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11 August 2019

U.S. International Tax This Week for August 9

Ernst & Young's U.S. International Tax This Week newsletter for the week ending August 9 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

In light of the Ninth Circuit Court of Appeals decision in Altera Corp. v. Commissioner in June 2019, the Internal Revenue Service (IRS)’s Large Business and International (LB&I) division formally withdrew its Altera Memo on 31 July, in LB&I-04-0719-008 (Withdrawal of Directive LB&I-04-0118-005). The LB&I Commissioner noted that examiners should continue applying Treas. Reg. Sections 1.482-7A(d)(2) and 1.482-7(d)(3) including opening new examinations regarding cost sharing arrangement (CSA) stock-based compensation (SBC) issues. LB&I stated that “these issues may be factually intensive, and transfer pricing teams should develop the facts to support their analysis and conclusions.”

The withdrawal memo also noted that Issue Teams should consult the Practice Network and Counsel for support in analyzing the issue and that LB&I will monitor further developments related to the Ninth Circuit’s decision.

The original Altera memo (Directive LB&I-04-0118-005 (Cost Sharing Arrangement (CSA) Stock Based Compensation (SBC) Directive)) directed audit teams not to initiate any new examinations for issues related to stock-based compensation in a CSA while the Altera case was on appeal to the Ninth Circuit. For pending CSA examinations, LB&I would halt issue development, pending a decision if the taxpayer elects to extend the statute of limitations until Altera was resolved.

On 7 June, in a 2-1 ruling, a Ninth Circuit panel reversed the Tax Court’s holding in Altera Corp. and upheld a 2003 regulation that requires participants in a CSA to treat SBC costs as compensable. The Ninth Circuit concluded that the 2003 regulations were valid under the Administrative Procedures Act. The Ninth Circuit held that SBC costs should be treated as shared by participants in a CSA. Following the issuance of the June opinion, the taxpayer filed a petition for a rehearing “en banc.” The taxpayer is waiting on a decision regarding the petition for en banc review.

The tax press this week reported that President Trump signed the instruments of ratification to the four tax protocols amending US treaties with Luxembourg, Switzerland, Japan, and Spain. The Senate gave its advice and consent to approve the long-delayed agreements on 16 and 17 July 2019. EY Tax Alert 2019-1283 has details.

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EY Guides and Publications

How US employers address global payroll challenges — the webcast polling results
In an increasingly global economy, payroll, tax and HR professionals are challenged to understand and comply with a vast array of new rules and to incorporate these requirements into existing payroll policies and practices. During our June 25, 2019 webcast, we surveyed the more than 2,000 participants about how they are addressing their global payroll challenges.

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Recent Tax Alerts

United States

Africa

Asia

Canada & Latin America

— Aug 08: Venezuela enacts equity tax (Tax Alert 2019-1438)

Europe

Middle East

Oceania

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Recent Newsletters

ITS/Washington Dispatch
   Highlights of this edition include:

Treaty news

— US Senate approves long-delayed tax protocols with Luxembourg, Switzerland, Japan and Spain

Digital taxation

— US responds to France’s new DST

Treasury and IRS news

— IRS proposed regulations address passive foreign investment companies, clarify longstanding PFIC issues

— IRS releases final regulations addressing partnership allocations of creditable foreign tax expenditures

OECD Developments

— G7 Finance Ministers support OECD two-pillar project to develop new rules for taxing multinational businesses

— OECD releases update on peer review of preferential tax regimes and no-or-only- nominal tax jurisdictions

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IRS Weekly Wrap-Up

Internal Revenue Bulletin

 2019-32Internal Revenue Bulletin of August 5, 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: 2019-1444

 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

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