June 13, 2021
U.S. International Tax This Week for June 11
Ernst & Young's U.S. Tax This Week newsletter for the week ending June 11 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.
Bipartisan infrastructure talks between President Joe Biden and Senate Environment & Public Works Ranking Member Shelley Moore Capito and other Republicans ended on 8 June when the President suspended negotiations without a deal. The focus of infrastructure talks then shifted to a separate Senate bipartisan group that included Senators Joe Manchin and Mitt Romney, which on 10 June announced that they had reached a tentative infrastructure deal. Although few details are available, the Senators reportedly agreed to a $1.2 trillion1 infrastructure package, but with $579 billion of that in new funding. The proposed infrastructure plan "would be fully paid for and not include tax increases," according to a statement from Senator Rob Portman, a member of the group. The package has now gone to the Senate Republican conference and the Biden Administration to see if there is broader agreement on the proposed deal. At the time of this publication, the President has not commented on the new infrastructure proposal.
On the House side, the bipartisan Problem Solvers Caucus on 9 June released an eight-year $1.25 trillion infrastructure proposal. It is not clear how closely the House Problem Solvers infrastructure proposal parallels the latest Senate proposal.
G-7 Finance Ministers and Central Bank Governors issued a communiqué following their 4-5 June meeting that, among other things, expressed strong support for the ongoing work on the G20/OECD BEPS 2.0 project. As expected, the G-7 committed to "reaching an equitable solution on the allocation of taxing rights, with market countries awarded taxing rights on at least 20% of profit exceeding a 10% margin for the largest and most profitable multinational enterprises." The G-7 also called for the removal of all Digital Services Taxes (DSTs) and other relevant similar measures on all companies, and committed to a global minimum tax of at least 15% on a country by country basis.
Current activity in the BEPS 2.0 project is now focused on efforts to reach conceptual agreement in the Inclusive Framework on both Pillar One and Pillar Two before the 9-10 July meeting of the G20 Finance Ministers and Central Bank Governors, and to finalize that agreement in connection with G20 meetings in October. The specific parameters reflected in the G7 communiqué with respect to profit allocation and coordination with DSTs under Pillar One and with respect to the global minimum tax rate under Pillar Two are matters that are the subject of intensive negotiations in the 139-member Inclusive Framework. It remains to be seen what specifics will be included in any agreement that is reached in the Inclusive Framework.
A Treasury official this week was quoted as saying that the Biden Administration's proposed 15% minimum tax on book earnings could include a requirement for companies to publicly disclose book-tax differences. Responding to criticism of the proposed minimum tax, the official said it should be seen as a backstop to the corporate tax system, adding "We've really thought through the contours of this proposal."
According to the recently released Green Book, companies with a calculated base in excess of $2 billion would make an additional payment to the Internal Revenue Service (IRS) for the excess of up to 15% on their book income over their regular tax liability. Companies would be given credit for taxes paid above the minimum book-tax threshold in prior years, for book net operating loss deductions, for general business tax credits and for foreign tax credits.
Treasury and the IRS on 10 June issued Notice 2021-36, announcing US plans to amend the Base Erosion and Anti-abuse Tax (BEAT) final regulations under IRC Section 59A and Section 6038A with respect to qualified derivative payment (QDP) reporting. The Notice defers the applicability date of certain provisions relating to QDP reporting until tax years beginning on or after 1 January 2023. The IRS issued final and proposed BEAT regulations in December 2019 and additional final regulations in October 2020. The preamble to the latter regulations noted a public comment requesting that the US address the interaction of the QDP, the BEAT netting rule and QDP reporting requirements found in the 2019 final regulations. Treasury and IRS are continuing to study the issue and therefore are extending the transition period.
Treasury has released a document that discusses information reporting proposals with regard to virtual currencies (including cryptocurrency). The proposals call for using existing tax regimes "by treating certain virtual currency similarly to other similar assets, as appropriate." The document specifically looks to using Section 6045 (Broker Reporting), Section 6050I ("Cash" Reporting) and Section 6038D (Specified Foreign Financial Asset Reporting) in the virtual currency area. According to Treasury, these proposals would complement "the Administration's proposal to require information reporting by financial institutions."
Telework and other employer challenges in 2021 and beyond (June 17)
During this Thought Center Webcast, Ernst & Young professionals will bring together their insights and experience to discuss how COVID-19 impacts continue to challenge employers, particularly around the demand for telework arrangements after state and local mandatory work-from-home orders have expired.
Tax in the time of COVID-19: Update on legislative, economic, regulatory and IRS developments (June 18)
During this Thought Center Webcast, Ernst & Young professionals will provide updates on: (i) the US economy and tax policy; (ii) breaking developments; and (iii) what’s happening at the IRS.
The indirect tax technology journey: Now. Next. Beyond. (June 23)
During this Thought Center Webcast, Ernst & Young professionals will share insights into how market-leading organizations are using technology to adapt to new legislation and market trends, and to effectively transform tax operations.
Recent Tax Alerts
— Jun 10: PE Watch | Latest developments and trends, June 2021 (Tax Alert 2021-1155)
— Jun 08: USCIS temporarily suspends biometrics requirement for L-2 and H-4 applicants (Tax Alert 2021-1140)
— Jun 04: USTR announces 25% punitive tariffs on six specific countries in response to their Digital Services Taxes; Suspends tariffs for 180 days (Tax Alert 2021-1116)
— Jun 03: Changes to immigration rules designed to restrict entry of foreigners into Vietnam and manage spread of COVID-19 discussed (Tax Alert 2021-1109)
— Jun 04: Taiwan proposes amendments to domestic regulations governing application of tax treaties (Tax Alert 2021-1106)
Canada & Latin America
— Jun 09: Canada Revenue Agency releases revised Information Circular on Mutual Agreement Procedures (Tax Alert 2021-1148)
— Jun 04: Argentine Senate approves tax reform bill that would raise corporate income tax rates (Tax Alert 2021-1119)
— Jun 08: French Government issues draft Amending Finance Bill for 2021 (Tax Alert 2021-1139)
— Jun 07: Romania amends MDR legislation (Tax Alert 2021-1136)
— Jun 04: UK to begin accession process to join Trans-Pacific Partnership (Tax Alert 2021-1125)
— Jun 04: The Netherlands and Cyprus sign double tax treaty (Tax Alert 2021-1123)
— Jun 04: Cyprus announces extension of the non-application of administrative fines for DAC6 submissions until 30 September 2021 and an update to the Cypriot XML schema (Tax Alert 2021-1122)
— Jun 04: Denmark passes bill on CFC taxation (Tax Alert 2021-1107)
— Jun 10: UAE amends VAT penalty rules (Tax Alert 2021-1152)
— Jun 07: G7 Finance Ministers express strong support for global tax changes under BEPS 2.0 (Tax Alert 2021-1131)
— Jun 04: OECD releases fifth batch of Stage 2 peer review reports on dispute resolution (Tax Alert 2021-1105)
Highlights of this edition include:
— Treasury Green Book offers new details on international tax proposals
— Senate hearing discusses Biden Administration’s international tax proposals
— House bill would require SEC regulations on CbC financial information disclosure, including taxes
— President Biden proposes increased IRS budget to improve tax compliance
— IRS modifies guidance on accounting method changes for certain foreign corporations
— IRS official comments on treaty derivative benefits post-Brexit
— Government releases early drafts of 2021 Schedules K-2 and K-3 for Forms 1065, 1120-S and 8865
— PR Treasury issues guidance for complying with the requirement to submit a transfer pricing study
— OECD reviewing options to roll back unilateral digital taxes
— Parties to OECD MLI release interpretative opinion
IRS Weekly Wrap-Up
Internal Revenue Bulletin
|Internal Revenue Bulletin of June 7, 2021
Ernst & Young Client Portal, the leading source for news, analysis, and reference materials for corporate tax professionals, has a variety of content of interest to international tax practitioners, including:
— International Tax Online Reference Service. Key information about, and important tax developments from, 56 foreign jurisdictions, including information on tax rates, interest rates and penalties, withholding, and filing dates.
— EY/Passport. EY/Passport is your guide to planning ventures in the global economy, offering a wealth of tax and business knowledge on more than 150 countries.
Because the matters covered herein are complicated, U.S. International 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.
1 Currency references in this Alert are to the US$.