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International Tax Journal: Code Sec. 956 Proposed Regs

Code Sec. 951(a)(1)(B) requires a US shareholder of a controlled foreign corporation (CFC) to include in its gross income “the amount determined under section 956 with respect to such shareholder for such year….” This amount generally is the shareholder’s pro rata share of the average of the amounts of US property held by the CFC as of the close of each quarter. The amount of the inclusion is reduced by the amount of the CFC’s previously taxed income, and limited by its earnings and profits. Proposed Code Sec. 956 regulations generally would eliminate this Subpart F inclusion rule for corporate US shareholders, although not in all cases. In those cases where a CFC’s earnings are subject to taxation under Code Sec. 951(a)(1)(B), proposed foreign tax credit regulations would deny deemed paid foreign tax credits for foreign income taxes paid on the CFC’s earnings that are subject to taxation. Read more. Originally published in International Tax...

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Tax Reform Insights: IRS Proposes Section 163(j) Regulations – New Business Interest Expenses Deduction Limit

On November 26, 2018, the Internal Revenue Service (IRS) issued proposed regulations (Proposed Regulations) pursuant to section 163(j). Public Law 115-97, the Tax Cuts and Jobs Act (TCJA), amended Internal Revenue Code (Code) Section 163 by modifying paragraph (j) to limit the amount of business interest a taxpayer may deduct for taxable years beginning after December 31, 2017. The amendment generally limits the deduction for business interest to the sum of a taxpayer’s business interest income and thirty percent of a taxpayer’s adjusted taxable income (ATI) for the taxable year. The Code Section 163(j) limit is also increased by a taxpayer’s “floor plan financing interest,” which is certain interest used to finance the acquisition of motor vehicles held for sale or lease. Code Section 163(j)(8) defines ATI as a taxpayer’s taxable income computed without regard to: any item of income, gain, deduction, or loss which is not properly allocable to a trade or...

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Weekly IRS Roundup December 17 – 21, 2018

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of December 17 – 21, 2018: December 18, 2018: The IRS issued a news release providing guidance on excess business loss limitations and net operating losses following changes made by the Tax Cuts and Jobs Act. December 19, 2018: The IRS issued Revenue Ruling 2019-03, providing various prescribed rates for federal income tax purposes for January 2019. December 19, 2018: The IRS issued Revenue Procedure 2019-06, prescribing discount factors used in computing unpaid losses under section 846 of the Code, as amended by the Tax Cuts and Jobs Act. December 19, 2018: The IRS issued Notice 2019-04, extending temporary dyed fuel relief, initially provided in Notice 2017-30, through December 31, 2019. December 20, 2018: The IRS issued proposed regulations implementing anti-hybrid provisions under sections 245A(e) and 267A of the Code, enacted as...

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Proposed Regulations under Section 956 Provide Benefits for Corporate Taxpayers

On October 31, 2018, the Internal Revenue Service (IRS) and US Department of the Treasury (Treasury) released proposed regulations (REG-114540-18) (the Proposed Regulations) that would prevent, in many cases, income inclusions for corporate US shareholders of controlled foreign corporations (CFCs) under section 956. As a result, among other considerations, the Proposed Regulations could significantly expand the ability of corporate US affiliates to benefit from credit support of CFCs. Read the full article. 

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Weekly IRS Roundup October 15 – 19, 2018

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of October 15 – 19, 2018: October 16, 2018: The IRS issued Rev. Proc. 2018-54, which sets forth procedural rules for certain taxpayers that hold investments in one or more segregated asset accounts to elect to treat certain mortgage-backed securities as having deemed issuers for purposes of the diversification requirements of Internal Revenue Code (Code) Section 817(h). October 17, 2018: The IRS, in Qualified Intermediaries News, reminded entities seeking Qualified Intermediary, Withholding Partnership or Withholding Foreign Trust status with a withholding agreement effective in 2018 that the deadline for submitting the applications is November 16, 2018. October 18, 2018: The IRS issued Notice 2018-81, which describes the manner in which taxpayers should notify the IRS of revocation of an election to aggregate or disaggregate certain...

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Weekly IRS Roundup September 17 – 21, 2018

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of September 17 – 21, 2018: September 17, 2018: The Treasury Inspector General for Tax Administration (TIGTA) released a report reviewing whether the IRS complied with legal and internal guidelines governing the seizure of property for unpaid taxes. September 17, 2018: TIGTA released a second report compiling statistical information reported by the IRS in order to provide information about how the IRS uses its compliance resources and the resulting tax collections. September 18, 2018: The IRS published Revenue Ruling 2018-17, which provides the applicable federal interest rate for October 2018 and other interest rates. September 19, 2018: The IRS published Revenue Procedure 2018-49, which allows taxpayers that early adopted a method of revenue recognition to change such method to one described in Section 16.11 of Revenue Procedure...

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Weekly IRS Roundup August 27 – 31, 2018

Presented below is our summary of significant IRS guidance and relevant tax matters for the week of August 27 – 31, 2018: August 27, 2018: The IRS announced changes to its Compliance Assurance Process (CAP) program. We posted about the changes to CAP here. August 28, 2018: In Notice 2018-70, the IRS announced that it will issue proposed regulations clarifying the definition of a “qualifying relative” for various purposes, including the new $500 credit for certain dependents. August 30, 2018: The Office of Management and Budget (OMB) completed its review of a proposal to remove parts of the Internal Revenue Code Section 385 regulations, which address the treatment of debt among members of an expanded affiliated group. August 31, 2018: The IRS released Revenue Procedure 2018-58, which includes the current list of jurisdictions subject to reporting requirements for certain deposit interest paid to nonresident alien individuals. August 31, 2018: The IRS published...

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New Proposed Regulations Limit Use of Non-Government Attorneys

On March 28, 2018, the Treasury Department and Internal Revenue Service (IRS) published Proposed Regulation § 301.7601-1(b)(3)(i) and (ii) which permits the IRS to hire outside specialists to assist in determining the correctness of a taxpayer’s tax liability. The Proposed Regulation also contains an exception specifically prohibiting the IRS from hiring outside attorneys to review summoned information or question witnesses providing testimony under oath. The participation of outside attorneys became controversial during the audit of a large technology company when the IRS hired an outside law firm to augment its own resources for the transfer pricing audit of the company. On October 16, 2017, in response to the requirements of Executive Order 13789, requiring the Secretary of the Treasury to review all regulations issued after January 1, 2016, the Treasury Department and the IRS announced that they were considering proposing an amendment to Treas. Reg. §...

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