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Weekly IRS Roundup December 20 – December 24, 2021

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of December 20, 2021 – December 24, 2021. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.

December 20, 2021: The IRS published a news release announcing that victims of this month’s tornadoes in parts of Illinois and Tennessee will have until May 16, 2022, to file various individual and business tax returns and make tax payments.

December 20, 2021: The IRS released instructions for Form 8992, U.S. Shareholder Calculation of Global Intangible Low-Taxed Income (GILTI), to reflect a new separate Schedule A and eliminate the requirement for domestic partnerships to file the form.

December 20, 2021: The IRS released Publication 17, Your Federal Income Tax (for Individuals), which was updated for the 2021 tax year. This publication covers the general rules for filing a federal income tax return and supplements the information contained in tax form instructions.

December 21, 2021: The IRS released a memorandum that reissues interim guidance AP-08-0521-0015 concerning procedures for accepting images of signatures and digital signatures and approval to receive documents by email and transmit documents to taxpayers. The memorandum is in response to the COVID-19 pandemic, where the IRS took several steps to protect employees while still delivering on their mission-critical functions.

December 21, 2021: The IRS released Published 15, (Circular E), Employer’s Tax Guide, which explains tax responsibilities as an employer. The updates reflect COVID-19 related employment tax credits and other tax relief.

December 22, 2021: The IRS published a news release announcing that victims of Hurricane Ida in six states now have until February 15, 2022 (extended from January 3), to file various individual and business tax returns and make tax payments. The updated relief covers the entire states of Louisiana and Mississippi, as well as parts of New York, New Jersey, Connecticut and Pennsylvania.

December 23, 2021: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).

Special thanks to Robbie Alipour in our Chicago office for this week’s roundup.




Code Sec. 367(a) and (d) After the TCJA

Code Sec. 367(a) and (d) subject to taxation a transfer of tangible and intangible property by a U.S. person to a foreign corporation in an otherwise tax-free transaction. While for many years exceptions were provided for transfers of certain types of property, the Tax Cuts and Jobs Act (“TCJA”) amended Code Sec. 367, removing the exceptions and broadening the definition of intangible property.

Specifically, Code Sec. 367(a)(1) provides generally that gain realized on the transfer of property by a U.S. person to a foreign corporation is subject to taxation. Former Code Sec. 367(a)(3) had provided an exception for property transferred to a foreign corporation for use in an active trade or business outside the United States. For example, this exception was available for the transfer of a foreign plant and equipment. The exception did not apply to a transfer of inventory, accounts receivable, intangible property within the meaning of former Code Sec. 936(h)(3) (B), or foreign currency. The TCJA eliminated this exception, such that gain on a transfer of property by a US person to a foreign corporation is now subject to immediate taxation, except for property subject to Code Sec. 367(d).

Access the full article.

Originally published by International Tax Journal: November/December 2019




Weekly IRS Roundup August 26 – 30, 2019

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of August 26 – 30, 2019.

August 26, 2019: The IRS released a Treasury Decision in which it issued correcting amendments to TD 9866 (i.e., the global intangible low-taxed income (GILTI) and Foreign Tax Credit Regulations pertaining to IRC §951A). The correcting amendments to Treasury Regulations Section 1.951A-2 include in the second sentence of paragraph (c)(4)(iv)(A)(2)(i), removing the language “paragraph (c)(4)(ii)(A)” and adding “paragraph (c)(4)(iii)(A)” in its place, and in the third sentence, removing the language “paragraph (c)(4)(ii)(B)” and adding “paragraph (c)(4)(iii)(B)” in its place, among other changes.

August 27, 2019: The IRS released a revenue procedure in which it added Georgia to the list of countries for which the United States has an automatic exchange of deposit interest information as related to certain nonresident alien individuals. This revenue procedure supersedes Rev. Proc. 2018-36.

August 28, 2019: The IRS issued a news release and a revenue procedure in which it announced that interest rates will remain the same for the calendar quarter beginning October 1, 2019, as they were in the prior quarter. Specifically, those rates are 5% for overpayments (4% for corporations), 2.5% for the portion of a corporate overpayment exceeding $10,000, 5% for underpayments, 7% for large corporate underpayments and, for taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

August 29, 2019: The IRS released a revenue procedure in which it set forth 2018 annual percentages for Foreign Insurance Companies carrying on US business. Specifically, the domestic asset/liability percentage was set at 118.3% for foreign life insurance companies and 201.2% for foreign property and liability insurance companies. The revenue procedure also published domestic investment yields of 4.5% for foreign life insurance companies and 3.5% for foreign property and liability insurance companies. The IRS stated that a foreign insurance company must compute its estimated tax payments for its investment income for such taxable years by using the greater of its actual effectively connected net investment income or its minimum net investment income using these percentages, except that such company may continue to use the prior year’s percentages, as published in Revenue Procedure 2018-45, if the due date of an installment is less than 20 days after the current procedure is published in the Internal Revenue Bulletin.

August 30, 2019: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).

Special thanks to Alex Ruff in our Chicago office for this week’s roundup.




Weekly IRS Roundup April 8 – 12, 2019

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of April 8 – 12, 2019.

April 8, 2019: The IRS issued a news release warning taxpayers against rushing to file their returns and recommending they file for an extension if needed.

April 9, 2019: The IRS issued a news release seeking volunteers for the taxpayer advocate panel. The application process is open through May 3, 2019.

April 10, 2019: The IRS issued corrections to final regulations (TD 9846) implementing Section 965 of the code.

April 11, 2019: The IRS released Revenue Procedure 2019-18 providing a safe harbor for professional sports teams when determining the value of player and staff-member contracts for the purpose of recognizing gain or loss on a trade, staff-member contract or draft pick.

April 11, 2019: The IRS issued corrections to proposed regulations (REG–104464–18) dealing with the amount of the deduction for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI).

April 12, 2019: The IRS issued a news release announcing 50 million people still needed to file their 2018 returns as the deadline approaches.

April 12, 2019:  IRS Commissioner Chuck Rettig released a message thanking taxpayers for filing their returns.

Special thanks to Terence McAllister in our New York office for this week’s roundup.




Weekly IRS Roundup March 4 – 8, 2019

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of March 4 – 8, 2019.

March 4, 2019: The IRS issued proposed regulations under Section 250 of the Code for determining domestic corporations’ deductions for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI).

March 4, 2019: The IRS issued a news release kicking off the annual list of what the agency terms the most prevalent or “Dirty Dozen” tax scams.

March 5, 2019: The IRS released Notice 2019-18 informing taxpayers that the Treasury Department and the IRS no longer intend to amend the required minimum distribution regulations under § 401(a)(9) of the Internal Revenue Code.

March 6, 2019: The IRS scheduled a public hearing for March 25, 2019, on proposed regulations relating to the Base Erosion and Anti-Abuse Tax.

March 6, 2019: The IRS released Notice 2019-20 providing a waiver of penalties under Sections 6722 and 6698 to certain partnerships for the 2018 tax year.

March 8, 2019: The IRS issued a news release postponing tax return filing and payment deadlines for victims of tornadoes and severe storms in parts of Alabama.

March 9, 2019: The IRS issued a news release advising business owners and self-employed individuals that Publication 5318 contains information of recent tax law changes that might affect their bottom line.

March 9, 2019: The IRS scheduled a March 20 public hearing on proposed regulations on hybrid entities and transactions under section 267A, and scheduled an April 10 public hearing on proposed regulations regarding withholding requirements.

Special thanks to Terence McAllister in our New York office for this week’s roundup.




Weekly IRS Roundup January 7 – 11, 2019

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of January 7 – 11, 2019. Tax news is very limited because of the government shutdown:

January 7, 2019: The IRS issued a news release confirming that, despite the partial federal government shutdown, it will process tax returns beginning January 28, 2019, and provide refunds to taxpayers as scheduled.

January 7, 2019: The IRS released the final 2018 version of Form 8996, dealing with certification as a qualified opportunity fund under section 1400Z-2 of the Code, enacted in the Tax Cuts and Jobs Act.

January 7, 2019: The IRS issued an announcement cancelling a public hearing—originally scheduled for January 10, 2019—on proposed regulations concerning qualified opportunity funds under section 1400Z-2 of the Code, in light of the partial federal government shutdown.

January 7, 2019: The IRS released final instructions for Form 8992, dealing with the calculation of global intangible low-taxed income under section 951A of the Code, enacted in the Tax Cuts and Jobs Act.

January 8, 2019: The IRS released the final 2018 version of Form 8992, dealing with the calculation of global intangible low-taxed income under section 951A of the Code, enacted in the Tax Cuts and Jobs Act.

January 11, 2019: The IRS issued a news release announcing the start of the IRS Free File program for this filing season and detailing new consumer protections that have been added to the program.

Special thanks to Le Chen in our DC office for this week’s roundup.




Bloomberg Tax: Prop. GILTI Regs: ‘Tested Income’

The Treasury and IRS recently issued proposed regulations under §951A.1 The regulations provide rules for determining the amount of the inclusion in a U.S. shareholder’s gross income of global intangible low-taxed income (GILTI).

The GILTI inclusion amount is the aggregate of a U.S. shareholder’s pro rata shares of tested income less tested losses from each directly and indirectly owned controlled foreign corporation (CFC), less 10% of its aggregate pro rata shares of qualified business asset investments (reduced by certain interest expense). 2 This article discusses the rules in the proposed regulations for determining a CFC’s tested income.

Read the full article.

Originally published in Bloomberg Tax: Tax Management International Journal, November 2018.




Weekly IRS Roundup September 10 – 14, 2018

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of September 10 – 14, 2018:

September 10, 2018: The IRS announced the following five new Large Business & International compliance campaigns: (1) Internal Revenue Code (Code) Section 199 Claims Risk Review; (2) Syndicated Conservation Easement Transactions; (3) Foreign Base Company Sales Income: Manufacturing Branch Rules; (4) Form 1120F Interest Expense/Home Office Expense; and (5) Individuals Employed by Foreign Governments and International Organizations. We discuss these new campaigns in more detail here and have reported about previous LB&I campaigns in the below blog posts.

September 13, 2018: Treasury and the IRS released proposed regulations under Code Section 951A, the new tax on global intangible low-taxed income earned by controlled foreign corporations. The proposed regulations include a number of anti-abuse provisions.

September 13, 2018: The IRS published Revenue Procedure 2018-48, which provides guidance regarding how certain amounts included in income under Code Sections 951(a)(1) and 986(c) are treated for purposes of determining whether a REIT satisfies the Code Section 856(c)(2) gross income test.

September 14, 2018: The IRS issued Notice 2018-73, which provides updated interests rates and guidance regarding the corporate bond monthly yield curve.

September 14, 2018: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandum and Chief Counsel Advice).

Special thanks to Kevin Hall in our DC office for this week’s roundup.




News of Wayfair Decision Breaks during Tax in the City® New York

The first New York meeting of McDermott’s Tax in the City® initiative in 2018 coincided with the June 21 issuance of the US Supreme Court’s (SCOTUS) highly anticipated Wayfair decision. Just before our meeting, SCOTUS issued its opinion determining that remote sellers that do not have a physical presence in a state can be required to collect sales tax on sales to customers in that state. McDermott SALT partner Diann Smith relayed the decision and its impact on online retailers to a captivated audience. Click here to read McDermott’s insight about the decision.

The event also featured a CLE/CPE presentation on the ethical considerations relative to tax reform by Kristen Hazel, Jane May and Maureen O’Brien, followed by a roundtable discussion on recent tax reform insights led by Britt Haxton, Sandra McGill, Kathleen Quinn and Diann Smith. Below are a few takeaways from last week’s Tax in the City® New York:

  • Supreme Court Update: Wayfair – Jurisdiction to Tax – The 5-4 opinion concluded that the physical presence requirement established by the Court in its 1967 National Bellas Hess decision and reaffirmed in 1992’s Quill is “unsound and incorrect” and that “stare decisis can no longer support the Court’s prohibition of a valid exercise of the States’ sovereign power.” This opinion will have an immediate and significant impact on sales and use tax collection obligations across the country and is something every company and state must immediately and carefully evaluate within the context of existing state and local collection authority. Click here to read McDermott’s insight about the decision.
  • Tax Reform: Ethical Considerations – Because of tax reform, taxpayers face increased uncertainty and will likely face increased IRS/state scrutiny for their 2017 and 2018 returns. Therefore, it’s crucial for taxpayers to be intentional about post-reform planning and compliance by coordinating among various departments (federal tax, state and local tax, employee benefits, treasury, operations, etc.). Taxpayers should understand the weight of various IRS and state revenue authority guidance, the IRS’s authority to issue retroactive regulations within 18 months of passing legislation, and how to take reasonable positions in the absence of guidance. They should also understand that the IRS is allowed more than three years to assess tax, even when there is an omission of global intangible low taxed income (GILTI) or when the tax relates to the Section 965 transition tax.
  • Tax Reform Changes to Employee Compensation and Benefit Deductions – Post-tax reform, all employees of US public companies, private companies with US publicly traded debt, and foreign issuers with ADRs traded on the US market are covered employees subject to the $1 million limit for deductible compensation. Though a grandfather rule applies if existing contracts are not materially modified, key questions about how to apply this rule remain. Tax reform eliminated the employer deduction for transportation subsidies (other than bicycle subsidies). It also reduced employers’ ability to deduct meal and entertainment expenses, and removed employers’ and employees’ ability to deduct moving expenses.
  • False Claims Act and Starbucks – False Claims Act actions involving state tax issues are becoming more and more [...]

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Tax Reform Insight: New Foreign Tax Credit Rules May Warrant Restructuring Foreign Branches

The 2017 Tax Act added a separate foreign tax credit limitation category, or basket, for income earned in a foreign branch. As a result, certain US groups may be limited in their ability to use foreign income taxes paid or accrued by a foreign branch as a credit against their US federal income tax liability.

This new limitation can present a problem for a taxpayer with losses in some foreign branches and income in other foreign branches. Consider, for example, a US consolidated group that has $1,000 of losses from Foreign Branch X and $1,000 of income in Foreign Branch Y on which it pays $200 of foreign income taxes. The group would have zero income in its foreign branch basket, and therefore the $200 of foreign taxes would not be currently usable as a foreign tax credit. The credits can be carried over to other tax years, but they may never be tax benefited if the above circumstances continue.

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