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November 1, 2020
2020-2586

U.S. Tax This Week for October 30

Ernst & Young's U.S. Tax This Week newsletter for the week ending October 30 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

IRS concludes anti-abuse rule under IRC Section 704(c) triggered in asset contribution to foreign partnership

In an IRS Office of Chief Counsel Memorandum (FAA 20204201F), the IRS has advised that the IRC Section 704(c) anti-abuse rule applies to contributions that a US corporate taxpayer made of high-value, low-basis assets to a partnership formed with a related foreign entity. The partnership used the "traditional method," with curative allocations limited to gain on the disposition of the contributed property, for making allocations with respect to the built-in gain for purposes of IRC Section 704(c). The IRS determined that it may exercise its authority to apply a "curative method" that would cure the distortion. EY Tax Alert 2020-2556 has details.

IRS announces plans to limit the use of 'telescoping' in APA and MAP cases

The IRS's Advance Pricing and Mutual Agreement program (APMA) has announced that it is updating the parameters that it follows in mutual agreement procedure (MAP) and advance pricing agreement (APA) cases. The updates are expected to significantly restrict the use of "telescoping" of results in MAPs and APAs. EY Tax Alert 2020-2585 has details.

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EY Guides, Surveys, and Reports

Eye on the Election (October 26)
EY’s Washington Council Ernst & Young LLP looks at the themes, mechanics, and polls of the 2020 presidential and congressional elections.

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Upcoming Webcasts

Tax in the time of COVID-19: Post election outlook (November 6)
During this Thought Center Webcast, Ernst & Young professionals will provide updates on: (i) elections, US economy and tax policy; (ii) breaking developments; and (iii) what's happening at the IRS.

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Recent Tax Alerts

Courts

— Oct 26: Court allows case on indemnification for unpaid energy grants to go forward (Tax Alert 2020-2549)

Internal Revenue Service

— Oct 29: IRS announces plans to limit the use of 'telescoping' in APA and MAP cases (Tax Alert 2020-2585)

— Oct 29: IRS issues proposed regulations on average income test for low-income housing credit (Tax Alert 2020-2575)

— Oct 27: IRS releases 2021 inflation adjustments for fringe benefits and Form W-2 reporting penalties (Tax Alert 2020-2562)

— Oct 27: GAO recommends making the standards for tax-exempt hospitals' community-benefit compliance more explicit (Tax Alert 2020-2560)

— Oct 26: IRS releases the qualified retirement plan limitations for year 2021 - 401(k) pretax remains at $19,500, catch-up limit unchanged at $6,500 (Tax Alert 2020-2557)

— Oct 26: IRS concludes anti-abuse rule under IRC Section 704(c) triggered in asset contribution to foreign partnership (Tax Alert 2020-2556)

— Oct 26: Executive summary on the employee Social Security tax deferral updated to include IRS guidance through October 1, 2020 (Tax Alert 2020-2551)

International

— Oct 29: Spain releases 2021 State Budget Bill (Tax Alert 2020-2584)

— Oct 29: South Africa issues 2020 Medium Term Budget Policy Statement: Tax highlights (Tax Alert 2020-2583)

— Oct 29: UK issues guidance on accounting for VAT on goods moving between Great Britain and Northern Ireland from 1 January 2021 (Tax Alert 2020-2582)

— Oct 29: Portugal postpones certified invoicing system for entities registered solely for VAT purposes (Tax Alert 2020-2581)

— Oct 29: Philippines clarifies certain issues related to filing of transfer pricing information return (Tax Alert 2020-2580)

— Oct 29: Argentina amends promotional tax system for the knowledge-based economy (Tax Alert 2020-2576)

— Oct 28: Ireland publishes Finance Bill 2020: A review of international tax provisions (Tax Alert 2020-2572)

— Oct 28: Spain sends anti-tax evasion Bill to Parliament for approval (Tax Alert 2020-2571)

— Oct 28: Kenya gazettes VAT regulations on electronic tax invoices (Tax Alert 2020-2570)

— Oct 28: BREXIT | Status of UK citizens in Germany from January 1, 2021 discussed (Tax Alert 2020-2569)

— Oct 27: Peruvian tax authorities announce exchange of tax and financial information with more than 130 countries in 2021 (Tax Alert 2020-2564)

— Oct 27: Poland implements new charge on certain beverages from 1 January 2021 (Tax Alert 2020-2563)

— Oct 26: Kenya gazettes VAT regulations on digital marketplace supply (Tax Alert 2020-2553)

— Oct 26: OECD releases third batch of Stage 2 peer review reports on dispute resolution (Tax Alert 2020-2552)

— Oct 23: Luxembourg Tax Authorities publish XML schema and User Guide on submitting MDR reports (Tax Alert 2020-2545)

Legislation

— Oct 29: What to expect in Washington (October 30) (Tax Alert 2020-2590)

— Oct 29: Administration finalizes rule to bolster consumer-friendly price transparency requirements for insurers, delays information blocking rule compliance dates (Tax Alert 2020-2579)

— Oct 27: Reps. Neal, Brady release 'Securing a Strong Retirement Act' (Tax Alert 2020-2565)

States

— Oct 29: EY's state guide to COVID-19 payroll and employment tax provisions is updated through October 21, 2020 (Tax Alert 2020-2578)

— Oct 29: California issues guidance concerning the nonresident income tax implications when employees work temporarily in the state due to COVID-19 (Tax Alert 2020-2577)

— Oct 28: Maine issues guidance on income tax withholding and nexus when employees are working temporarily in the state due to COVID-19 (Tax Alert 2020-2567)

— Oct 27: Missouri issues guidance on income tax withholding and nexus for teleworkers, including those employees working temporarily in the state due to COVID-19 (Tax Alert 2020-2561)

— Oct 26: Tennessee began charging employer accounts with COVID-19 UI benefits on October 1, 2020; CARES Act funds allocated to the state UI trust fund to prevent employer tax increases in 2021 (Tax Alert 2020-2555)

— Oct 26: Massachusetts issues final regulations concerning income tax withholding for employees working temporarily in the state due to COVID-19 (Tax Alert 2020-2554)

— Oct 23: California issues guidance on liability for unemployment, disability and employment training tax for employees working temporarily in the state due to COVID-19 (Tax Alert 2020-2544)

— Oct 23: New York issues guidance on the nonresident income tax liability to employees working temporarily outside of the state due to COVID-19 (Tax Alert 2020-2543)

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Recent Newsletters

State and Local Tax Weekly
   Highlights of this edition include:

— Alabama adopts new policy requiring annual renewal of most tax registrations beginning Nov. 1, 2020. The Alabama Department of Revenue (AL DoR) announced that, beginning Nov. 1, 2020, taxpayers will be required to renew most of their Alabama tax licenses on an annual basis.

— Income/Franchise, Sales & Use, Business Incentives, Property Tax, Compliance & Reporting, Payroll & Employment Tax, Miscellaneous Tax, Global Trade, Value Added Tax

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IRS Weekly Wrap-Up

Final Regulations

 TD 9927Consolidated Net Operating Losses
 TD 9901Deduction for Foreign-Derived Intangible Income and Global Intangible Low-Taxed Income; Correcting Amendments

Proposed Regulations

 REG-119890-18Section 42, Low-Income Housing Credit Average Income Test Regulations

Revenue Procedures

 2020-45Tax forms and instructions

Notices

 2020-792021 Limitations Adjusted as Provided in Section 415(d), etc.

Internal Revenue Bulletin

 2020-44Internal Revenue Bulletin of October 26, 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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