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November 14, 2021
2021-2071

U.S. International Tax This Week for November 12

Ernst & Young's U.S. International Tax This Week newsletter for the week ending November 12 is now available. Prepared by Ernst & Young's International Tax Services group, this weekly update summarizes important news, cases, and other developments in international taxation.

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Spotlight

President Joe Biden will sign the Infrastructure Investment and Jobs Act (HR 3684) next week when Congress returns to Washington from the Veterans Day work period recess. The House passed the Senate-passed bill late on 5 November, clearing the way for about $550 billion in new spending on highway and other projects. Worth noting, the infrastructure bill will impose information-reporting requirements on sales of cryptocurrency and other "digital assets." Cryptocurrency and other "digital assets" sold by customers of "brokers" will be subject to Form 1099-B reporting and cost-basis reporting. The legislation specifically amends the Internal Revenue Code (IRC) to make certain changes including expanding the definition of a broker, defining "digital assets," and applying the cost-basis-reporting regime for securities to digital assets. The amendments will be effective for information returns filed in 2024 for the 2023 calendar year.

House Speaker Nancy Pelosi, who attended the climate summit in Glasgow this week, reiterated the plan for the House to vote on the Build Back Better Act (HR 5376) next week. Last week's agreement among House progressives and moderates that resulted in passage of the bipartisan infrastructure bill also called for the House to vote on the budget reconciliation bill no later than the week of 15 November.

Recall Democratic moderates withheld their support for the bill last week pending estimates from the Congressional Budget Office (CBO). CBO announced this week that they would be releasing estimates for individual titles of the reconciliation bill as they are completed, but warned that some estimates would take longer — particularly for provisions that interact with various titles of the bill.

There is some speculation that this week's reported high US inflation numbers for October may affect the timing of Senate action on the Build Back Better bill. Senator Joe Manchin reacted to the inflation report saying the "threat" from inflation is not temporary and "getting worse." The Senator's comments are being viewed through the prism of the possible inflationary impact of the proposed $1.7 trillion budget reconciliation package.

A senior Treasury official this week said that the first set of eagerly-anticipated final foreign tax credit regulations are still planned to be released before the end of the year. The official said the final rules, which are expected to come in at around 400 pages, are in the "clearance process." Treasury and the Internal Revenue Service issued proposed foreign tax credit regulations in September 2020. Repeating prior comments, the official said the foreign tax credit package would focus on core rules, including jurisdictional nexus and refundable credits. A second set of final foreign tax credit regulations will likely be released in 2022, he said. The proposed regulations would apply to foreign taxes paid or accrued in tax years beginning on or after the date of publication of the final rules.

Proposed regulations on previously taxed earnings and profits (PTEP) are approximately a month or two from completion as to core aspects of the package, the official said, but will then require considerable review. The first set of proposed PTEP regulations are expected to be released in 2022. The official conceded that provisions in the House's proposed Build Back Better Act could affect the first set of PTEP regulations currently in process, pointing to proposed changes to IRC Section 961(c) basis adjustments.

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Upcoming Webcasts

Biden tax reform and the Build Back Better Act (November 18)
During this EY Webcast, Ernst & Young professionals will discuss the latest version of the Build Back Better Act (H.R. 5376) reconciliation bill and what it could mean for your business. Topics to be discussed include: (i) Current state of the bill and its prospects for passage; (ii) Corporate minimum tax; (iii) International provisions (global intangible low-taxed income/subpart F, foreign tax credits, foreign-derived intangible income, base erosion and anti-abuse tax); (iv) Interest expense limitations; and (v) What companies should be doing now.

Tax in the time of COVID-19: update on legislative, economic, regulatory and IRS developments (November 19)
During this EY Webcast, Ernst & Young professionals will discuss how businesses can navigate the tax policy environment and continue to effectively operate their tax function in this time of crisis and change. Panelists will provide updates on: (i) the US economy and tax policy; (ii) breaking developments; and (iii) what’s happening at the IRS.

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Recent Tax Alerts

Asia

— Nov 10: OECD releases Hong Kong Stage 2 peer review report on implementation of Action 14 minimum standard (Tax Alert 2021-2052)

— Nov 09: Indonesia passes wide-ranging tax law amendments (Tax Alert 2021-2039)

Canada & Latin America

— Nov 11: Costa Rica's General Customs Directorate issues guidelines on processes and operations in free trade zones for public comment (Tax Alert 2021-2062)

— Nov 10: Canada's deadline to convert Health and Welfare Trusts to Employee Life and Health Trusts is imminent (Tax Alert 2021-2056)

— Nov 05: Dominican Republic's Ministry of Finance and the General Directorate of Internal Taxes issue guidance on non-invoiced inventory outflows (Tax Alert 2021-2032)

Europe

— Nov 09: Finland announces new policies relating to Posted Workers (Tax Alert 2021-2048)

— Nov 09: UK Autumn Budget 2021 | Considerations for Japanese groups operating in the UK (Tax Alert 2021-2045)

— Nov 05: UK Plastic Packaging Tax | Legislation in UK Budget Finance Bill and consultation on new regulations (Tax Alert 2021-2027)

Middle East

— Nov 05: Turkey enacts new tax law (Tax Alert 2021-2026)

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Recent Newsletters

ITS/Washington Dispatch

   Highlights of this edition include:

Legislation

  • President Biden releases pared down budget reconciliation framework

Digital economy

  • G20 leaders confirm commitment to global tax changes under BEPS 2.0
  • Six country Joint Statement on transitional approach to existing unilateral measures during period before Pillar One is in effect

Treasury and IRS news

  • IRS rules gains and losses arising from commodity hedges may be sourced by reference to the underlying hedged inventory property
  • IRS revises Forms W-8ECI, W-8BEN-E, W-8BEN
  • FinCEN provides FBAR relief to victims of recent natural disasters giving them until 31 December 2021 to file

Transfer pricing news

  • IRS maintaining policy on 'telescoping' in APA and MAP cases while trying to alleviate administrative burden, official says
  • Cyprus clarifies US-Cyprus CAA for exchange of CbC reports

OECD developments

  • MLI Conference of the Parties issues two opinions re MAP implementation and entry into effect of arbitration rules
  • OECD releases outcomes of fourth phase of peer reviews on BEPS Action 13
  • OECD releases seventh batch of Stage 2 peer review reports on dispute resolution
  • OECD releases PRC Stage 2 peer review report on implementation of Action 14 minimum standard

United Nations

  • UN releases MAP and Tax Dispute Resolution Handbook

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IRS Weekly Wrap-Up

Internal Revenue Bulletin

 2021-46Internal Revenue Bulletin of November 15, 2021

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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.

 

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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