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20 January 2019

U.S. International Tax This Week for January 18

Ernst & Young's U.S. International Tax This Week newsletter for the week ending January 18 is now available. Prepared by Ernst & Young's International Tax Services group, this weekly update summarizes important news, cases, and other developments in international taxation.

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Spotlight

The Internal Revenue Service (IRS) issued final regulations on Section 965 transition tax on 15 January. The final regulations are generally consistent with the proposed regulations published on 9 August 2018, but with certain modifications. Notable changes from the proposed regulations include:

  • Excluding certain commodities from the cash position of a specified foreign corporation (SFC)
  • Requiring a US shareholder of an SFC at any point during the inclusion year to include in gross income its pro rata share an SFC’s Section 965 amount, even if the SFC ceases to be an SFC during the transition year
  • Clarifying the inclusion ordering rules, including for Section 1248 amounts and amounts paid between SFCs that are disregarded for Section 965 purposes
  • Clarifying that Section 965(b) previously taxed earnings and profits (PTI) are treated as included under Section 951 for purposes of Section 1248(d)(1)
  • Allowing a US shareholder to limit the basis adjustments required under the basis-shifting election to avoid gain recognition from the election
  • Allowing US shareholders to elect to not disregard payments between SFCs occurring between earnings and profits (E&P) measurement dates
  • Making foreign taxes associated with a hovering deficit available to the extent of current E&P of the SFC with the hovering deficit
  • Taking only actual Section 956 inclusions into account in the “without” calculation when calculating the net tax liability for purposes of the Section 965(h) installment election
  • Determining the aggregate foreign cash position of a consolidated group by treating the consolidated group as a single US shareholder

The final regulations retain the applicability dates that were in the proposed regulations and, consistent with Section 965, generally apply beginning with the last taxable year of a foreign corporation that begins before 1 January 2018. With respect to a US person, the final regulations apply beginning in the taxable year in which or with which such taxable year of the foreign corporation ends.

The Office of Management and Budget’s Office of Information and Regulatory Affairs is currently reviewing proposed regulations under Section 250 on the deductions for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI).

Senate Finance Committee Chairman Chuck Grassley this week said his committee would address tax extenders as the first major piece of tax legislation in the new Congress. The Chairman was quoted as saying that he expected that tax extenders and a separate IRS restructuring bill would move quickly, as they received bipartisan support in the last Congress. Chairman Grassley did not indicate when extenders legislation would be introduced, nor did he mention technical corrections. On the House side, Ways and Means Committee Chairman Richard Neal earlier indicated health care was his top priority, although he also said he was considering how to address tax extenders legislation.

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Upcoming Webcasts

Global oil and gas transactions review 2019 (February 14)
With positivity in the transactions market and a focus on portfolio restructuring, observers expected 2018 to be a busy year for deals. But as the year played out, oil price volatility, geopolitical tension and questions around oversupply likely disrupted some deal completions. Expectations for 2019 include an increase in private equity investment and cross-sector M&A, driven by technology and digital. But will oil and gas companies continue to look closer to home for their deals? During this Thought Center Webcast, Ernst & Young professionals will discuss these issues.

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Recent Tax Alerts

United States

Africa

Asia

Canada & Latin America

Europe

Middle East

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Recent Newsletters

Washington Dispatch
   Highlights of this edition include:

Legislation

— Congress fails to enact year-end tax bill
— JCT issues ‘Blue Book’ on Tax Cuts and Jobs Act

Treasury and IRS news

— IRS proposed regulations provide guidance on the base-erosion and anti-abuse tax under Section 59A
— IRS issues proposed regulations addressing foreign persons’ taxable gain or loss from sale / exchange of interests in partnerships engaged in US business
— IRS issues proposed hybrid dividends / entities regulations
— IRS announces future foreign corporate PTEP regulations
— IRS issues proposed regulations to ease burdens under FATCA and Chapter 3
— US Treasury grants another extension of time for reporting signature authority (FBAR, Form 114) over certain foreign financial accounts

OECD developments

— OECD publishes tax report to G20 leaders
— OECD releases second annual peer review report on Action 5 on the exchange of tax rulings

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IRS Weekly Wrap-Up

Internal Revenue Bulletin

 2019-04Internal Revenue Bulletin of January 22, 2019

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Additional Resources

Ernst & Young Client Portal, the leading source for news, analysis, and reference materials for corporate tax professionals, has a variety of content of interest to international tax practitioners, including:

— International Tax Online Reference Service. Key information about, and important tax developments from, 56 foreign jurisdictions, including information on tax rates, interest rates and penalties, withholding, and filing dates.

— EY/Passport. EY/Passport is your guide to planning ventures in the global economy, offering a wealth of tax and business knowledge on more than 150 countries.

Because the matters covered herein are complicated, U.S. International Tax This Week should not be regarded as offering a complete explanation and should not be used for making decisions. Any decision concerning matters covered herein should be reviewed with a qualified tax advisor.

Document ID: 2019-0173

 

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