The European Commission on 12 April proposed an initiative to require large multinationals to disclose publicly their profits, taxes, employee headcount and other information for each European Union country in which they operate, and for certain yet-unidentified tax haven jurisdictions. Companies would also have to disclose aggregated information regarding their businesses outside the European Union and in the designated tax havens. Under the proposal, the information would be disclosed for a period of at least five years on the company's website, and on an official register in the EU. This proposal must now go through the approval process in Europe and if adopted, EU member states would have one year to enact conforming national legislation.

This initiative is separate from the OECD Base Erosion and Profit Shifting (BEPS) action on country-by-country (CbC) reporting, which requires more detailed information to be shared among tax authorities and that would not be made public. The European Commission underscored that the purpose of the latest EU initiative is to help EU citizens understand how much and where EU companies pay taxes, in contrast to CbC reporting, which is aimed at assisting tax authorities in tax compliance.

The distinction between CbC reporting under Action 13 of the BEPS project and the latest EC proposal IS important. Robert Stack, Treasury deputy assistant secretary (international tax affairs) in March said that while the United States supports CbC reporting, a minimum standard agreed to as part of the Action 13 BEPS project, the US would stop the sharing of such information with any country that publicly discloses the CbC data. However, unlike CbC reporting under Action 13 of the BEPS project, the proposal by the European Commission would impose a requirement to comply directly on large multinationals to report the information on the company website and an official EU register.

Similar to BEPS Action 13 on country-by-country reporting, the EC proposal would require reporting by a multinational company with annual revenue in excess of EUR 750 million. The European Commission's reporting requirement is proposed to apply to any multinational company — European or not — that is currently active in the EU's single market with a permanent presence in the Union. Groups based outside the EU could designate a single EU subsidiary or branch to file the group's information in the EU. An EC fact sheet is available. An EY Tax Alert provides details.

In regard to the ongoing controversial EU state aid investigations, a top EU official was recently in Washington meeting with US officials, including Treasury Secretary Jack Lew. Treasury officials have said publicly they believe the EU is unfairly targeting US multinationals and that the investigations amount to retroactive taxation.

EU Competition Commissioner Margrethe Vestager was quoted as saying after the latest meetings that findings of illegal state aid do not amount to retroactive taxation because the EU is applying existing law that has not changed to prior years. US officials have recently hinted they are considering the use of Code Section 891 if they conclude that the EU is unfairly discriminating against US companies. Section 891, which has never been invoked by any US President, allows for the doubling of the rate of tax of citizens and foreign corporations of foreign countries if the President determines that US citizens or corporations are being subject to discriminatory or extraterritorial taxes.

In other news, a senior Senate Finance Committee aide was quoted as saying this week that Finance Committee Chairman Orrin Hatch's draft corporate integration plan may include a nonrefundable withholding tax rate of 35%, imposed on both interest payments and dividends. According to the aide, such a proposal would be aimed at blurring the current more favorable tax treatment of debt over equity.

Chairman Hatch earlier indicated he may release his corporate integration proposal sometime in May.

Also this week, the Senate Finance and House Ways and Means Committees introduced a technical corrections package in the House and Senate (S. 2775 and H.R. 4891). The measures are identical and would provide technical corrections for drafting errors to recently enacted tax legislation, such as the 2015 tax extenders deal enacted last December.

The IRS on 13 April proposed regulations (REG-133673-15) that clarify the determination of the amount and timing of Section 305(c) deemed distributions that result from adjustments to rights to acquire stock, including deemed distributions on convertible bonds arising from adjustments to conversion ratios. The proposed regulations also address withholding and reporting obligations relating to these deemed distributions.

The preamble states that the IRS has concluded that deemed distributions should be viewed as distributions of additional rights to acquire stock (the amount of which is the fair market value of that right). Specifically, under the proposed regulations, the amount of the deemed distribution would be the excess of (A) the fair market value of the right to acquire stock over (B) the fair market value of the right to acquire stock without the applicable adjustment, both determined immediately after the applicable adjustment.

In regard to withholding, the proposed regulations provide guidance to withholding agents regarding their obligations to withhold on deemed distributions under Section 305(c) with respect to certain payments to foreign persons on amounts subject to withholding under Sections 1441 and 1442. The proposed regulations also address withholdable payments in accordance with FATCA (Sections 1471 — 1474). The proposed changes aim to address concerns from withholding agents about ambiguities in the law, particularly when no cash payment corresponds to a deemed distribution or a withholding agent (other than the issuer) lacks knowledge of a deemed distribution.

The proposed withholding regulations would apply to payments made on or after the date final regulations are published. However, withholding agents may rely on these proposed regulations for deemed distributions under Section 305(c) occurring on or after 1 January 2016. An EY Tax Alert provides details.