Waiting for the Other Shoe to Drop: State and Local Tax Implications of Federal Tax Reform – International Tax Provisions
Posted on Mar 14, 2018
The state and local tax (SALT) impact of the recently enacted federal tax reform is still being assessed. Because of states’ broad conformity to the federal income tax laws, many of these changes will have an impact on taxpayers’ SALT liabilities. In their article for Bloomberg Tax, Eversheds Sutherland attorneys Jeff Friedman, Todd Betor and Michael Spencer focus on the SALT consequences stemming from the following international provisions of the Tax Cuts and Jobs Act: • a one-time “transition tax” on untaxed accumulated earnings and profits of controlled foreign corporations...
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Resignation of Treasury Official Expected to Result in Guidance Delays
Posted on Mar 12, 2018
Treasury Deputy Assistant Secretary of Tax Policy Dana Trier stepped down from his position on February 23. Trier’s role focused on developing guidance on various aspects of the new tax reform law, including the partnership and international tax provisions. Practitioners have expressed concern that his departure will result in delays in issuing regulations, which could result in taxpayers taking positions on their tax returns without guidance. His departure may also result in more non-binding “subregulatory guidance” through notices, announcements and press releases. Although Trier is gone,...
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Treasury Considering Treatment of Foreign Taxes Under Transition Tax
Posted on Mar 5, 2018
Under the new Tax Act, U.S. shareholders are charged a one-time tax on deferred foreign earnings of their foreign subsidiaries; these earnings and profits are measured as of November 2 if the amount is greater than on December 31. Taxpayers have brought to Treasury’s attention that the use of the November 2 date can result in an overstatement of earnings because foreign taxes generally do not accrue until year end. However, according to Gary Scanlon, from the Treasury’s Office of the International Tax Counsel, “Treasury is taking its time thinking through exceptions and ways to modify the...
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Treasury to Issue Regulations Limiting Exclusion to the New Carried Interest Holding Period to C Corporations
Posted on Mar 2, 2018
The legislation formerly known as the Tax Cuts and Jobs Act extended the section 1061 carried interest holding period from one year to three years. However, section 1061(c)(4) provided an exception for “any interest in a partnership directly or indirectly held by a corporation.” The reference to a corporation arguably applies to both S corporations and C corporations, which provides the opportunity for the use of S corporations to avoid the three year holding period. As a result, the recently released Notice 2018-18 provides that S corporations are not corporations for the purposes of...
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The Treasury Department Anticipates Releasing a Notice on IRC 163(j) in the Near Future
Posted on Feb 21, 2018
Krishna Vallabhaneni, Treasury deputy tax legislative counsel, recently stated that the Treasury Department plans on issuing a notice in the coming weeks to address some of the recent issues related to amended IRC 163(j) (interest expense deductions). Some of the specific issues the notice will address include the treatment of carryovers and limitations under the previous section 163(j), its application to partnerships, and whether the provision will be applied on a consolidated group basis. Read more: Interest Expense Deduction Notice Expected in Coming Weeks
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EU Finance Ministers Debate the EU’s Response to the 2017 Tax Act
Posted on Feb 20, 2018
Finance ministers from key EU countries, including France, Germany and Italy, are questioning whether some of the provisions of the 2017 tax act are contrary to World Trade Organization (WTO) rules. The finance ministers are currently reviewing whether to file a complaint with the WTO out of concern that the tax act will spark a race to the bottom with respect to tax rates. EU finance ministers are also considering whether pushing forward with their own tax reform project—the creation of a common EU tax scheme –would address their concerns. Read more: EU Mulls Retaliation over Trump Tax...
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IRS Releases Revenue Procedure Limiting Changes to Annual Accounting Periods
Posted on Feb 15, 2018
The IRS has restricted the ability of taxpayers to make certain changes in accounting periods, through the issuance of Revenue Procedure 2018-17. The revenue procedure modifies Revenue Procedure 2002-39 and Revenue Procedure 2006-45, which deal with approval for changes to annual accounting periods. The modification generally denies automatic approval for changes to tax years of specified foreign corporations that otherwise would have a tax year corresponding to calendar year 2017, in order to address issues related to section 965 (the transition tax on deferred foreign earnings). Read the...
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Eversheds Sutherland Releases Videocast on the Interest Deduction Limitation under Section 163(j)
Posted on Feb 13, 2018
Eversheds Sutherland (US) LLP recently released a videocast covering the broadly applicable limitation on the ability to deduct interest under Section 163(j), enacted as part of the recent tax act. This short video includes an overview of the limitation, the differences between the current and prior limitation, and the exceptions to the limitation. Listen to the video: The Interest Deduction Limitation under Section 163(j)
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Eighteen Guidance Priorities and New Projects Released in Second Quarter Update to Priority Guidance Plan
Posted on Feb 12, 2018
The second quarter update to the 2017-2018 Priority Guidance Plan was released by the Treasury and IRS this past Wednesday. It sets forth eighteen priorities for guidance on tax issues stemming from the Tax Act, including for new sections 965 and 163(j), and other international sections. The update also contains projects that are hoped to be completed through June 30, 2018. These include guidance on section 861 (addressing how to allocate interest expense and characterize income) and section 367 (treatment of property transfers to foreign corporations). Read the second quarter update here....
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Videocast: Eversheds Sutherland Releases Videocast on the new BEAT provision
Posted on Feb 8, 2018
Eversheds Sutherland (US) LLP recently released a videocast, discussing the new Base Erosion and Anti-Abuse Tax (“BEAT”). This brief video walks through an example of how BEAT would be calculated. View it here: Tax Reform: Base Erosion and Anti-Abuse Tax (BEAT)
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Eversheds Sutherland Releases Videocast Providing a Basic Overview of International Tax Provisions
Posted on Feb 7, 2018
Eversheds Sutherland (US) LLP recently released a videocast which provides a brief overview of the impact of international tax provisions. This short video provides a concise overview of various international provisions in the recent legislation formerly known as the Tax Cuts and Jobs Act, including those related to the reduced corporate tax rate, the shift to a hybrid territorial/worldwide system and base erosion (including BEAT and hybrid transactions). Over the next few days, additional videocasts on the base erosion and anti-abuse tax (BEAT), the global intangible low-taxed income...
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White House Requests $90 Million Funding for Implementation of Tax Cuts and Jobs Act
Posted on Feb 6, 2018
Congress is expected vote on a funding bill this week to avoid a government shutdown. President Trump has requested that $90 million be added to the bill to fund the IRS’s implementation of the Tax Cuts and Jobs Act. This amount falls short of the $397 million that the Treasury Department had estimated it would cost for the IRS to respond to the Act. Read more: House GOP Scrambles to Avoid Shutdown; Interpreting the Market
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Regulations and Notices to Provide Guidance on New Tax Bill
Posted on Feb 5, 2018
As the early guidance period for the new tax bill continues, the Treasury and IRS plan to shift to focusing on developing regulations over the next six months. A less notice-oriented approach is expected, with only five to ten limited-scope notices addressing basic questions, such as section 163(j) business interest issues, anticipated. IRS and Treasury tax reform projects will be included in the soon-to-be-released amended 2017-2018 priority guidance plan and are predicted to tackle repatriation provisions and other major international provisions, including base erosion, GILTI, and FDII....
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How Will Georgia Conform to Federal Tax Reform? Annual Legislation Introduced
Posted on Feb 5, 2018
The Georgia Legislature has introduced its annual Internal Revenue Code (IRC) conformity bill—HB 821. Georgia conformity is typically updated annually to apply for the most recent tax year. In light of the recently enacted federal tax reform, this year’s conformity bill will receive particular attention because of what tax reform provisions Georgia chooses to adopt and not to adopt. View the full Legal Alert.
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Chamber of Commerce Provides Feedback on Notice 2018-07
Posted on Feb 2, 2018
The U.S. Chamber of Commerce recently released recommendations for further guidance in response to Notice 2018-07, which provides guidance related to section 965 (the transition tax on deferred foreign earnings). The recommendations include excluding short-term loans from foreign affiliates to a U.S. parent from aggregate foreign cash if they have previously triggered a taxable inclusion, and providing guidance on avoiding double counting of earning and profits. The Chamber made 13 recommendations in total. Read more: Chamber of Commerce Tackles Transactions Tax Guidance...
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