Senate Finance Committee Democrats are working with the Joint Committee on Taxation to craft further measures to target corporate inversions as well as "mini reforms" to the US international tax system, according to senior congressional staff members quoted in the tax press. It is not yet clear if the activity will result in a discussion draft, a bill, or some other work product.

Finance Committee Chairman Orrin Hatch's long-awaited corporate integration discussion draft is also in the final stages, according to a congressional staffer. The hold-up reportedly is key data from the Joint Committee on Taxation.

The US government and the EU continue to be at odds on the issue of the ongoing EU state aid investigations. Speaking at a Washington tax conference this week, Robert Stack, Treasury deputy assistant secretary (international tax affairs) called the investigations an "extraordinary mess" and an "expansive reinterpretation" of European competition law and principles espoused in the recent OECD BEPS transfer pricing final reports. An EU official at the conference responded by saying the arm's length principle is recognized as a nondiscrimination measure by the European Court of Justice. Moreover, he said the European Commission's sole aim in the state aid investigations is to end market distortions.

Meanwhile, EU Competition Commissioner Margrethe Vestager was reported to have earlier reassured OECD officials that the European Commission was not attempting to recast the OECD's transfer pricing guidelines and would follow the OECD guidelines in their state aid analysis of transfer pricing rulings.

US Congressional tax leaders in recent months have voiced increasing concern over the state aid investigations, which have been described by many in the government as unfairly targeting US multinationals. Speaking on their own behalf this week, senior Congressional staffers were quoted as calling the EU actions a "retroactive theft of the US tax base." Another official said House Ways and Means Committee members are watching to see how Treasury will respond to the EU investigations.

Addressing the same OECD conference, Pascal Saint-Amans, OECD Director of the Center for Tax Policy and Administration, said the next big tax agenda item for the G-20 will be promoting tax certainty in the wake of the BEPS project. He said tax certainty will be the main topic at a special G-20 tax policy symposium in Chengdu, China in July.

And, a Treasury official at the conference said that while the US is participating in the OECD BEPS multilateral instrument project, officials are waiting to see what the final deliverable looks like before deciding whether to sign on. The official also disclosed the US is waiting for the OECD's final profit attribution rules before making a decision on the multilateral instrument.

The proposed Section 385 debt/equity regulations continue to cause reverberations in the lead up to their expected finalization later this year. A Treasury official this week was quoted as saying the government may use something other than current year earnings and profits in crafting an exception from the transaction or recast rules for ordinary course related-party distributions. Treasury Deputy International Tax Counsel Douglas Poms said the government is considering alternatives that include looking at earnings before interest, taxes, depreciation and amortization. He asked for taxpayer comments in the area.

Finally, the US Tax Court this week held for the taxpayer in Medtronic Inc. & Consolidated Subsidiaries v. Commissioner, T.C. Memo. 2016-112, a $1.358 billion transfer pricing deficiency case. The court ruled that four intercompany agreements involving licensed intangibles were at arm's length and found the IRS had acted in an arbitrary, capricious, or unreasonable manner.