future interests in property) are not included in the total amount of taxable gifts under §§ 2503 and 2523(i)(2) made during that year.

.36 Tax on Arrow Shafts. For calendar year 2016, the tax imposed under § 4161(b)(2)(A) on the first sale by the manufacturer, producer, or importer of any shaft of a type used in the manufacture of certain arrows is $0.49 per shaft.

.37 Passenger Air Transportation Excise Tax. For calendar year 2016, the tax under § 4261(b)(1) on the amount paid for each domestic segment of taxable air transportation is $4. For calendar year 2016, the tax under § 4261(c)(1) on any amount paid (whether within or without the United States) for any international air transportation, if the transportation begins or ends in the United States, generally is $17.80. Under § 4261(c)(3), however, a lower amount applies under § 4261(c)(1) to a domestic segment beginning or ending in Alaska or Hawaii, and the tax applies only to departures. For calendar year 2016, the rate is $8.90.

.38 Reporting Exception for Certain Exempt Organizations with Nondeductible Lobbying Expenditures. For taxable years beginning in 2016, the annual per person, family, or entity dues limitation to qualify for the reporting exception under § 6033(e)(3) (and section 5.05 of Rev. Proc. 98-19, 1998-1 C.B. 547), regarding certain exempt organizations with nondeductible lobbying expenditures, is $112 or less.

.39 Notice of Large Gifts Received from Foreign Persons. For taxable years beginning in 2016, § 6039F authorizes the Treasury Department and the Internal Revenue Service to require recipients of gifts from certain foreign persons to report these gifts if the aggregate value of gifts received in the taxable year exceeds $15,671.

.40 Persons Against Whom a Federal Tax Lien Is Not Valid. For calendar year 2016, a federal tax lien is not valid against (1) certain purchasers under § 6323(b)(4) who purchased personal property in a casual sale for less than $1,530, or (2) a mechanic's lienor under § 6323(b)(7) who repaired or improved certain residential property if the contract price with the owner is not more than $7,630.

.41 Property Exempt from Levy. For calendar year 2016, the value of property exempt from levy under § 6334(a)(2) (fuel, provisions, furniture, and other household personal effects, as well as arms for personal use, livestock, and poultry) cannot exceed $9,120. The value of property exempt from levy under § 6334(a)(3) (books and tools necessary for the trade, business, or profession of the taxpayer) cannot exceed $4,560.

.42 Interest on a Certain Portion of the Estate Tax Payable in Installments. For an estate of a decedent dying in calendar year 2016, the dollar amount used to determine the "2-percent portion" (for purposes of calculating interest under § 6601(j)) of the estate tax extended as provided in § 6166 is $1,480,000.

.43 Failure to File Tax Return. For tax years beginning in 2016, the amount of the additional tax under § 6651(a) for failure to file a tax return within 60 days of the due date of such return (determined with regard to any extensions of time for filing) shall not be less than the lesser of $135 or 100 percent of the amount required to shown as tax on such returns.

.44 Failure to File Certain Information Returns, Registration Statements, etc. For tax years beginning in 2016, the penalty amounts under § 6652(c) are:

(1) for failure to file a return required under § 6033(a)(1) (relating to returns by exempt organization) or § 6012(a)(6) (relating to returns by political organizations):

ScenarioDaily
Penalty
Maximum Penalty
Organization (§ 6652(c)(1)(A)) $20Lessor of $10,000 or
5% of gross receipts
of the organization
for the year.
Organization with gross receipts
exceeding $1,020,000
(§ 6652(c)(1)(A))
$100 $51,000
Managers (§ 6652(c)(1)(B)) $10 $5,000
Public inspection of annual
returns and reports
(§ 6652(c)(1)(C))
$20 $10,000
Public inspection of
applications for exemption and
notice of status (§ 6652(c)(1)(D))
$20 No Limits

(2) for failure to file a return required under § 6034 (relating to returns by certain trust) or § 6043(b) (relating to terminations, etc., of exempt organizations):

ScenarioDaily
Penalty
Maximum Penalty
Organization or trust
(§ 6652(c)(2)(A))
$10 $5,000
Managers (§ 6652(c)(2)(B)) $10 $5,000
Split-Interest Trust
(§ 6652(c)(2)(C)(ii))
$20$10,000
Any trust with gross receipts
exceeding $255,000
(§ 6652(c)(2)(C)(ii))
$100$51,000

(3) for failure to file a disclosure required under § 6033(a)(2):

ScenarioDaily
Penalty
Maximum Penalty
Tax-exempt entity
(§ 6652(c)(3)(A))
$100$51,000
Failure to comply with written
demand (§ 6652(c)(3)(B)(ii))
$100$10,000

.45 Other Assessable Penalties With Respect to the Preparation of Tax Returns for Other Persons. For tax years beginning in 2016, the penalty amounts under § 6695 are:

ScenarioPer Return or
Claim for Refund
Maximum
Penalty
Failure to furnish copy to
taxpayer (§ 6695(a))
$50 $25,500
Failure to sign return
(§ 6695(b))
$50 $25,500
Failure to furnish identify-
ing number (§ 6695(c))
$50 $25,500
Failure to retain copy or list
(§ 6695(d))
$50 $25,500
Failure to file correct
information returns
(§ 6695(e))
$50 per return or
item in return
$25,500
Negotiation of check
(§ 6695(f))
$510 per check No limit
Failure to be diligent in
determining eligibility for
earned income credit (§ 6695(g))
$510 No limit

.46 Failure to File Partnership Return. For tax years beginning in 2016, the dollar amount used to determine amount of the penalty under § 6698(b)(1) is $195.

.47 Failure to File S Corporation Return. For tax years beginning in 2016, the dollar amount used to determine amount of the penalty under § 6699(b)(1) is $195.

.48 Failure to File Correct Information Returns. For tax years beginning in 2016, the penalty amounts under § 6721 are:

(1) for persons with average annual gross receipts for the most recent three taxable years of more than $5,000,000, for failure to file correct information returns are:

ScenarioPenalty
Per Return
Calendar Year
Maximum
General Rule (§ 6721(a)(1))$260$3,193,000
Corrected on or before 30
days after required filing
date (§ 6721(b)(1))
$50 $532,000
Corrected after 30th day but
on or before August 1
(§ 6721(b)(2))
$100$1,596,500

(2) for persons with average annual gross receipts for the most recent three taxable years of $5,000,000 or less, for failure to file correct information returns are:

ScenarioPenalty
Per Return
Calendar Year
Maximum
General Rule (§ 6721(d)(1)(A))$260$1,064,000
Corrected on or before 30 days
after required filing date
(§ 6721(d)(1)(B))
$50 $186,000
Corrected after 30th day but
on or before August 1
(§ 6721(d)(1)(C))
$100 $532,000

(3) for failure to file correct information returns due to intentional disregard of the filing requirement (or the correct information reporting requirement) are:

ScenarioPenalty
Per Return
Calendar Year
Maximum
Return other than a return
required to be filed under
§§ 6045(a), 6041A(b),
6050H, 6050I, 6050J, 6050K, or
6050L (§ 6721(e)(2)(A))
Greater of (i) $530,
or (ii) 10% of
aggregate amount of
items required to be
reported correctly
No limit
Return required to be filed
under §§ 6045(a),
6050K, or 6050L (§
6721(e)(2)(B))
Greater of (i) $530,
or (ii) 5% of
aggregate amount of
items required to be
reported correctly
No limit
Return required to be filed
under § 6050I(a) (§
6721(e)(2)(C))
Greater of (i) $26,600,
or (ii) amount of cash
received up to $106,000
No limit
Return required to be filed
under § 6050V (§
6721(e)(2)(D))
Greater of (i) $260, or
(ii) 10% of the value
of the benefit of any
contract with respect
to which information
is required to be
included on the return
No limit

.49 Failure to Furnish Correct Payee Statements. For tax years beginning in 2016, the penalty amounts under § 6722 are: (1) for persons with average annual gross receipts for the most recent three taxable years of more than $5,000,000, for failure to file correct information returns are:

ScenarioPenalty
Per Return
Calendar Year
Maximum
General Rule (§ 6722(a)(1)) $260$3,193,000
Corrected on or before 30 days
after required filing date
(§ 6722(b)(1))
$50 $532,000
Corrected after 30th day but
on or before August 1
(§ 6722(b)(2))
$100$1,596,500

(2) for persons with average annual gross receipts for the most recent 3 taxable years of $5,000,000 or less, for failure to file correct information returns are:

ScenarioPenalty
Per Return
Calendar Year
Maximum
General Rule (§ 6722(d)(1)(A))$260$1,064,000
Corrected on or before 30 days
after required filing date
(§ 6722(d)(1)(B))
$50 $186,000
Corrected after 30th day but
on or before August 1
(§ 6722(d)(1)(C))
$100 $532,000

(3) for failure to file correct payee statements due to intentional disregard of the requirement to furnish a payee statement (or the correct information reporting requirement) are:

ScenarioPenalty
Per Return
Calendar Year
Maximum
Statement other than a
statement required under
§§ 6045(b), 6041A(e)
(in respect of a return
required under § 6041A(b)),
6050H(d), 6050J(e), 6050K(b),
or 6050L(c) (§ 6722(e)(2)(A))
Greater of (i) $530,
or (ii) 10% of
aggregate amount of
item required to be
reported correctly
No limit
Payee statement required under
§§ 6045(b), 6050K(b), or
6050L(c) (§ 6722(e)(2)(B))
Greater of (i) $530,
or (ii) 5% of
aggregate amount of
items required to be
reported correctly
No limit

.50 Attorney Fee Awards. For fees incurred in calendar year 2016, the attorney fee award limitation under § 7430(c)(1)(B)(iii) is $200 per hour.

.51 Periodic Payments Received under Qualified Long-Term Care Insurance Contracts or under Certain Life Insurance Contracts. For calendar year 2016, the stated dollar amount of the per diem limitation under § 7702B(d)(4), regarding periodic payments received under a qualified long-term care insurance contract or periodic payments received under a life insurance contract that are treated as paid by reason of the death of a chronically ill individual, is $340.

SECTION 4. EFFECTIVE DATE


.01 General Rule. Except as provided in section 4.02, this revenue procedure applies to taxable years beginning in 2016.

.02 Calendar Year Rule. This revenue procedure applies to transactions or events occurring in calendar year 2016 for purposes of sections 3.08 (rehabilitation expenditures treated as separate new building), 3.09 (low-income housing credit), 3.13 (transportation mainline pipeline construction industry optional expense substantiation rules for payments to employees under accountable plans), 3.20 (private activity bonds volume cap), 3.21 (loan limits on agricultural bonds), 3.22 (general arbitrage rebate rules), 3.23 (safe harbor rules for broker commissions on guaranteed investment contracts or investments purchased for a yield restricted defeasance escrow), 3.30 (expatriation to avoid tax), 3.33 (unified credit against estate tax), 3.34 (valuation of qualified real property in decedent's gross estate), 3.35 (annual exclusion for gifts), 3.36 (tax on arrow shafts), 3.37 (passenger air transportation excise tax), 3.40 (persons against whom a federal tax lien is not valid), 3.41 (property exempt from levy), 3.42 (interest on a certain portion of the estate tax payable in installments), 3.50 (attorney fee awards), and 3.51 (periodic payments received under qualified long-term care insurance contracts or under certain life insurance contracts).

SECTION 5. DRAFTING INFORMATION


The principal author of this revenue procedure is William Ruane of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this revenue procedure, contact Mr. Ruane at (202) 317-4718 (not a toll-free call).


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