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Spotlight

House Ways and Means Committee Chairman Kevin Brady this week was quoted as saying that House Republican tax writers and Trump Administration officials are discussing a framework for a so-called "phase two" tax reform bill. The Chairman said that discussions are following a similar track to those that led up to last December's Tax Cuts and Jobs Act (TCJA). No specifics or timetable were discussed, although earlier reports said a second reform bill could address the treatment of capital gains as well as making certain temporary measures in the TCJA permanent. While Chairman Brady earlier was quoted as saying he would like to see a vote on a second tax reform bill this year, it is generally seen as unlikely to pass the Senate in 2018.

Final anti-corporate inversion regulations under Section 7874 may be out in June, according to a recent court filing in the IRS's Fifth Circuit appeal in Chamber of Commerce v. IRS. The unopposed motion asked for a 60-day extension to file a response brief due to the pending final regulations, which may affect the case. In Chamber of Commerce, a federal district court held that Treasury and the IRS violated the Administrative Procedures Act (APA) by issuing Reg. Section 1.7874-8T with an immediate effective date and without complying with the APA's 30-day notice-and-comment requirement. Temporary anti-inversion regulations were issued in April 2016.

The IRS Large Business and International division (LB&I) this week announced the approval of six additional compliance campaigns, mostly in the individual nonresident compliance and withholding area. The IRS also indicated that the LB&I is reviewing previously announced IRS campaigns in light of enactment of the TCJA, to determine if any of the existing campaigns are affected by the recent legislation.

The United Nations (UN) on 18 May released an updated UN Model Tax Treaty, including a new Article 12A that provides source-based taxation for fees for technical services, and a new version of Article 1 that includes a fiscally transparent entity clause and saving clause. The updated model treaty also has a new Article 29 with provisions relating to entitlement to treaty benefits. The new measures include a limitation on benefits rule, a third state permanent establishment rule and a general anti-abuse rule. The model further contains certain concepts from the Organisation for Economic Co-operation and Development Base Erosion and Profit Shifting (BEPS) project.

The UN's Committee of Experts on International Cooperation in Tax Matters also reportedly released several tax documents and drafts, including several draft chapters of the UN Handbook on Dispute Avoidance and Resolution, summary notes on a paper regarding the treatment of collective investment vehicles (CIVs), and a draft update of the Manual for the Negotiation of Bilateral Tax Treaties Between Developed and Developing Countries.