Legal Alert: Biden’s second (attempted) bite at the private equity apple – Key 2023 Green Book proposals impacting private equity funds and their investors
Posted on Apr 1, 2022
On March 28, 2022, the Biden Administration released the 2023 Fiscal Year Budget (the Budget) followed by the release of the Treasury’s Green Book, which provides explanations of the Biden Administration’s revenue proposals. Of the numerous tax proposals, several are of critical importance to private equity funds, their sponsors and investors. At the core of the Biden Administration’s proposals is “ensuring that the wealthiest Americans and the biggest corporations begin to pay their fair share.”1 A brief summary of certain key tax proposals impacting the private equity fund universe is...
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Legal Alert: Billionaires, BEAT, and Basis-Shifting – 2023 Green Book proposes tax changes affecting corporations, partnerships and individuals
Posted on Mar 31, 2022
On March 28, 2022, the Biden Administration released the 2023 Fiscal Year Budget (the 2023 Budget). It is important to note that the Budget assumes the Build Back Better Act (the BBBA) will be enacted as passed by the House on November 19, 2021 (other than Section 137601 of the BBBA, which would increase the cap on the federal tax deduction for state and local income and real estate taxes (the SALT cap)). The 2023 Budget contains proposals that would be in addition to those included in the BBBA. Highlights of the BBBA are covered in prior alerts located here and here. Among many other items,...
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Treasury Green Book includes Pillar II undertaxed payments rule (UTPR), corporate tax increase rate
Posted on Mar 29, 2022
On March 28, the Biden Administration released the 2023 Fiscal Year Budget, followed by the release of the Treasury’s Green Book, which provides explanations of the Biden Administration’s revenue proposals. Among the proposals is the adoption of the OECD’s Pillar II undertaxed payments rule (UTPR) in lieu of the Base Erosion Anti-Abuse Tax (BEAT). The UTPR denies a deduction or requires an equivalent adjustment to the extent the income of a constituent entity under the scope of Pillar II’s global minimum tax is taxed under the 15% tax rate threshold. The proposal would repeal BEAT and...
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Legal Alert: IRS provides additional guidance on cost of removal, salvage and normalization
Posted on Oct 20, 2021
In PLR 202141001 (July 15, 2021) the IRS expanded upon the guidance it provided in PLR 202033002 (Aug. 14, 2020) regarding the proper ratemaking treatment of cost of removal (COR) and salvage under the normalization rules. As explained in our alert, the IRS: Reaffirmed that COR is not subject to the normalization rules, but salvage must be normalized. The computation of the reversal of the excess tax reserve created by the rate Tax Cuts and Jobs Act (TCJA)1 by taking into account the COR component of depreciation is inconsistent with the normalization rules. Conversely, the computation of...
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Legal Alert: Significant, Proposed Limitations on IRA Investments Included in House Legislation
Posted on Oct 5, 2021
On September 27, 2021, the Build Back Better budget reconciliation legislation was introduced in the House of Representatives (the Legislation), which includes numerous revenue raisers and other tax-related changes. While many of these proposals have garnered much attention (increases in individual and corporate rates, among others), limitations on investments that can be held by individual retirement accounts (IRAs) could, if enacted, have a significant impact as well. Read the full legal alert here.
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New cryptocurrency tax law proposals by the House Ways and Means Committee
Posted on Oct 4, 2021
On September 13th, the House Ways and Means Democrats proposed legislative changes 1 that, if enacted, would impact the manner in which gain or loss is determined with respect to actual or certain deemed sales of cryptocurrencies. The legislation recently underwent the markup process and is now with the House Budget Committee. 2 The proposals generally extend the “wash sale rule” and the “constructive sale rule”, which ordinarily only apply to certain transactions involving stock and other securities, to also apply to “digital assets,” such as cryptocurrencies. These amendments may present...
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Legal Alert: The devil is in the details – Final infrastructure framework announced, fingers crossed for continued R&E deductibility
Posted on Sep 23, 2021
Democratic leadership announced today that an agreement has been reached to fund the pending infrastructure and budget reconciliation measures. There does not appear to be any agreement regarding which specific tax measures that will be included, however, it is hoped that continued deductibility of research and experimental (R&E) expenditures will be included. Read the full legal alert here.
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Legal Alert: An incomplete picture: Democratic senators release “framework” for international tax overhaul
Posted on Aug 31, 2021
On August 25, 2021, Senate Finance Committee members Wyden, Brown, and Warner released draft bill language and a section-by-section summary of their proposed International Tax Reform Framework. The legislative language is generally in line with the International Tax Overhaul proposals first released by the Senators on April 5, 2021. The draft legislation includes some provisions similar to provisions that were included in the Green Book released by Treasury on May 28, 2021, including, in particular, modifications to the Global Intangible Low-Taxed Income (GILTI) rules that were enacted as...
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Last ditch effort to narrow reporting requirements on crypto denied; alternative avenues still remain for industry to reduce scope of new rules
Posted on Aug 19, 2021
The Senate approved the Infrastructure Investment and Jobs Act (H.R. 3684) (the Act), advancing the new legislation to the House for consideration. In an effort to raise revenue for part of the overall $1 trillion in infrastructure spending, the Act contains language that would amend federal law on digital asset information reporting by expanding reporting requirements for brokers, including the requirement that businesses report all cryptocurrency transactions exceeding $10,000. Specifically, the Act modifies the definition of “broker” under Section 6045 of the Internal Revenue...
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Legal Alert: Rev. Proc. 2021-34, IRS guidance for implementing the final Section 451 regulations
Posted on Aug 17, 2021
On August 12, 2021, the IRS released Rev. Proc. 2021-34, setting forth procedural guidance to implement the final Section 451 regulations (Final Regulations). In a lengthy 70-page piece of guidance, the revenue procedure not only provides accounting method changes and the terms and conditions to comply with the Final Regulations by its effective date, (tax years beginning on or after January 1, 2021), it also permits taxpayers to early adopt the Final Regulations for the 2020 tax year. With the addition of six new automatic accounting method changes, as well as the myriad of modifications...
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Legal Alert: Budget Reconciliation Act I – Setting the Stage: Senate provides slim details of Budget Resolution Agreement
Posted on Aug 11, 2021
On Monday, August 9, the Senate released the framework for the Fiscal Year 2022 Budget Resolution Agreement, and subsequently passed the resolution in a 50-49 partisan vote on August 10. The resolution now goes to the House, as both chambers of Congress must pass the final reconciliation bill. The framework totals $3.5 trillion in Budget Reconciliation instructions. The instructions aim for “every major program proposed by President Biden to receive robust funding.” While details on the Budget Reconciliation are slim, the framework provides hints at what is to come. Read our Legal Alert...
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New proposed legislation adds information reporting requirements for digital assets
Posted on Aug 5, 2021
The proposed Infrastructure Investment and Jobs Act would explicitly impose information reporting on cryptocurrency transfers in the same way information reporting is required on transfers of stock or securities. Therefore, both sales price and “basis” – typically original acquisition price – would be reported to the IRS, which would inform the IRS of a taxpayer’s sale of cryptocurrency, and allow the IRS to ascertain gain associated with the sale of a unit of cryptocurrency. These items are already required to be independently reported by a taxpayer on a tax return. Notably,...
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Legal Alert: Making a Manchin out of a molehill – Senate infrastructure and budget debates heat up
Posted on Jul 15, 2021
Fresh from their July 4 recess, the Senate has returned to Washington to continue infrastructure and budget bill negotiations. As previously discussed, there are two distinct legislative paths making their way through Congress: (1) a bipartisan infrastructure package; and (2) a Democratic budget reconciliation bill focusing on family aid, healthcare, and a global minimum tax. Important to the passage of both bills appears to be Sen. Joe Manchin (D-WV). On Tuesday, July 13, Sen. Manchin told reporters that he would not support a bipartisan infrastructure bill or a Democratic-only budget bill...
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Legal Alert: IRS issues new Section 45Q CCUS ruling
Posted on Jul 9, 2021
The IRS issued Revenue Ruling 2021-13 on July 1, 2021, which provides additional guidance regarding the section 45Q carbon capture, utilization and storage (CCUS) credit. More specifically, the ruling concludes that: A taxpayer needs to own only one component of carbon capture equipment within a single process train to be the person that is entitled to the tax credit.For section 45Q purposes, the placed in service date of the single process train is the date on which the new components of carbon capture equipment are installed, notwithstanding the inclusion of existing equipment in the...
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Legal Alert: Downsizing from a House to a Manchin: Federal and International tax negotiations continue
Posted on Jul 8, 2021
As Congress and the White House look to make a deal on infrastructure by this summer, negotiations regarding changes in the tax law continue. Since our prior alert, while progress has been made regarding a bipartisan infrastructure deal and a minimum global tax, the details of most corporate tax proposals have yet to be decided. Of course, the most pressing question remains – What will Sen. Joe Manchin do? As the “swing vote” in the 50-50 split Senate, Democrats need all members on board to pass any legislation through the reconciliation process, which will by necessity be less...
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Legal Alert: IRS extends continuity safe harbor for renewable energy projects
Posted on Jun 30, 2021
On June 29, 2021, the IRS issued Notice 2021-41, which provides a further extension of the continuity safe harbor and revises the “facts and circumstances” rules:- For PTC and ITC-eligible projects for which construction began in calendar years 2016 through 2019, the continuity safe harbor is extended to six years.- For PTC and ITC-eligible projects for which construction began in 2020, the continuity safe harbor is extended to five years.- Under a facts and circumstances analysis, the continuity requirement may be satisfied under either the continuous construction test or the continuous...
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Legal Alert: FY 2022 Green Book goes big for green energy
Posted on Jun 1, 2021
On May 28, 2021, Treasury released the General Explanations of the Administration’s Fiscal Year 2022 Revenue Proposals, more commonly referred to as the Green Book. The issuance of the Green Book provides further detail on the White House’s American Jobs Plan, one of the major proposals in the development of an infrastructure bill. The Green Book’s release comes as Congress works through its own proposals. While the various proposals have differences in approach, they indicate strong, continued and expanded support for green energy tax initiatives. Read the full Legal Alert...
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Legal Alert: Warren bill fundamentally changes financial account reporting requirements and substantially increases IRS funding
Posted on May 28, 2021
On May 24, 2021, Sen. Warren introduced Senate Bill 1788, the “Restoring the IRS Act” (the Proposed Legislation). The Proposed Legislation generally (1) imposes new information reporting obligations on financial institutions relating to various types of transaction information associated with an account of an individual or business at that institution, (2) provides for significantly increased IRS funding, (3) requires certain reports to Congress relating to IRS enforcement priorities, the tax gap, and racial disparities relating to IRS enforcement, (4) increases underpayment penalties under...
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Legal Alert: Rev. Proc. 2021-26 provides accounting method change procedures for CFCs seeking to use the alternative depreciation system
Posted on May 26, 2021
Recently released Revenue Procedure 2021-26 (the Revenue Procedure) provides taxpayers with guidance regarding accounting method changes made on behalf of foreign corporations. The Revenue Procedure: Allows controlled foreign corporations (CFCs) to obtain automatic consent to change depreciation methods to use the alternative depreciation system under section 168(g) (ADS) (or to change the convention or recovery period under ADS) for purposes of calculating taxable income and earnings and profits (E&P).Updates the rules for the computation of section 481(a) adjustments...
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State of play: A May methods update
Posted on May 19, 2021
At last week’s ABA May Tax Meeting, government attorneys from both the Internal Revenue Service National Office Income Tax & Accounting division (IT&A) and the Department of the Treasury provided updates to taxpayers and practitioners on the status of guidance projects, and offered clarification regarding certain recent legislative proposals. IT&A leadership acknowledged that while during the onboarding of a new administration the guidance process tends to slow, the Biden Administration came in quickly with experienced leadership, ready to work and “firing on all cylinders.” Our...
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The Made in America Tax Plan Webcast Series
Posted on May 11, 2021
This three-part series focused on President Biden’s Made in America Tax Plan and addressed changes to federal provisions, energy taxes and changes for companies with non-US operations.April 21 | An Overview of the Legislation Highlighting Key Federal Tax ProvisionsAs part of Biden’s American Jobs Plan, the President has rolled out his opening offer to change the American corporate tax rules to incentivize job creation and investment in the United States, reduce and prevent profit shifting outside the United States, and promote tax equity. Entitled the “Made in America Tax Plan,” the package...
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Who in the world is Joe Manchin: International tax proposals vary under Biden, Senate proposals
Posted on Apr 23, 2021
Just a few months after regulations were finalized, and as taxpayers were getting comfortable with the international tax provisions implemented by the 2017 Tax Cuts and Jobs Act (TCJA), proposals from President Biden1 and the Senate Finance Committee2 to overhaul international tax have arrived. While similarities are present between the two proposals, including raising the corporate tax rate, restructuring GILTI, and virtual replacement of the current BEAT and FDII regimes, the specific rates and details vary. Read our highlights from the current proposals from President Biden and the...
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Treasury and IRS Release Final Regulations under Section 163(j) with respect to Partnerships and CFCs
Posted on Jan 5, 2021
On January 5th, the Department of the Treasury and the Internal Revenue Service released final regulations under section 163(j). Amended by the Tax Cuts and Jobs Act (TCJA), section 163(j) generally limits a taxpayer’s interest deduction to the sum of its business interest income, floor plan financing interest, and 30% of its adjusted taxable income (ATI). The regulations finalize portions of the regulations that were proposed in September 2020, which related to the application of section 163(j) to partnerships and controlled foreign corporations (CFCs). The final regulations generally...
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OMB Completes Its Review of Proposed Regulations under Section 163(j)
Posted on Jan 5, 2021
The Office of Management and Budget (OMB) has completed its review of proposed regulations under section 163(j). Section 163(j) generally limits a taxpayer’s interest deduction to the sum of its business interest income, floor plan financing interest, and 30% of its adjusted taxable income. The proposed regulations provide rules applicable to partnerships and controlled foreign corporations in calculating interest limitations under section 163(j) for such entities and their owners. Read More: Final Business Interest Deduction Regs Possibly Days Away
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