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May 16, 2021
2021-0977

U.S. Tax This Week for May 14

Ernst & Young's U.S. Tax This Week newsletter for the week ending May 14 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

Ways & Means subpanel holds tax fairness hearing

During the May 12 House Ways and Means Select Revenue Measures Subcommittee hearing, "Funding Our Nation's Priorities: Reforming the Tax Code's Advantageous Treatment of the Wealthy," Democratic members largely criticized the benefits to high-income individuals of the lower capital gains tax rate and stepped-up basis, while Republicans warned that increasing capital gains rates and corporate taxes will harm businesses, investment, and US competitiveness. Republicans also warned that expanded unemployment benefits are keeping workers from returning. EY Tax Alert 2021-0968 has details.

IRS guidance clarifies taxes on benefits under dependent care assistance programs

In Notice 2021-26, the IRS clarifies the temporary changes made to dependent care assistance programs (DCAPs) by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Disaster Relief Act) and the American Rescue Plan Act of 2021 (ARPA). Under Notice 2021-26, unused funds remaining in an employee's DCAP in 2020 or 2021 that are carried over to plan years ending in 2021 or 2022 will remain excludible from gross income and wages for 2021 or 2022 to the extent that the amounts would have been within the exclusion limits for the years from which the amounts were carried over. Notice 2021-26, however, also clarifies that reimbursements in 2022 will be taxed to the extent that the reimbursements exceed the 2022 applicable exclusion limit if the amounts do not derive from a grace period or carryover, which could occur for a non-calendar plan year that began in 2021. EY Tax Alert 2021-0958 has details.

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Upcoming Webcasts

International tax talk quarterly series with the EY Global Tax Desk Network (May 18)
During this Thought Center Webcast, Ernst & Young professionals across the region will highlight recent tax trends and important developments, including increased tax controversy and mitigation considerations, from country and regional perspectives.

Work from anywhere: How do we re-envisage our future after the unimaginable? (May 19)
During this EY Webcast, Ernst & Young professionals will highlight the journey of four organizations during this complicated year. Learn how they each reimagined how and where work gets done. Each panelist will share a unique point of view on the success and challenges of the past year, including a look ahead.

A taxpayer’s guide to the International Compliance Assurance Programme (ICAP) (May 20)
During this EY Webcast, Ernst & Young professionals along with the Organisation for Economic Cooperation and Development (OECD) will discuss the recently announced third phase of ICAP.

Domestic tax quarterly webcast series: a focus on state tax matters (June 3)
During this Thought Center Webcast, Ernst & Young professionals will discuss important state tax policy developments and federal tax developments that could affect state and local taxes.

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Recent Tax Alerts

Courts

— May 12: Tax Court holds mining company can't deduct estimated drilling costs as cost of goods sold, absent any gross receipts from the sale of goods (Tax Alert 2021-0965)

Internal Revenue Service

— May 13: Responding to fuel supply issues, IRS won’t impose penalties on dyed diesel fuel sold for highway use in certain states, May 7-21, 2021 (Tax Alert 2021-0972)

— May 11: IRS guidance clarifies taxes on benefits under dependent care assistance programs (Tax Alert 2021-0958)

— May 11: IRS releases Health Savings Account limits for 2022 (Tax Alert 2021-0954)

— May 11: IRS provides guidance on accounting method changes by CFCs (Tax Alert 2021-0953)

— May 10: IRS publishes 2022 inflation adjustment amounts for HSAs (Tax Alert 2021-0944)

— May 10: New IRS guidance clarifies unused dependent care assistance program funds carried over to 2021 or 2022 won’t be taxed as wages (Tax Alert 2021-0942)

International

— May 13: Indian Tax Tribunal applies beneficial treaty rate to dividend distributed during the dividend distribution tax regime (Tax Alert 2021-0975)

— May 13: OECD releases Ireland Stage 2 peer review report on implementation of Action 14 minimum standard (Tax Alert 2021-0971)

— May 13: PE Watch | Latest developments and trends, May 2021 (Tax Alert 2021-0970)

— May 12: Australia issues 2021-22 Federal Budget (Tax Alert 2021-0964)

— May 12: Vietnam's mandatory quarantine period extended to 21 days for all inbound travelers (Tax Alert 2021-0963)

— May 12: UK announces temporary measures relating to Right to Work checks to end on June 20 (Tax Alert 2021-0962)

— May 12: Swiss Federal Council issues official Dispatch on revised withholding tax reform (Tax Alert 2021-0961)

— May 11: Global labor and employment law strategic topics | April 2021 edition (Tax Alert 2021-0956)

— May 12: Qatar releases transfer pricing FAQs (Tax Alert 2021-0952)

— May 11: UK issues guidance on new Plastic Packaging Tax (Tax Alert 2021-0951)

— May 11: Uruguay extends due dates for filing certain tax returns and making advance payments of tax (Tax Alert 2021-0950)

— May 11: Jordan clarifies scope of National Contribution Tax (Tax Alert 2021-0949)

— May 11: Algeria issues list of strategic activities for foreign direct investment (Tax Alert 2021-0948)

— May 11: India issues thresholds for triggering “significant economic presence” in India (Tax Alert 2021-0943)

— May 10: CJEU issues decision on VAT concept regarding ”restaurant and catering services” within a catering area (Tax Alert 2021-0941)

— May 07: UK announces Global Talent visa fast track route for "prestigious award" winners (Tax Alert 2021-0936)

— May 07: India signs new migration and mobility agreement with United Kingdom (Tax Alert 2021-0935)

— May 07: Ghana Revenue Authority issues administrative guidelines on various tax measures (Tax Alert 2021-0929)

— May 07: OECD releases Japan Stage 2 peer review report on implementation of Action 14 minimum standard (Tax Alert 2021-0922)

Legislation

— May 13: House Financial Services country-by-country tax reporting bill (Tax Alert 2021-0973)

— May 13: Senate Finance panel questions USTR Katherine Tai on trade policy (Tax Alert 2021-0969)

— May 13: Ways & Means subpanel holds tax fairness hearing (Tax Alert 2021-0968)

— May 12: What to expect in Washington (May 12) (Tax Alert 2021-0960)

— May 12: Senate Finance subpanel holds tax gap hearing (Tax Alert 2021-0959)

States

— May 13: Colorado updates guidance on paid sick leave law for 2021 to include time off for COVID-19 vaccines and makes other changes (Tax Alert 2021-0974)

— May 11: Philadelphia Department of Revenue issues frequently asked questions concerning compliance with the Wage Tax requirements under its COVID-19 policies (Tax Alert 2021-0957)

— May 11: Texas proposes amending franchise tax credit for research and development activities (Tax Alert 2021-0955)

— May 10: Texas exempts forgiven PPP loans, other federal COVID-19 related grants and loans from franchise tax (Tax Alert 2021-0945)

— May 07: Kansas law establishes marketplace facilitator provisions, decouples from GILTI and IRC 163(j) business interest expense limitations (Tax Alert 2021-0934)

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Recent Newsletters

State and Local Tax Weekly
   Highlights of this edition include:

— California conforms to federal income tax treatment of PPP loans and EIDL advance grants.

On April 29, 2021, Governor Gavin Newsom signed a bill (AB 80) conforming the state corporate and individual income tax treatment of Paycheck Protection Program (PPP) loans and Economic Injury Disaster Loan (EIDL) advance grants under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the Consolidated Appropriations Act, 2021 (CAA) to federal tax law (with some modifications).

— Ohio Supreme Court ruling that a waste hauler could claim sales/use tax exemption for 'highway transportation for hire'. The Ohio Supreme Court's ruled in N.A.T. Transp. Inc. v. McClain that a waste hauler could claim the "highway transportation for hire" sales/use tax exemption for the purchase of two trucks used to transport waste to disposal sites designated by the customer.

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

ITS/Washington Dispatch
   Highlights of this edition include:

Legislation

  • US Treasury releases President’s plan to overhaul corporate tax system
  • Senators Wyden, Brown and Warner release International Tax Framework
  • President Biden lays out $1.8 trillion American Families Plan proposal
  • Senate Finance Committee chairman reintroduces clean energy legislation

Digital Taxation

  • Treasury Secretary proffers BEPS 2.0 Pillar One proposal to Inclusive Framework

IRS news

  • IRS issues proposed regs to coordinate WHT and gain deferral for certain foreign persons and partnerships investing in QOFs, clarify working capital safe harbor
  • IRS releases FAQs on ICAP program for US multinational enterprises
  • IRS extends time for submitting APA and MAP requests with e-signatures

OECD developments

  • OECD releases consultation document with proposed changes to Commentaries to OECD Model Tax Convention on Article 9 (Associated Enterprises) and related articles
  • OECD publishes Arbitration Profiles for 30 countries under MLI, clarifies entry into effect
  • OECD releases fourth batch of Stage 2 peer review reports on dispute resolution
  • OECD releases third annual peer review report and revised peer review documents on BEPS Action 6 relating to prevention of treaty abuse

United Nations

  • UN tax committee approves new digital taxation article for UN model tax treaty
  • UN releases new Transfer Pricing Manual

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IRS Weekly Wrap-Up

Revenue Procedures

 2021-25Tax forms and instructions
 2021-26Changes in accounting periods and in methods of accounting

Announcements

 2021-10Qualified Opportunity Zone Boundaries Unaffected by 2020 Decennial Census Changes

Notices

 2021-26Taxation of dependent care benefits available pursuant to an Extended claims period or carryover

Internal Revenue Bulletin

 2021-20Internal Revenue Bulletin of May 17, 2021

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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