October 11, 2020
U.S. Tax This Week for October 9
Ernst & Young's U.S. Tax This Week newsletter for the week ending September 9 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.
Top of the Week
IRS 'practice unit' sets forth examination guidance on the inclusion of stock based compensation in cost sharing arrangements
As part of the Internal Revenue Service (IRS) Large Business and International Division's (LB&I's) knowledge management efforts, on September 30, the IRS released a new practice unit titled "Cost Sharing Arrangements with Stock Based Compensation" (DCN INT-T-226). The practice unit focuses on the inclusion of stock-based compensation (SBC) as an intangible development cost (IDC) under a cost sharing arrangement (CSA) subject to Treas. Reg. Section 1.482-7 and provides guidance for tax audits together with relevant resources (the SBC practice unit). EY Tax Alert 2020-2413 has details.
Final regulations add clarifications and revisions to source-of-income rules Final regulations (T.D. 9921) on sourcing income from sales of personal property, including inventory (the Final Regulations), generally retain the basic approach of proposed regulations that were released in December 2019 to address changes made to IRC Section 863(b)(2) by the Tax Cuts and Jobs Act (2017) (REG-100956-19) (the Proposed Regulations). The Final Regulations also revise the Proposed Regulations' guidance on sourcing income from sales of personal property under IRC Section 865(e)(2), as well as other provisions of former Treas. Reg. Sections 1.863-3 and 1.864-5 (the Prior Regulations) that were not amended by the Proposed Regulations. EY Tax Alert 2020-2435 has details.
EY Guides, Surveys, and Reports
Public policy spotlight | 8 key issues for 2020 US elections
With US voters beginning to cast ballots, many are seeking to gauge how the results of the 2020 US elections will shape the US legislative and regulatory environment on a range of issues affecting workers, companies and the economy; as well as environmental issues, global trade and supply chains. This publication, from the Ernst & Young LLP Office of Public Policy, explores eight key issues for the 2020 elections and what to expect under the potential scenarios.
Final foreign tax credit regulations expand guidance on TCJA changes (October 13)
During this Thought Center Webcast, Ernst & Young professionals will discuss the recently released final foreign tax credit (FTC) regulations (TD 9922). With the final regulations, the Treasury Department continues to provide guidance under the foreign tax credit provisions of the Internal Revenue Code that were amended by the Tax Cuts and Jobs Act (TCJA).
Tax Tech Power Platform webcast series: Conducting comprehensive reporting and data analytics to streamline the workflow review process (October 14)
During this Thought Center Webcast, Ernst & Young professionals will show how Power BI can be utilized to streamline the workflow reviews and signoffs of tasks from session 2 by providing analytics that highlight year over year apportionment factors, payments and workflow analytics.
Proposed foreign tax credit regulations would add new requirements, election (October 15)
During this Thought Center Webcast, Ernst & Young professionals will discuss (i) New jurisdictional nexus requirement for determining whether a credit is allowed for a foreign income tax; (ii) Rules for allocating and apportioning foreign income taxes paid with respect to certain disregarded transactions; (iii) Identifying foreign income taxes for which a credit and deduction are denied under IRC Section 245A(d); and (iv) A new election to capitalize and amortize research and experimentation (R&E) and advertising expenditures for purposes of apportioning interest expense.
State & local tax developments in the real estate industry (October 20)
During this Thought Center Webcast, Ernst & Young professionals will discuss: (i) State responses to the COVID-19 pandemic; (ii) State income tax conformity to the CARES Act; (iii) Remote workforce issues, including wage withholding, business tax and individual income tax; and (iv) Recent SALT legislation and proposals, including California’s “split roll” property tax initiative, New York’s proposed recordation tax on mezzanine debt and preferred equity, realty transfer tax increases and more.
Latin America ‘nearshoring’ webcast series: Panama session (October 21)
As companies evaluate their global supply chains in light of recent disruptions, there is heightened interest in the concept of “nearshoring,” i.e., the transferring of a business operation to a nearby country from a more distant one. During this Thought Center Webcast, Ernst & Young is sponsoring a series of webcasts featuring our local country professionals. We will kick off the series with a session on Panama.
Tax Tech Power Platform webcast series: Process optimization through forms/document automation and tax system integration (October 28)
During this Thought Center Webcast, Ernst & Young professionals will demonstrate how you can use the Power Platform to populate state estimated tax payment forms as well as integrate data back into tax systems for e-filings.
Recent Tax Alerts
Internal Revenue Service
— Oct 08: Final regulations add clarifications and revisions to source-of-income rules (Tax Alert 2020-2435)
— Oct 07: Final regulations allow IRS to determine withholding rate on periodic retirement and annuity payments (Tax Alert 2020-2420)
— Oct 07: IRS issues IRC Section 1446(f) final regulations addressing tax withholding on transfers of partnership interests (Tax Alert 2020-2419)
— Oct 07: IRS 'practice unit' sets forth examination guidance on the inclusion of stock based compensation in cost sharing arrangements (Tax Alert 2020-2413)
— Oct 07: Final regulations clarify deduction disallowances for IRC Section 274 entertainment and food or beverage expenses (Tax Alert 2020-2412)
— Oct 05: IRS releases Form 941 instructions for employee deferral of Social Security tax allowed as part of a COVID-19 relief measure (Tax Alert 2020-2402)
— Oct 05: IRS again extends due date for complying with certain Affordable Care Act reporting requirements, offers limited relief from failure-to-furnish penalties (Tax Alert 2020-2401)
— Oct 05: Sales and Use Tax Quarterly Update for October 2020 (Tax Alert 2020-2398)
— Oct 02: QUEST Economic Update highlights key US and global economic trends - October 2, 2020 (Tax Alert 2020-2393)
— Oct 02: IRS provides transition relief for health coverage reporting (Tax Alert 2020-2392)
— Oct 02: IRS LB&I adds compliance campaign on limitations on CNOL carryovers (Tax Alert 2020-2387)
— Oct 08: Saudi Arabia introduces real estate transaction tax (Tax Alert 2020-2433)
— Oct 08: EY publication highlights 2020 Q3 tax policy developments across the Americas (Tax Alert 2020-2432)
— Oct 08: US initiates Section 301 investigation into Vietnam currency policy; files WTO appeal on Canada lumber finding (Tax Alert 2020-2431)
— Oct 08: PE Watch | Latest developments and trends, October 2020 (Tax Alert 2020-2430)
— Oct 08: EY Canada's Tax Matters @ EY for October 2020 (Tax Alert 2020-2423)
— Oct 08: Dutch Government publishes further details on job-related investment tax credit (Tax Alert 2020-2422)
— Oct 08: Philippines amends fair market value definition for unlisted shares of stock (Tax Alert 2020-2421)
— Oct 07: Australia issues 2020-21 Federal Budget (Tax Alert 2020-2416)
— Oct 07: ECOFIN publishes revised list of non-cooperative jurisdictions for tax purposes (Tax Alert 2020-2415)
— Oct 07: Swiss Federal Supreme Court issues decision on withholding tax reclaims on derivatives and beneficial ownership (Tax Alert 2020-2414)
— Oct 07: British Columbia Land Owner Transparency Act takes effect (Tax Alert 2020-2409)
— Oct 06: Singapore provides transfer pricing guidance related to impact of COVID-19 (Tax Alert 2020-2407)
— Oct 05: Japan's immigration information as of October 5 provided (Tax Alert 2020-2403)
— Oct 05: Zambian Government issues 2021 Budget (Tax Alert 2020-2400)
— Oct 05: Turkey extends application of temporary and high rate of Additional Customs Duties through 31 December 2020 (Tax Alert 2020-2399)
— Oct 02: Danish Tax Board rules Danish data center does not create a permanent establishment for nonresident company (Tax Alert 2020-2390)
— Oct 02: Peru-Japan double tax treaty is sent to Peruvian Congress for approval (Tax Alert 2020-2386)
— Oct 02: Chile's tax authorities amend reporting obligations for indirect transfers (Tax Alert 2020-2385)
— Oct 02: Peru's tax authority postpones filing of CbC report for 2019 tax year (Tax Alert 2020-2384)
— Oct 02: Canada's Distributed Investment Plans required to request certain investor information by October 15 (Tax Alert 2020-2380)
— Oct 09: What to expect in Washington (October 9) (Tax Alert 2020-2441)
— Oct 02: House approves updated HEROES Act as bipartisan talks continue (Tax Alert 2020-2383)
— Oct 08: New California law allows certain nonresident aliens to elect to file group returns instead of individual returns (Tax Alert 2020-2434)
— Oct 08: New York announces 2021 paid family and medical leave insurance deduction and benefit limits; accrued paid sick leave law is enacted (Tax Alert 2020-2426)
— Oct 07: New York City sick leave law amended to match New York State's paid leave requirements (Tax Alert 2020-2411)
— Oct 06: New Jersey reinstates the higher personal income tax rate for millionaires retroactive to January 1, 2020; employers must adjust withholding effective immediately (Tax Alert 2020-2406)
— Oct 02: Los Angeles to implement tax amnesty program for certain city taxes effective October 1, 2020 (Tax Alert 2020-2389)
— Oct 02: Ohio Supreme Court ruling provides first judicial guidance on Commercial Activity Tax sourcing rule for gross receipts for purchased contracts (Tax Alert 2020-2388)
State and Local Tax Weekly
Highlights of this edition include:
- New Jersey FY 2021 budget extends corporation business surtax through 2023, increases income tax rate imposed on millionaires, increases assessment on HMO net written premium. On Sept. 29, 2020, New Jersey Governor Phil Murphy as part of the Fiscal Year 2021 budget signed into law: (i) A. 4721, extending the Corporation Business Tax (CBT) surtax, (ii) A. 10, imposing an increased gross income tax (GIT) rate on millionaires, (iii) A. 4722, increasing the annual assessment on net written premiums of health maintenance organizations (HMOs).
- Income/Franchise, Sales & Use, Business Incentives, Property Tax, Compliance & Reporting, Controversy, Payroll & Employment Tax, Miscellaneous Tax, Global Trade, Value Added Tax, Upcoming Webcasts
Highlights of this edition include:
Treasury and IRS news
- Final BEAT regulations adopt proposed BEAT guidance with some changes
- Treasury releases final and newly proposed foreign tax credit regulations
- Treasury issues final sourcing regulations on sales of personal property (including inventory)
- IRS releases final and proposed regulations related to the repeal of Section 958(b)(4)
- IRS issues final regulations on characterization of foreign persons’ gain or loss from sale / exchange of interests in partnerships engaged in a US trade or business
- IRS delays certain Section 987 foreign currency regulations for additional year
- Notice 2020-69 provides rules on entity treatment election for certain S corporations for purposes of GILTI in AAA inclusions
- Final BEPS 2.0 Pillar 1 and 2 blueprints will be published on 12 October
- OECD releases outcomes of third phase of peer reviews on BEPS Action 13
IRS Weekly Wrap-Up
| ||TD 9924||Income Tax Withholding From Wages|
| ||TD 9925||Meals and Entertainment Expenses Under Section 274|
| ||TD 9910||Base Erosion and Anti-Abuse Tax|
| ||TD 9902||Guidance Under Sections 951A and 954 Regarding Income Subject to a High Rate of Foreign Tax; Correcting Amendment|
| ||2020-41||26 CFR 601.105: Examination of returns and claims for refund, credit or abatement; determination of tax liability|
Internal Revenue Bulletin
| ||2020-41||Internal Revenue Bulletin of October 5, 2020|
| ||2020-42||Internal Revenue Bulletin of October 13, 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.