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September 12, 2021

U.S. International 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.


The House Ways and Means Committee began the initial markup of the $3.5 trillion budget reconciliation package on 9-10 September. Recent reports suggest the tax portions of the plan are likely to be released sometime in the next few days, ahead of a continued committee markup on 14-15 September. This week's markup measures include universal paid family and medical leave, access to child care, strengthening retirement savings, and trade programs.

House Democrats are moving forward as Senate Democratic moderate Joe Manchin is strongly hinting he will only support a substantially pared down version of the bill. The press this week reported that Senator Manchin is indicating he will only support a reconciliation bill that costs upwards of $1.5 trillion; the Senator had earlier said he would support a reconciliation package in the one to two trillion dollar range. Senate Majority Leader Chuck Schumer meanwhile rejected Senator Manchin's earlier suggestion that Congress should take a "strategic pause" before enacting a major reconciliation bill. The Majority Leader said on 9 September, "We are moving forward on this bill."

Treasury on 7 September also continued to press for a 21% minimum corporate tax on foreign earnings, posting on its website an "opinion piece" by senior Treasury officials titled, Why the United States Needs a 21% Minimum Tax on Corporate Foreign Earnings.

Senate Finance Committee Chairman Ron Wyden on 10 September released draft partnership tax legislation that addresses "partnership tax complexity." The major proposal reportedly would raise $172 billion and is described as being on the "revenue menu" for budget reconciliation. A press release accompanying the draft legislation describes the proposals as closing "loopholes that allow wealthy investors and mega-corporations to use pass-through entities, primarily partnerships, to avoid paying their fair share of taxes."

A senior Treasury official this week confirmed that while the coming final foreign tax credit (FTC) regulations will maintain the jurisdictional nexus requirement in the proposed regulations, they will clarify and "maybe make a little more flexible" the requirement that the foreign law be similar to US law. The proposed FTC regulations (REG-101657-20), issued in the fall of 2020, provided rules that would fundamentally revamp how to determine the creditability of a foreign tax under IRC Section 901 by requiring a foreign tax to meet a jurisdictional-nexus requirement (which would generally deny a credit for certain extra-jurisdictional taxes).

The official was quoted as saying that the first tranche of the final regulations will be released toward the end of 2021 and will contain the original "core" ideas of the proposed regulations. Besides the jurisdictional nexus requirement, the first installment of the final regulations will include rules on foreign taxes subject to disallowance under IRC Section 245A(d) as well as rules related to foreign taxes paid on disregarded payments. The second tranche of final rules, to be released sometime later, reportedly will include elections to capitalize certain expenses for determining tax book value of assets, a rule for directly allocating interest to foreign bank branches, and definitions of financial services income.

Treasury and the Internal Revenue Service (IRS) on 9 September issued the 2021–2022 Priority Guidance Plan in Notice 2021-28, which contains a total of 193 projects that are priorities for allocating resources during the plan year. The IRS indicated that this year's plan periodically will be updated to reflect new priorities and legislative initiatives.

In a recently released private letter ruling (PLR 202135006), the IRS permitted a taxpayer effectively to undo planning undertaken during a so-called gap period. (The gap period refers to the period: (i) beginning after 31 December 2017 (the second E&P measurement date for purposes of the IRC Section 965 transition tax) and (ii) ending on the last day of the CFC's last tax year beginning before 1 January 2018 (the last year to which the Global Intangible Low-Taxed Income regime did not apply).)

After many taxpayers implemented gap period strategies in 2018, Treasury and the IRS in 2019 issued regulations (the extraordinary disposition regulations) under IRC Sections 245A and 954(c)(6) 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 (i.e., 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. Before PLR 202135006 was issued, it was not clear whether the IRS would permit taxpayers to "unwind" gap period transactions. See EY Tax Alert 2021-1629 for details.

Upcoming Webcasts

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.

Recent Tax Alerts


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

Canada & Latin America

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

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

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

Middle East

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

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


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

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

Recent Newsletters

ITS/Washington Dispatch
   Highlights of this edition include:


  • 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

IRS Weekly Wrap-Up

Internal Revenue Bulletin

 2021-36Internal Revenue Bulletin of September 7, 2021

Additional Resources

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:

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.