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Spotlight

Both the Senate and the House of Representatives held their last sessions last week before breaking for summer recess. Both are expected to return after Labor Day.

The Republicans held their National Convention in Cleveland this week where they formally nominated Donald Trump for President and Mike Pence for Vice President. The Democrats are expected to hold their National Convention next week in Philadelphia.

Speaking on 20 July at the International Fiscal Association USA New York regional seminar, Daniel McCall, IRS Deputy Associate Chief Counsel (International-Technical), indicated that Treasury and the IRS hope to finish numerous guidance projects before the end of the Obama administration. This list of guidance projects include:

— Final and temporary regulations on the Foreign Account Tax Compliance Act (FATCA)
— Final regulations under Section 721(c) that implement Notice 2015-54 regarding transfers to partnerships with foreign partners
— Temporary or final regulations under Section 367(d)
— Final regulations implementing anti-abuse rules under Section 956 regarding loans to partnerships with controlled foreign corporations as partners
— Final regulations on passive foreign investment companies under Section 1298(f)
— Temporary and proposed regulations on Section 901(m)
— Regulations under the Section 987 currency gain rules
— Finalization of parts of the temporary regulations under Section 7874
— Final regulations under Section 871(m)
— Final regulations under Section 305(c)

At the New York State Bar Association Tax Section summer meeting in New York, Robert Stack, Treasury Deputy Assistant Secretary (International Tax Affairs), acknowledged that the proposed Section 385 regulations is a "blunt instrument," and noted that there are four main areas where the regulations could have unintended results. Stack listed the four areas as: cash pooling and short-term debt movement around multinational groups, foreign-to-foreign intragroup loans, impact on banking and other highly regulated industries, and effects on S corporations and other passthrough entities. Stack also noted that Treasury will only issue the final regulations once it is satisfied that it has taken into account the various comments received.

Andrew Hickman, the former head of the OECD's transfer pricing group, spoke at a 19 July panel at the National Association for Business Economics Transfer Pricing Symposium in Washington. Hickman defended the OECD"s guidance on actions 8-10 and noting that it does uphold the arm's length principle. He also commented that the OECD's discussion draft on profit attribution to permanent establishments (PE) is intended to illustrate that attributing profit to a PE under article 7 of the model tax convention and performing a transfer pricing analysis under article 9 may result in different allocations of profit.

At the same conference, Treasury officials noted that the OECD's digital economy task force will convene on 6 and 7 October to restart the work on the taxation on the digital economy. This work follows on from the issuance of the final reports in October 2015 and will chart out a mandate for the work related to the taxation of the digital economy through 2020.