Eversheds Sutherland Tax Reform Law Blog
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Treasury and IRS Release Final Regulations under Section 163(j) with respect to Partnerships and CFCs

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)

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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Treasury and IRS Release Final Regulations under Section 451

On December 22, the Department of the Treasury and the Internal Revenue Service released final regulations under section 451(b) and (c). Section 451(b) generally provides that a taxpayer must recognize income no later than when the taxpayer takes the income into account on its applicable financial statement, and section 451(c) provides rules regarding the timing of the recognition of advance payments. The regulations generally finalize regulations proposed in September 2019 with certain changes, such as adding additional special methods of accounting under Treas. Reg. §1.451-3(c)(5). Read...
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Tax on Broadband Service Providers is New York’s Newest Bad Idea

Companion bills recently introduced in New York State (A. 11180 and S. 9112) would impose a temporary tax on businesses that provide broadband internet access service.  Revenues generated from the tax would be earmarked to fund the provision of broadband internet access services to students in the state during the COVID-19 pandemic. The tax proposal would assess an “annual charge” on a provider’s “gross intrastate telecommunication revenue”— which remarkably is undefined.  Also astonishing is the lack of a tax rate — the New York State Department of Taxation and Finance is directed...
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District Court Holds Section 965 Constitutional

On November 19, the U.S. District Court for the Western District of Washington held that the transition tax under section 965 was constitutional. Section 965, enacted by the Tax Cuts and Jobs Act, generally imposes a transition tax on a US shareholder’s pro rata share of the accumulated earnings and profits of certain foreign corporations. The court found that the transition tax was a tax on income allowed under the Sixteenth Amendment and that the transition tax did not violate due process. Read More: Moore v. United States
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Treasury and IRS Release Final Regulations under Section 245A and Section 951A Anti-Abuse Rules

On November 20, the Department of the Treasury and the Internal Revenue Service released final regulations under sections 245A and 951A. The rules coordinate two anti-abuse rules directed at certain transactions that occurred in 2018 between related controlled foreign corporations. The guidance generally finalizes proposed regulations issued in August 2020, except that the final regulations expand the application of the disqualified basis reduction rule under section 951A. Read More: Final RegulationsRead More: Prior Proposed Regulations
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Something to Keep an Eye On: Texas Comptroller Says Web-Based Services for Eye Doctors Is Taxable Data Processing

The Texas Comptroller of Public Accounts issued a private letter ruling concluding that several services provided to optometrists and ophthalmologists were subject to sales tax as data processing.  Specifically, the Comptroller determined that the taxpayer’s web-based software system, which doctors use to manage patient relationships, schedule appointments, refill prescriptions, and communicate about treatment, is a taxable data-processing service.  The taxpayer’s software “captures and sends data” to and from the taxpayer’s servers and, according to the Comptroller, constitutes...
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Treasury and IRS Release Final and Proposed Foreign Tax Credit Regulations

On September 29, the Department of the Treasury and the Internal Revenue Service released final and proposed regulations that provide guidance with respect to the calculation of foreign tax credits. The final regulations address a variety of computational issues, such as the allocation and apportionment of deductions under sections 861 through 865, the allocation of apportionment of foreign taxes, and the application of the foreign tax credit limitation to consolidated groups. The proposed regulations also address a variety of issues, such as the determination of foreign income taxes subject...
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Mississippi DOR issues marketplace facilitator guidance for food delivery

Mississippi Notice 72-20-09 provides additional guidance on Mississippi’s marketplace facilitator law, which took effect on July 1, 2020. The Notice explains that a sale facilitated and delivered by a third-party food delivery service is not a “retail sale” by the facilitator. Rather, the restaurant will charge sales tax on the selling price it charged for the food. But if a third-party delivery company additionally makes direct sales of items from its own inventory, the delivery company must collect and remit sales tax on those sales.
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Treasury and IRS Release Final Regulations on Sales by Foreign Persons of Certain Partnership Interests

On September 21, the Department of the Treasury and the Internal Revenue Service released final regulations under section 864(c)(8). Section 864(c)(8) generally treats gain from the sale or exchange by a nonresident alien individual or foreign corporation of an interest in a partnership that is engaged in a trade or business in the United States as effectively connected with such trade or business. The final regulations generally adopt proposed regulations issued in 2018 that provided rules for determining the amount of gain or loss treated as effectively connected with the conduct of a...
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Treasury and IRS Release Final Regulations on Full Expensing under Section 168(k)

On September 21, the Department of the Treasury and the Internal Revenue Service released final regulations under section 168(k). Amended by the Tax Cuts and Jobs Act, section 168(k) generally allows full expensing of certain depreciable property. The final regulations generally finalize proposed regulations released in 2019 that address the requirements to qualify for the additional depreciation deduction. Read More: Final RegulationsRead More: 2019 Proposed Regulations
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Treasury and IRS Release Final and Proposed Regulations on Downward Attribution under Section 958(b)

On September 21, the Department of the Treasury and the Internal Revenue Service released final and proposed regulations addressing the repeal of section 958(b)(4) by the Tax Cuts and Jobs Act (TCJA). Prior to the TJCA, section 958(b)(4) provided that section 318(a)(3) (downward attribution) did not apply to treat a US person as owning stock owned by a person who is a not a US person. The final regulations generally modify provisions of the Code outside of subpart F and are intended to ensure that the provisions operate in a manner consistent with their operation prior to the repeal of...
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Treasury and IRS Release Final BEAT Regulations

On September 1, the Department of the Treasury and the Internal Revenue Service released final regulations under section 59A. Section 59A imposes a base erosion and anti-abuse tax (or BEAT), which generally operates as a minimum tax on income without regard to certain deductible payments made to foreign related parties. The final regulations finalize proposed regulations that were issued in December 2019 and generally provide guidance with respect to the determination of a taxpayer’s aggregate group, provide an election to waive deductions in order to avoid triggering BEAT, and detail...
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Treasury and IRS Release Final and Proposed Regulations under Section 245A

On August 21, the Department of the Treasury and the Internal Revenue Service released proposed and final regulations under section 245A.  Section 245A allows a 100% deduction to a corporate US shareholder for the foreign-source portion of dividends received from a specified 10% owned foreign corporation (SFC). The final regulations limit the deduction for certain dividends received by United States persons from foreign corporations under section 245A and the look-through rule in section 954(c)(6) for certain dividends received by controlled foreign corporations. The proposed regulations...
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OIRA Completes Review of Final and Proposed Regulations under Section 245A

On August 7, the Office of Information and Regulatory Affairs (OIRA) completed its review of regulations finalizing temporary regulations issued last June related to the 100% deduction available to a corporate US shareholder for the foreign-source portion of dividends received from a specified 10% owned foreign corporation (SFC) under section 245A and the look-through rule under section 954. OIRA also completed its review of new proposed regulations that would provide coordination rules regarding the anti-abuse rules under sections 245A and 951A, relating to global intangible low-taxed...
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