17 May 2020 U.S. International Tax This Week for May 15 Ernst & Young's U.S. International Tax This Week newsletter for the week ending May 15 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. —————————————————————————
Spotlight The House is expected to vote on 15 May to approve the Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES Act), H.R. 6800, a US$3 trillion stimulus package that proposes the next installment in COVID-19 legislation. The 1800 + page bill (the summary is 71 pages) was introduced by House Democrats on 12 May and includes US$1 trillion in state and local funding, more direct payments, unemployment insurance, money for testing, and a host of other provisions. The Senate will not take up the bill, with the Majority Leader quoted as saying the HEROES Act is a "parade of absurdities." Senate Majority Leader Mitch McConnell confirmed this week that there is a "high likelihood" there will be another coronavirus bill enacted by Congress, saying he is in discussions with members of the Trump Administration. Senate Republicans and the Trump Administration are first expected to reach some form of agreement on the parameters of what should be included in the next bill before negotiating with Democrats. Senator McConnell declined to set a timeline for action, however, reiterating that Senate Republicans are in no rush to pass another stimulus package. Senate action on a coronavirus bill before June is seen as increasingly unlikely. Treasury and the Internal Revenue Service (IRS) this week issued final regulations (TD 9897) that adopt without substantive change the 2016 proposed regulations under IRC Section 385 that characterize certain corporate interests as stock or debt. The final regulations address the treatment of qualified short-term debt instruments, controlled partnerships, and consolidated groups under the so-called Distribution Regulations; these regulations recharacterize a debt instrument issued by a domestic corporation as stock if the instrument is issued to a member of the domestic corporation's expanded group in a distribution, in exchange for related-party stock, or in exchange for property in certain asset reorganizations. Although the 2016 proposed regulations cross-referenced temporary regulations that expired on 13 October 2019, taxpayers were permitted to rely on the 2016 proposed rules if they applied the rules consistently and in their entirety. Consistent with recent guidance, the US reiterated that Treasury and the IRS continue to study the appropriate approach to making the Distribution Regulations more streamlined and targeted through future proposed regulations. The IRS on 11 May announced certain modifications to the procedures for filing documents related to mutual agreement procedure and advance pricing agreement (APA) requests and APA annual reports. Documents requiring the taxpayer's signature may now be submitted using an image of the signature or the taxpayer's digital signature, and all submissions may be filed electronically. In regard to pending and executed APAs, the IRS disclosed that officials from the Advance Pricing and Mutual Agreement Program are discussing both substantive and procedural issues with treaty partners, including the application of transfer pricing methods during periods of economic distress and the impact on specific industries, among other issues. EY Tax Alert 2020-1302 has details. |
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Upcoming Webcasts International tax talk (May 19)
During this Thought Center Webcast, Ernst & Young professionals will provide you with information on major tax law changes in the countries and jurisdictions covered by our US-based Global Tax Desk Network as well as discuss COVID-19 economic stimulus – measures and potential impacts. Latin America Tax Series: Brazil, Peru, Chile (May 19)
During this Thought Center Webcast, Ernst & Young Asia-Pacific Latin America tax desk professionals will discuss the highlights of the various tax reforms, the COVID-19 stimulus packages introduced, and also the challenges faced by Asia-Pacific companies in doing business in these Latin America countries. Latin America Tax Series: Colombia, Ecuador, Paraguay (May 26)
During this Thought Center Webcast, Ernst & Young Asia-Pacific Latin America tax desk professionals will discuss the highlights of the various tax reforms, the COVID-19 stimulus packages introduced, and also the challenges faced by Asia-Pacific companies in doing business in these Latin America countries. Continuing developments on BEPS 2.0 in the new economic environment (May 28)
During this Thought Center Webcast, Ernst & Young professionals will focus on the current developments with respect to the BEPS 2.0 project and current country actions with respect to DSTs and will look at how the global health crisis and economic downturn is affecting country activity in both areas. COVID-19: How global trade finance is being disrupted and redefined (June 3)
During this Thought Center Webcast, International Trade and Forfaiting Association (ITFA) and EY banking and supply chain professionals will explore the challenges and risks facing the banking and corporate sectors. —————————————————————————
Recent Tax Alerts —————————————————————————
Recent Newsletters - President Trump signs interim coronavirus relief measure; attention turns to COVID-19 bill #4
- IRS issues final and proposed regulations on hybrid mismatches, DCLs and conduit financing; more certainty but some surprises
- New anti-abuse rule targeting certain 'GILTI gap period' transactions included in proposed regulations on hybrid mismatch, dual consolidated loss, conduit financing and GILTI rules
- Taxpayers need to consider international tax implications of making certain NOL elections under Revenue Procedure 2020-24
- IRS issues FAQs on interaction of NOL carrybacks and Section 965 inclusions
- IRS announces taxpayers can temporarily fax Forms 1139 and 1045 to claim NOL carrybacks and AMT credits under CARES Act
- IRS provides relief for potential tax consequences caused by COVID-19 travel restrictions
- IRS withdraws 2004 Notice on 'Midco' transactions
- IRS releases FAQs on transfer pricing documentation best practices
- IRS issues annual APA report for 2019
- OECD BEPS 2.0 project to continue on current timelines
- OECD Secretariat issues guidance on impact of the COVID-19 crisis on treaty-related issues
- OECD releases second batch of Stage 2 peer review reports on dispute resolution
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IRS Weekly Wrap-Up Internal Revenue Bulletin | | 2020-21 | Internal Revenue Bulletin of May 18, 2020 |
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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: 2020-1298 | 
