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September 12, 2021
2021-1635

U.S. Tax This Week for September 10

Ernst & Young's U.S. Tax This Week newsletter for the week ending September 10 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 allows taxpayer to reverse "gap period" transaction through late check-the-box election

In a private letter ruling (PLR 202135006, released September 3, 2021), the Internal Revenue Service (IRS) permitted a taxpayer effectively to undo planning undertaken during a so-called gap period (described later). After many taxpayers implemented gap period strategies in 2018, the U.S. Department of the Treasury (Treasury) and the IRS in 2019 issued regulations (the extraordinary disposition regulations) under IRC Sections 245A and 954(c)(6) of the Internal Revenue Code that retroactively neutralized, and in some cases penalized, gap period strategies. In the newly released PLR, the IRS granted the taxpayer's request to make a late entity-classification election (familiarly, a check-the-box election) that would cause the relevant transaction to become disregarded. The PLR is unique insofar as the taxpayer's stated motivation for requesting relief was to mitigate the "negative tax consequences" attributable to the extraordinary disposition regulations. EY Tax Alert 2021-1629 has details.

Ways and Means Committee unveils portion of reconciliation plans

On September 7, House Ways and Means Committee Chairman Richard Neal (D-MA) announced that the Committee will begin considering legislative proposals under budget reconciliation instructions later this week and released the first batch of draft legislative text for the Democrats' proposed Build Back Better Act. Included in this week's markup, which will begin Thursday and Friday (Sept. 9-10), are investments aimed at providing universal paid family and medical leave; expanding access to dental, vision, and hearing benefits in Medicare; enhancing access to child care; strengthening retirement benefits; and modernizing trade programs, among other items. EY Tax Alert 2021-1618 has details.

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Upcoming Webcasts

Implementing income recognition rules under IRC Section 451 (September 13)
During this Thought Center Webcast, Ernst & Young professionals will have a discussion regarding immediate actions taxpayers should take for their 2020 tax returns, as well as 2021 considerations.

International tax talk quarterly series with the EY Global Tax Desk Network (September 14)
During this Thought Center Webcast, Ernst & Young professionals will provide you with information on major tax law changes in the countries and jurisdictions covered by our US-based Global Tax Desk Network. This webcast features panelists from across the Asia-Pacific region, Latin America and the EU, who will discuss: (i) Offshore indirect transfers (OIT) regulations, including reporting obligations and their impact on transactions and restructurings; (ii) Perspectives of revenue authorities implementing OIT regulations; and (iii) Practical considerations for businesses in light of local country/regional perspectives.

US international tax reform: Update on recent developments (September 20)
Significant international tax changes have been proposed this year, including the Biden Administration’s Made in America Plan (as outlined in the Green Book) and a discussion draft of Senator Ron Wyden’s international tax framework, among others. Many of these changes would significantly affect the global taxation of multinational corporate groups. During this Thought Center Webcast, Ernst & Young professionals will discuss the various proposals.

Accounting for income taxes: A quarterly perspective (September 21)
During this Thought Center Webcast, Ernst & Young professionals, moderated by Angela Evans, Partner, Tax Accounting and Risk Advisory Services (TARAS), will discuss ongoing issues and regulatory trends in the tax accounting arena. Topics will include recent tax legislation with tax accounting implications and a review of current income tax accounting concepts.

US Indirect Tax Controversy: Current audit trends and outlook, including ways to manage your state tax posture (September 29)
During this Thought Center Webcast, Ernst & Young professionals will discuss recent audit trends in select states, including California, New York and Texas, and possible avenues to resolve uncertain tax positions.

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Recent Tax Alerts

Internal Revenue Service

— Sep 08: IRS allows taxpayer to reverse "gap period" transaction through late check-the-box election (Tax Alert 2021-1629)

— Sep 08: QUEST Economic Update highlights key US and global economic trends — September 8, 2021 (Tax Alert 2021-1627)

— Sep 08: IRS says employers that fail to timely deposit any portion of deferred employment taxes under CARES Act will owe penalty on entire amount (Tax Alert 2021-1624)

— Sep 02: IRS allows e-signatures on specified forms indefinitely (Tax Alert 2021-1606)

— Aug 30: CCA articulates five-factor test in determining income inclusion of reimbursement payments (Tax Alert 2021-1584)

— Aug 30: Eligible taxpayers may use IRS FIRE System's new online application for information returns beginning September 26, 2021 (Tax Alert 2021-1583)

— Aug 26: IRS rules payments to REIT for use of fiber optic cable capacity are 'rents from real property,' geographic operational area can be used for limited rental exception (Tax Alert 2021-1573)

— Aug 26: New guidance on income recognition modifies procedures for obtaining automatic consent to change accounting methods (Tax Alert 2021-1572)

International

— Sep 09: PE Watch | Latest developments and trends, September 2021 (Tax Alert 2021-1633)

— Sep 09: EY Canada's Tax Matters @ EY for September 2021 (Tax Alert 2021-1632)

— Sep 09: Norwegian Government proposes changes in petroleum taxation (Tax Alert 2021-1621)

— Sep 08: Turkey reduces withholding tax rate to 0% for certain venture capital and real estate investment fund earnings (Tax Alert 2021-1620)

— Sep 08: German Ministry of Finance issues guidance on dispute resolutions for income and property taxes (Tax Alert 2021-1615)

— Sep 07: Turkey extends application and first installment payment deadlines for Tax Amnesty (Tax Alert 2021-1614)

— Sep 07: Thailand's nonresident electronic service providers subject to VAT from 1 September 2021 (Tax Alert 2021-1613)

— Sep 07: Argentine Central Bank issues new guidance for entities with new financial debt to access the official foreign-exchange market (Tax Alert 2021-1612)

— Sep 02: Nigerian Government signs Petroleum Industry Bill 2020 into Law (Tax Alert 2021-1603)

— Sep 02: Brazilian House of Deputies approves bill modifying the corporate income tax system as part of comprehensive tax reform (Tax Alert 2021-1600)

— Sep 01: Global labor and employment law strategic topics | July 2021 Edition 2 (Tax Alert 2021-1595)

— Sep 01: Mainland China simplifies application procedures for unilateral advance pricing arrangements (Tax Alert 2021-1594)

— Sep 01: Australian Treasury releases revised draft law on Corporate Collective Investment Vehicle regime (Tax Alert 2021-1593)

— Aug 31: Thailand's VAT to remain at 7% for an additional two years (Tax Alert 2021-1585)

— Aug 27: USCIS requires COVID-19 vaccinations for applicants applying for adjustment of status or refugee status (Tax Alert 2021-1579)

— Aug 27: Japan's application process starts for Carbon Neutrality and Digital Transformation related tax incentives (Tax Alert 2021-1571)

— Aug 26: Dominican Republic enacts Law No. 163-21 promoting the trading of publicly-offered securities on the Dominican Republic Stock Exchange (Tax Alert 2021-1575)

Legislation

— Sep 09: Education and Labor Committee unveils $761B reconciliation package (Tax Alert 2021-1634)

— Sep 08: What to expect in Washington (September 8) (Tax Alert 2021-1619)

— Sep 08: Ways and Means Committee unveils portion of reconciliation plans (Tax Alert 2021-1618)

— Sep 01: Treasury announces it awarded $5 billion in New Markets Tax Credit program (Tax Alert 2021-1598)

— Aug 29: Discussion draft released by Senators Wyden, Brown, Warner proposes significant changes to current international tax rules (Tax Alert 2021-1580)

States

— Sep 08: Ohio taxpayers allege double taxation resulted from state's failure to correctly attribute withheld taxes (Tax Alert 2021-1628)

— Sep 08: EY special report analyzes impact of COVID-19 on current and future employer unemployment insurance costs (Tax Alert 2021-1623)

— Sep 07: Illinois enacts elective pass-through entity tax (Tax Alert 2021-1616)

— Sep 07: North Carolina will impose penalty for failure to electronically file 2021 annual withholding return and Forms W-2; other changes apply to reporting of Forms 1099-MISC and 1099-NEC (Tax Alert 2021-1611)

— Sep 07: Social Security Administration publishes wage-base projections for 2022 through 2030 (Tax Alert 2021-1601)

— Sep 02: Maryland Comptroller proposes regulations for digital advertising tax (Tax Alert 2021-1609)

— Sep 02: Multistate Tax Commission updates statement on P.L. 86-272 to address its views on activities conducted over the internet (Tax Alert 2021-1608)

— Sep 01: Virginia law protects employers from SUI tax increases in 2022 due to COVID-19 (Tax Alert 2021-1596)

— Aug 31: Kentucky law requires that employer leave policies extend to the adoption of a child (Tax Alert 2021-1589)

— Aug 30: New Jersey fiscal year 2022 SUI tax rates increase due to COVID-19 benefit claims (Tax Alert 2021-1582)

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Recent Newsletters

State and Local Tax Weekly
   Highlights of this edition include:

  • California superior court rules Proposition 22 which changes employment classification rules for app-based transportation and delivery drivers is unconstitutional. On Aug. 20, 2021, Alameda County Superior Court Judge Frank Roesch ruled Proposition 22, which changed the employment classification statutes for app-based transportation and delivery drivers by classifying them as independent contractors rather than employees, violates the state's constitution.
  • Income/Franchise, Sales & Use, Business Incentives, Controversy, Payroll & Employment Tax, Miscellaneous Tax, Upcoming Webcasts

ITS/Washington Dispatch
   Highlights of this edition include:

Legislation

  • Infrastructure legislation, FY’22 budget resolution move forward
  • Senate Finance Committee Chairman, members release international tax discussion draft
  • Finance Committee Chairman introduces bill that would change tax treatment of financial derivative transactions
  • Senate-passed infrastructure bill would impose information-reporting requirements on sales of cryptocurrency, other digital assets

IRS news

  • IRS extends to 1 January 2023, applicability date for W/H on certain transfers, distributions related to PTP interests
  • US, Germany agree on exchange of CbC reports

Transfer pricing news

  • Amgen intends to challenge $3.6b tax deficiency

OECD developments

  • OECD releases 2021 update on peer review of preferential tax regimes
  • OECD releases corporate tax statistics publication (third edition), including anonymized and aggregated CbC report statistics

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IRS Weekly Wrap-Up

Final Regulations

 T.D. 9952Certain Non-Government Persons Not Authorized To Participate in Examinations of Books and Witnesses as a Section 6103(n) Contractor
 T.D. 9953Recapture of Excess Employment Tax Credits Under the American Relief Plan Act of 2021

Proposed Regulations

 REG-102951-16Electronic-Filing Requirements for Specified Returns and Other Documents; Hearing
 REG-109077-21Recapture of Excess Employment Tax Credits Under the American Relief Plan Act of 2021

Revenue Procedures

 2021-37Procedures For Applications For Section 403(B) Pre-Approved Plans
 2021-38Rev. Proc. 2021-38
 2021-3926 CFR 601.601: Rules and Regulations
 2021-4026 CFR 601.201: Rulings and determination letters

Notices

 2021-522021-2022 Special Per Diem Rates
 2021-53Guidance on Reporting Qualified Sick Leave Wages and Qualified Family Leave Wages Paid For Leave Provided in 2021

Internal Revenue Bulletin

 2021-36Internal Revenue Bulletin of September 7, 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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