TaxReformLaw.com
content top

More Countries Joining the Transparency Trend

On October 29, more than 50 countries signed on to implement OECD standard for automatic exchange of information starting in 2017 or 2018.  The Secretary-General of the OECD, Angel Gurria, announced at the end of the Global Forum on Transparency and Exchange of Information for Tax Purposes that of the 123 Global Forum members, close to 90 agreed to implement the international standards.  The new measures will be employed by 51 of the signatories beginning in 2017 or 2018, with the remaining jurisdictions to follow thereafter. Signatories include countries that have historically shied away...
Continue Reading

New Inversion Notices Forthcoming

Our prior post on Notice 2014-52, Treasury’s crackdown on corporate inversions, outlined potential tools Treasury would consider using to counteract the attractiveness of inverting.  The Treasury Office of International Tax Council announced that at least one additional notice will likely be released prior to the issuance of the regulations, although the timing of the release is still unclear. Douglas Poms, senior counsel at the Treasury Dept., stated that the upcoming notice(s) will address earnings stripping and “additional inversion issues.”  Poms indicated, however, that if the...
Continue Reading

Treasury Dropping Hints on Earnings Stripping

Treasury Department officials are stating publicly the potential methods it is considering to reduce the benefit of inversion transactions through so-called “earnings stripping.”  According to reports of an October 29 panel discussion, Treasury is considering cutting back on interest deductions under section 163(j), or treating certain instruments as equity rather than debt under section 385. Treasury issued Notice 2014-52 in September (see our prior post), announcing forthcoming regulations which would impact what mergers would be within the purview of section 7874, the tax...
Continue Reading

Switzerland Moving Towards International Standards

Switzerland recently announced intentions for draft legislation to provide authority for amending existing double taxation avoidance agreements that would bring them in line with the OECD’s standard for exchange of information provisions.  The proposal would authorize the use of a unilateral extension to execute the amendments.  The amendments would apply the OECD standard to any existing treaty in which the counterparty agrees to exchange tax information with Switzerland upon request. In addition to the renegotiation of existing tax treaties (currently numbering 69), under the draft...
Continue Reading

Ireland Announces the End to the “Double Irish” Tax Structure

A tax structure often referred to as the “Double Irish” is being shut down by the Irish government, although companies that are currently utilizing the structure will have a five-year transition period before the new law eliminates the tax structure completely. Finance Minister Michael Noonan announced that Ireland’s 2015 budget is “abolishing the ability of companies to use the ‘Double Irish’ by changing [Ireland’s] residency rules to require all companies registered in Ireland to also be tax resident.” Under current Irish law, a company is an Irish tax resident if...
Continue Reading

The “Very Near Future” is Now: Treasury and IRS Release Anti-Inversion Notice

After much anticipation, the Treasury Department and IRS released new “anti-inversion” guidance on September 22, in Notice 2014-52.  The Notice announces forthcoming regulations that are targeted at reducing some of the perceived economic benefits of inverting.  The forthcoming regulations would apply primarily to companies which complete inversions on or after September 22, 2014, and generally would: Expand the reach of section 7874 inversion rules by requiring certain adjustments to the value of U.S. target and foreign acquiring corporation shares to reflect pre-transaction...
Continue Reading

Lew: Inversion Guidance Coming “Very, Very Soon,” Rather than Just in the “Very Near Future”

Anti-inversion guidance from Treasury is now a near-certainty, but when they arrive and how they will operate remains a mystery.  Treasury Secretary Jacob Lew used strong language to warn corporations against inverting in a September 17th interview with Bloomberg Television.  “Any company considering an inversion is now on notice that there is action that is going to be taken,” Lew said, warning that administrative action would come “very, very soon.”  On September 8th, Lew stated that Treasury would crack down on corporate tax inversions “in the very near future.”  Tax...
Continue Reading

Senator Wyden Renews Push for Tax Extenders

The Congressional tax agenda for the end of 2014 is now clear: tax extenders and inversions.  Even as inversions dominate the news, Senate Finance Committee Chairman Ron Wyden (D-Ore.) is continuing his push to pass legislation which extends expired tax provisions.  On September 15, Senator Wyden issued a statement on the need to renew expired tax provisions, stating that the actions are needed to provide certainty and relief to American workers and businesses.  Specifically, Sen. Wyden said that Congress’s failure to renew expired tax provisions is forcing American companies that are...
Continue Reading

Schumer-Durbin Target Earnings Stripping

The change from summer to fall did nothing to alter the focus of the Congressional tax debate – inversions.  To that end, two Senators have introduced a new bill on “earnings stripping.” Senators Charles Schumer (D-NY) and Dick Durbin (D-Ill.) introduced new legislation on September 11 that would significantly limit earnings stripping by inverted companies.  The Schumer-Durbin bill follows on the heels of, and in many ways closely resembles, a discussion draft introduced by Representative Sander Levin (D-Mich.)  (see our prior post on the Levin discussion draft).  Unlike the...
Continue Reading

State Legislators Getting in on Inversion Game

With numerous Congressional legislative proposals, and increasingly heated and political rhetoric, regarding corporate inversions, it was probably only a matter of time before state legislators entered the political fray. New Jersey state senator Shirley Turner (D-Mercer, Hunterdon) has proposed legislation which would deny certain state benefits to companies that have taken part in corporate inversions. Her two proposals would: Prohibit the state’s pension board from investing in companies that have been involved in a corporate inversion; and Make inverted companies ineligible for...
Continue Reading

Representative Levin Targets Earnings Stripping

Inversion transactions are making waves, and politicians are taking notice, with the number of legislative proposals dealing with inversions and other international tax issues growing at a fast rate. Of particular note, Representative Sander Levin (D-Mich.), the ranking member of the House Ways and Means Committee, released a discussion draft of the Stop Corporate Earnings Stripping Act of 2014 on August 1.  Among other changes, the discussion draft would tighten the so-called “earnings stripping” provisions of section 163(j) of the Internal Revenue Code by: Reducing a U.S....
Continue Reading

House Passes Bill to Make Bonus Depreciation Permanent

On July 11, 2014, the House of Representatives passed a bill to renew bonus depreciation and to make the provision permanent.  Bonus depreciation is one of several expired provisions that House Ways and Means Committee Chairman Dave Camp (R-Mich.) has made sought to make permanent. Bonus depreciation allows businesses to immediately deduct 50 percent of qualified purchased property and was one of the tax provisions that expired at the end of 2013.  The bill passed by the House makes a number of changes to the bonus depreciation provision such as expanding the definition of qualified...
Continue Reading

SALT Shaker: Alaska Supreme Court Determines Foreign-Source Dividends are Includable in the Apportionable Tax Base

The Alaska Supreme Court held that a foreign member of a water’s edge unitary group must include its foreign dividend income in the Alaska apportionable tax base, regardless of whether the income is “effectively connected income” (ECI) for federal income tax purposes. Alaska law incorporates the Internal Revenue Code, including the ECI rules, “unless excepted to or modified” by state law. The taxpayer argued that because the foreign-source dividends were not ECI for federal income tax purposes and were not included in federal taxable income, the income should not be included in the...
Continue Reading

Repatriation Holiday in the Driver’s Seat?

Senator Harry Reid (D-Nev.) and Sen. Rand Paul (R.-Ky.) are in negotiations on a one-time repatriation “holiday,” which would allow U.S. corporations to repatriate foreign earnings at a special reduced rate.  No proposal has formally been released, but reports on the negotiations say that the rate would be between 5 percent and 9.5 percent.  The short-term revenue increase would be used to replenish the Highway Trust Fund, the primary source of federal spending for roads and bridges.  The potential repatriation holiday would be similar to the 2004 repatriation holiday in...
Continue Reading

Internet Tax Freedom Act Extension Clears Congressional Committee

On June 18, the Judiciary Committee of the U.S. House of Representatives voted in favor of H.R. 3086, the Permanent Internet Tax Freedom Act (PITFA) by a vote of 30-4. PITFA permanently extends the moratorium on state and local taxation of Internet access and “multiple” or “discriminatory” taxes on electronic commerce. Background: The Internet Tax Freedom Act’s Expiration The Internet Tax Freedom Act (ITFA) is set to expire on November 1, 2014. In addition to permanently extending ITFA, PITFA will eliminate the “grandfather” provision that allows certain states to tax Internet...
Continue Reading