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October 18, 2020

U.S. Tax This Week for October 16

Ernst & Young's U.S. Tax This Week newsletter for the week ending October 16 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

OECD BEPS 2.0 blueprint reports released

The OECD Inclusive Framework on BEPS October 12 published "blueprints" responding to tax challenges arising from the digitalization — on Pillar One, dealing with the reallocation of taxing rights, and Pillar Two, introducing a global minimum tax — and said work will continue into the middle of 2021. For the first time in 11 months, the OECD also requested stakeholder comments on the two initiatives, opening a public consultation with comments due by December 14 (to EY Tax Alert 2020-2451 has details.

G20 Finance Ministers and Central Bank Governors' meeting communiqué extends mandate of Inclusive Framework to continue negotiations on BEPS 2.0 project until mid-2021

The G20 Finance Ministers and Central Bank Governors met via videoconference on October 14. At the conclusion of the meeting, a joint communiqué (the communiqué) on key topics discussed at the meeting was issued. With respect to the ongoing G20/OECD project on addressing the tax challenges arising from the digitalization of the economy (the "BEPS 2.0 project"), the communiqué reaffirms the G20's commitment to making further progress on the two-pillar approachand stresses the importance of addressing the remaining issues in order to reach a global and consensus-based solution by mid-2021. EY Tax Alert 2020-2472 has details.

EY Guides, Surveys, and Reports

Eye on the Election (October 12)
EY’s Washington Council Ernst & Young LLP looks at the themes, mechanics, and polls of the 2020 presidential and congressional elections in the attached article. They also outline significant post-election dates and activities.

Congress on hold with election on the horizon
The short congressional session before the home stretch of campaigning for the November 3 election focused on bipartisan negotiations over a next coronavirus package and extending government funding and other expiring programs beyond the close of the FY2020 fiscal year on September 30. Lawmakers are now mostly out of session aside from business related to a potential coronavirus deal and Senate Supreme Court nomination consideration. As a broader matter, policy outcomes on tax and other issues have come into greater focus. An updated article from Washington Council Ernst & Young LLP discusses what may be on the horizon.

Updated: Post-2020 tax policy possibilities | A Biden presidency and Democratic Senate could bring change to the course of tax policy
The 2020 presidential election season has been anything but typical, with the unprecedented circumstances of the coronavirus pandemic and a focus on racial injustice. Mainstay election issues of the economy and health care are viewed through the lens of crisis: reopening the economy is at odds with curbing the spread of the virus, and that tension has created economic uncertainty that the nation is not likely to completely get beyond for some time. How tax and economic policy will be addressed if Democrats are in control in 2021 is gaining attention. EY's Washington Council Ernst & Young LLP examines these issues in the attached article, which has been updated to reflect recent developments.

Upcoming Webcasts

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 in the time of COVID-19 (october 23)
During this Thought Center Webcast, Ernst & Young professionals will provide updates on: (i) US economy, elections and tax policy; (ii) Breaking developments; and (iii) What’s happening at the IRS.

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


— Oct 15: Law firm clients: New California law allows certain nonresident aliens to elect to file group returns instead of individual returns (Tax Alert 2020-2479)

Internal Revenue Service

— Oct 15: Final regulations under IRC Section 1446(f) set forth rules on withholding on transfers of partnership interests (Tax Alert 2020-2481)

— Oct 15: IRS says December 31 is last day for submitting Forms 1139 and 1045 by fax (Tax Alert 2020-2480)

— Oct 09: IRS issues final regulations on computing and reporting life insurance reserves (Tax Alert 2020-2448)

— Oct 09: Revenue ruling analyzes whether change in basis of computing life insurance reserves occurs in 10 examples (Tax Alert 2020-2447)


— Oct 15: Oman ratifies automatic exchange of information (Tax Alert 2020-2478)

— Oct 15: Portuguese Government submits Draft State Budget Law for 2021 to Parliament (Tax Alert 2020-2477)

— Oct 15: Egypt amends income tax and stamp duty law provisions (Tax Alert 2020-2476)

— Oct 14: G20 Finance Ministers and Central Bank Governors' meeting communiqué extends mandate of Inclusive Framework to continue negotiations on BEPS 2.0 project until mid-2021 (Tax Alert 2020-2472)

— Oct 14: Peruvian tax authorities address merger of nonresident entities with one entity having a PE in Peru (Tax Alert 2020-2471)

— Oct 14: Ireland issues Budget for 2021: Review of indirect tax and environmental measures (Tax Alert 2020-2470)

— Oct 14: Peruvian Tax Court rules Peruvian payor may not consider double tax treaty benefits when determining the withholding tax because the Certificate of Residency was issued retroactively (Tax Alert 2020-2469)

— Oct 13: Saudi Arabia extends economic relief initiatives until 31 December 2020 (Tax Alert 2020-2464)

— Oct 13: UK issues new guidance on Brexit and UK imports (Tax Alert 2020-2463)

— Oct 13: OECD's Inclusive Framework releases BEPS 2.0 documents and agrees to continue work with target of conclusion by mid-2021 (Tax Alert 2020-2462)

— Oct 12: Norway proposes 15% withholding tax on interest, royalty and certain lease payments to related parties tax resident in a low-tax jurisdiction (Tax Alert 2020-2459)

— Oct 12: Argentina issues guidance on foreign exchange regulations (Tax Alert 2020-2458)

— Oct 12: European Union imposes further anti-dumping duties on steel imports (Tax Alert 2020-2456)

— Oct 12: European Commission requests feedback on proposed directive to transform EU's VAT Committee into a "Comitology Committee" (Tax Alert 2020-2455)

— Oct 12: OECD BEPS 2.0 blueprint reports released (Tax Alert 2020-2451)

— Oct 12: OECD issues reports on BEPS Pillar One and Pillar Two blueprints (Tax Alert 2020-2449)

— Oct 09: Dutch Government publishes details on proposed changes to loss set-off rules (Tax Alert 2020-2444)

— Oct 09: Turkey's election regarding Article 5 of the MLI may impact certain tax treaties (Tax Alert 2020-2443)

— Oct 09: Kenya adjusts specific excise duty rates for inflation (Tax Alert 2020-2442)


— Oct 16: What to expect in Washington (October 16) (Tax Alert 2020-2488)

— Oct 13: Read the latest on tax policy and the US elections (Tax Alert 2020-2454)

— Oct 09: New US DHS H-1B strengthening and DOL wage rules discussed (Tax Alert 2020-2446)


— Oct 15: Statement by government official suggests that proposed foreign tax credit regulations would not affect the credit claimed by US related parties for the excise tax paid to Puerto Rico under Act 154 (Tax Alert 2020-2482)

— Oct 15: September 2020 jobless rate continues decline; more states take federal loans to fund UI benefit claims (Tax Alert 2020-2475)

— Oct 13: Alabama adopts new policy requiring annual renewal of most tax registrations beginning November 1, 2020 (Tax Alert 2020-2466)

— Oct 13: Social Security wage base to increase in 2021 (Tax Alert 2020-2465)

— Oct 13: California law expands COVID-19 supplemental paid sick leave to all employers through end of 2020; several California cities and counties have also enacted similar ordinances (Tax Alert 2020-2461)

Recent Newsletters

State and Local Tax Weekly
   Highlights of this edition include:

Ohio Supreme Court ruling provides first judicial guidance on Commercial Activity Tax sourcing rule for gross receipts not otherwise sitused. In Defender Security Co. v. McClain, the Ohio Supreme Court (Court) ruled that a company's receipts from the sale of customer contracts to another business are properly sitused to the out-of-state physical locations where the business purchaser received the benefit of the purchased contracts. In so finding, the Court reversed the denial of the company's refund claim for Commercial Activity Tax (CAT) by the Ohio Department of Taxation (OH DoT). The Court remanded the case back to the OH DoT to issue the refunds.

New California law allows certain nonresident aliens to elect to file group returns instead of individual returns. On Sept. 18, 2020, Governor Gavin Newsom signed into law AB 2660 (2020 Cal. Stats., ch. 102) (AB 2660), allowing nonresident aliens who are not eligible for, or have not been issued, a Social Security number (SSN) or an Individual Taxpayer Identification Number (ITIN) to elect to file a group return instead of an individual return for taxable income received for services that take place in California. As a result, the nonresident alien can make the election without having to provide an SSN or ITIN.

— Income/Franchise, Sales & Use, Business Incentives, Property Tax, Controversy, Payroll & Employment Tax, Miscellaneous Tax, Global Trade, Upcoming Webcasts

IRS Weekly Wrap-Up

Final Regulations

 TD 9913Dependent Defined
 TD 9911Computation and Reporting of Reserves for Life Insurance Companies
 TD 9917Guidance on the Determination of the Section 4968 Excise Tax Applicable to Certain Colleges and Universities

Revenue Procedures

 2020-4426 CFR 601.105: Examination of returns and claims for refund, credit or abatement; determination of correct tax liability
 2020-43Special rules relating to group health plans


 2020-77Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates

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.