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August 9, 2020
2020-2004

U.S. Tax This Week for August 7

Ernst & Young's U.S. Tax This Week newsletter for the week ending August 7 is now available. Prepared by Ernst & Young's National Tax Department in Washington, D.C., this weekly update summarizes important news, cases, and other developments in U.S. taxation.

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Top of the Week

Final and proposed regulations under IRC Section 163(j) narrow definition of business interest expense, expand anti-avoidance rules and substantially revise rules for foreign corporations

The Treasury Department released final regulations (TD 9905) on July 28, with guidance on applying the limitations on the deductibility of business interest expense (BIE) under IRC Section 163(j) (the Final Regulations), which was significantly modified by the Tax Cuts and Jobs Act (TCJA) and then temporarily modified by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The Final Regulations provide guidance on what constitutes interest for purposes of the limitation, how to calculate the limitation, which taxpayers and trades or business are subject to the limitation, and how the limitation applies in certain contexts (e.g., consolidated groups). EY Tax Alert 2020-1961 has details.

OECD report forecasts falling tax revenues in Asian and Pacific Economies as a result of COVID-19 pandemic

The Organisation for Economic Co-operation and Development (OECD) published Revenue Statistics in Asian and Pacific Economies 2020 (the Report) on 23 July 2020. The Report, in its seventh edition, is part of a long-standing series of similar reports from the OECD covering regional tax data. This edition covers 21 jurisdictions,with Bhutan, the People's Republic of China, Mongolia and Nauru included for the first time. Together, these 21 jurisdictions account for over 75% of GDP in Asia and over 90% in the Pacific. The Report includes data for years up to 2018. EY Tax Alert 2020-2001 has details.

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EY Guides, Surveys, and Reports

Global Labor and Employment Law Strategic Topics | 2020 Edition 2
A newsletter prepared by EY's Labor and Employment Law Services group explores the rules and must-do advice for employers that require attention to ensure the health and well-being in the workplace in 2020. This edition of the newsletter, attached below, focuses on the labor and employment law challenges for companies in Returning to Work (or Not) in our Covid -19 world.

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Upcoming Webcasts

Final and proposed Section 163(j) regulations address questions on business interest expense limitation (August 10)
During this Thought Center Webcast, Ernst & Young professionals will discuss the recently released final and proposed Section 163(j) regulations, which address the business interest expense limitation.

Beyond the pandemic | Building a future proof payroll operation (August 12)
During this Thought Center Webcast, Ernst & Young professionals discuss the challenges faced by payroll operations in today’s disruptive environment, the opportunities for transformation, and actions you can take to navigate the landscape and plan for beyond.

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Recent Tax Alerts

Courts

— Aug 06: Payments ex-husband made to ex-wife to divide marital property incident to divorce do not increase the basis in his LLC, Tax Court holds (Tax Alert 2020-1990)

Internal Revenue Service

— Aug 06: IRS provides guidance on special CARES Act rules for single-employer defined benefit pension plan (Tax Alert 2020-1999)

— Aug 06: IRS updates model notices that retirement plans use to explain tax consequences of making rollover-eligible plan distributions (Tax Alert 2020-1998)

— Aug 05: IRS extends deadline to claim rehabilitation credits (Tax Alert 2020-1985)

— Aug 04: IRS updates frequently asked questions about the CARES Act Social Security tax deferral (Tax Alert 2020-1974)

— Aug 02: Final and proposed regulations under IRC Section 163(j) narrow definition of business interest expense, expand anti-avoidance rules and substantially revise rules for foreign corporations (Tax Alert 2020-1961)

— Jul 31: IRC Section 163(j) guidance affects real estate industry (Tax Alert 2020-1960)

International

— Aug 06: Alberta announces Innovation Employment Grant to support R&D and reignite technology investment (Tax Alert 2020-2003)

— Aug 06: South African Government releases draft 2020 Tax Law Amendment Bills (Tax Alert 2020-2002)

— Aug 06: OECD report forecasts falling tax revenues in Asian and Pacific Economies as a result of COVID-19 pandemic (Tax Alert 2020-2001)

— Aug 06: Greece publishes Mandatory Disclosure Rules legislation: A detailed overview (Tax Alert 2020-2000)

— Aug 05: Uruguay further extends deadline for informing Central Bank of chain of ownership (Tax Alert 2020-1988)

— Aug 05: Cyprus postpones MDR reporting deadlines for six months (Tax Alert 2020-1987)

— Aug 05: Lithuania postpones MDR reporting deadlines for six months (Tax Alert 2020-1986)

— Aug 04: Colombia issues regulation on deferring income from private equity or collective investment funds, as well as rules on permanent establishments (Tax Alert 2020-1979)

— Aug 04: Italy approves legislation to implement Mandatory Disclosure Rules (Tax Alert 2020-1977)

— Aug 04: Portugal transposes EU ATAD Directives regarding hybrid mismatches into domestic tax law (Tax Alert 2020-1976)

— Aug 04: Korea announces 2020 tax reform proposals (Tax Alert 2020-1975)

— Aug 03: Uruguay extends deadlines for certain estimated tax payments due to COVID-19 (Tax Alert 2020-1967)

— Aug 03: Mexico amends customs rules for 2020, impacting maquiladoras and others (Tax Alert 2020-1966)

— Jul 31: Brazil's proposed federal VAT would increase tax rates for Brazilian banks and other financial institutions (Tax Alert 2020-1959)

— Jul 31: Zimbabwe presents 2020 mid-term budget proposals (Tax Alert 2020-1955)

— Jul 31: Vietnam issues decree amending loan interest deductibility cap and draft decree on related party transactions (Tax Alert 2020-1954)

— Jul 31: Ireland announces temporary reduction in VAT rate as part of July 2020 Stimulus Plan (Tax Alert 2020-1953)

— Jul 31: OECD releases ninth batch of peer review reports on BEPS Action 14 related to improving dispute resolution (Tax Alert 2020-1951)

— Jul 31: Canada's Department of Finance announces extension to incur flow-through qualifying expenditures (Tax Alert 2020-1950)

Legislation

— Aug 07: What to expect in Washington (August 7) (Tax Alert 2020-2011)

— Jul 31: Senate takes procedural vote toward unemployment stopgap (Tax Alert 2020-1948)

States

— Aug 06: Nevada plans to relieve employer UI accounts of COVID-19 benefit charges; use of federal funding to bolster the UI trust fund under consideration (Tax Alert 2020-1997)

— Aug 06: North Carolina announces transfer pricing resolution initiative for corporate taxpayers (Tax Alert 2020-1996)

— Aug 05: Colorado home rule, self-collected municipalities begin adopting economic nexus and marketplace facilitator collection laws after launch of online centralized filing portal (Tax Alert 2020-1989)

— Aug 05: California now issuing annual notice of UI benefit charges; COVID-19 UI benefits should not be charged to employer accounts (Tax Alert 2020-1984)

— Aug 05: Ernst & Young LLP webcast polling results show telework will continue beyond the COVID-19 emergency (Tax Alert 2020-1983)

— Aug 04: Puerto Rico's Treasury Department postpones certain filing and payment due dates because of Tropical Storm Isaias (Tax Alert 2020-1978)

— Aug 03: Wyoming legislation provides for noncharge of COVID-19 UI benefits by executive order (Tax Alert 2020-1970)

— Aug 03: Nevada Commerce Tax due August 14, 2020 (Tax Alert 2020-1956)

— Jul 31: New Jersey won't charge employer UI accounts for COVID-19 benefits; FY 2021 SUI tax rates not affected by COVID-19 (Tax Alert 2020-1958)

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Recent Newsletters

State and Local Tax Weekly
   Highlights of this edition include:

— New York State issues draft regulations on net operating losses. The New York State (NYS) Department of Taxation and Finance (Tax Department) has posted for comment new draft corporate franchise tax regulations under Article 9-A of the New York Tax Law (to be codified at N.Y. Comp. Codes and Regs. tit. 20, Subparts 3-10.1 through 3-10.8), which would add rules on the NYS corporate income tax treatment of net operating losses (NOLs) and NOL deductions (NOLDs) for tax years beginning on or after Jan. 1, 2015 (hereafter, draft regulations).

— Delaware Chancery Court finds state's unclaimed property information requests too expansive, rejects enforcement of subpoena as abuse of court's process. In Delaware Department of Finance v. AT&T, Inc., the Delaware Court of Chancery (Court) threw out a subpoena issued to AT&T, Inc. (AT&T) by the Delaware Department of Finance (Department) on behalf of a third-party unclaimed property audit firm.

— Income/Franchise, Sales & Use, Business Incentives, Controversy, Payroll & Employment Tax, Miscellaneous Tax, Value Added Tax

ITS/Washington Dispatch
   Highlights of this edition include:

The latest edition of Ernst & Young's Washington Dispatch is attached below. Prepared by Ernst & Young's International Tax and Transaction Services group, this monthly newsletter summarizes recent developments in US international taxation. Highlights of this month's edition include:

Treasury and IRS news

  • IRS issues final and proposed interest expense limitation regulations
  • Final and proposed GILTI regulations deliver few benefits and more than a few surprises
  • Final FDII regulations retain proposed regulations’ structure, but reduce documentation burden, defer effective date and make important substantive changes to computation of Section 250 deduction
  • IRS releases new draft partnership Schedules K-2 and K-3 for international tax reporting

OECD news

  • G20 Finance Ministers and Central Bank Governors’ meeting communiqué reiterates commitment to address digitalization tax challenges
  • OECD releases new corporate tax statistics including anonymized and aggregated Country-by-Country report statistics
  • OECD releases model rules for data reporting by platform operators for sellers in the sharing economy

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IRS Weekly Wrap-Up

Proposed Regulations

 REG-132766-18Small Business Taxpayer Exceptions Under Sections 263A, 448, 460 and 471
 REG-113295-18Effect of Section 67(g) on Trusts and Estates; Hearing Cancellation
 REG-132434-17Certain Non-Government Persons Not Authorized To Participate in Examinations of Books and Witnesses as a Section 6103(n) Contractor

Corrections

 TD 9896Rules Regarding Certain Hybrid Arrangements; Correction

Announcements

 2020-61Special Funding and Benefit Limitation Rules for Single-Employer Defined Benefit Pension Plans under the CARES Act
 2020-62Safe Harbor Explanations – Eligible Rollover Distributions

Internal Revenue Bulletin

 2020-32Internal Revenue Bulletin of August 3, 2020

Because the matters covered herein are complicated, U.S. 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.

 

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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