Conference Sparks Insights from Treasury Regarding New Tax Law

At an event organized by the District of Columbia Bar Community of Taxation on January 25, 2018, Treasury officials discussed the changes prompted by the recently passed tax legislation and how they affect a variety of different industries and areas.

Treasury is prioritizing guidance on changes that have immediate impacts on early financial statements. Among other guidance, Treasury will focus on projects involving qualified business income deduction under section 199A, changes to cost recovery under section 168, changes to the section 451 accrual method, and the revised section 163(j) interest expense limitations, particularly on how excess interest expense deductions would be carried forward for partners. There is no timeline yet for the Joint Committee on Taxation’s bluebook, an annual summary explaining recently enacted tax legislation typically released early in the year.

Read more: Treasury Weighing Impact of New Law as Guidance Plan Awaits; Interest Expense Limitation Presents Challenges for Partnerships

Treasury officials also commented that they believed the new foreign-derived intangible income provision (the so-called “FDII” benefit) would be compliant with the guidelines set out in Action 5 of the OECD’s BEPS project.  Action 5 states that patent box regimes should exclude income from trademarks and tie preferential treatment to research and developed to the country. EU foreign ministers have previously stated that as currently written, FDII would violate the OECD guidelines.  At the conference, Treasury officials indicated that they view the FDII rules as different from a patent box regime, in that the FDII rules are intended to achieve neutrality with respect to the location of intangibles, rather than create an incentive to hold intangibles in the United States.

Read more: Treasury Rep Defends TCJA Provision Against OECD Rules

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