The Internal Revenue Service has issued two sets of proposed regulations that address the timing of income inclusion under section 451 of the Internal Revenue Code, as required under the tax reform law. Under the 2017 law, certain types of income are required to be recognized as taxable income no later than the income of applicable financial statements.
The first proposal addresses the taxable year of income inclusion under an accrual method of accounting. The second addresses advance payments for goods, services and other items. Together, the proposals confirm favorable treatment of mortgage servicing income, provide information on the application of more restrictive rules to credit card fees and provide background on various rewards programs and other revenue streams.
Comments on the proposals will be due 60 days after publication in the Federal Register. ABA is currently reviewing the proposed regulations and gathering feedback for a potential comment letter.