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January 23, 2022

U.S. Tax This Week for January 21

Ernst & Young's U.S. Tax This Week newsletter for the week ending January 21 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.

Top of the Week

IRS's LB&I division issues interim guidance and FAQs on refund claims that include a claim for credit for increasing research activities

The IRS Large Business and International (LB&I) division has issued interim guidance (LB&I-04-0122–0001, or the Memorandum) and frequently asked questions (FAQs) on applying Field Advice 20214101F to refund claims that include a claim for credit for increasing research activities (research credit claim) and procedures for determining whether a refund claim is valid. The Memorandum mostly consists of additional or modified provisions in the Internal Revenue Manual. EY Tax Alert 2022-0090 has details.

European Commission builds on "Fit for 55" energy and climate package with new measures In December 2021, the European Commission (the Commission) released a series of legislative proposals as a continuation to the "Fit for 55" package announced in July 2021. The proposals aim to pave the way towards renewable and low carbon fuels and create a market for hydrogen. The package also contains provisions related to methane emissions, providing for obligatory tracking and reduction of methane released into the atmosphere from the energy sector. Furthermore, the Commission set forth the principles around sustainable carbon cycles and for efficient and green mobility and introduced another proposal aiming to foster the decarbonization of the building sector. The new measures are viewed as another milestone in delivering the goals of the European Green Deal. Ahead of implementation, the measures are expected to significantly accelerate business transformation toward sustainability in gas, agriculture and transportation sectors. EY Tax Alert 2022-0085 has details.

Upcoming Webcasts

How the UK AHC regime will impact the alternative investment funds landscape (January 24)
Please join our panel of professionals for our EY Webcast - a timely discussion of recent Tax industry trends and the outlook for changes relevant to US-based asset managers.

Tax policy matters: Prepare for potential impact of reform on your business (January 25)
During this EY Webcast, Ernst & Young professionals will have a discussion on: (i) BEPS 2.0 Pillar Two and the EU's proposed Directive on a global minimum level of taxation for multinational groups in the EU; (ii) ATAD3 / UNSHELL initiative against the misuse of shell entities; (iii) Future of the EU budget and the potential impact on taxes in the EU; (iv) Public Country-by-Country Reporting; and (v) Status of tax reform in the US.

EY Tax.Tech™ webcast series: Understanding the future of tax — the intelligent finance and tax function (January 25)
During this EY Webcast, Ernst & Young professionals will give a view into the workings of the new intelligent finance and tax function. They’ll explore issues ranging from the operating model necessary to underpin this integrated approach to the advanced technology platform and common data framework flowing through the complete finance and tax process life cycle.

BorderCrossings . . . With EY transfer pricing and tax professionals (January 27)
Multinational companies often encounter related transactions – for example, the sale of tangible goods with the use of intangibles, or the sale of goods along with services being provided. This month’s BorderCrossings EY Webcast addresses these issues by focusing on the related “aggregation principle” in transfer pricing. The webcast will also include a brief update on recent activities around the OECD’s “Pillar One” and “Pillar Two” initiatives under BEPS 2.0.

Recent Tax Alerts

Internal Revenue Service

— Jan 19: Tax M&A Update for December 2021 (Tax Alert 2022-0104)

— Jan 19: IRS modifies 20-year-old guidance on what constitutes a series of substantially equal periodic payments (Tax Alert 2022-0099)

— Jan 14: IRS's LB&I division issues interim guidance and FAQs on refund claims that include a claim for credit for increasing research activities (Tax Alert 2022-0090)

— Jan 14: IRS launches pilot program for fast tracking letter ruling requests under Associate Chief Counsel (Corporate) jurisdiction (Tax Alert 2022-0086)

— Jan 13: IRS TE/GE issues FY 2021 report on compliance activities of Exempt Organization function (Tax Alert 2022-0073)


— Jan 19: Ecuador modifies cross-border transaction rules (Tax Alert 2022-0109)

— Jan 20: Turkey introduces bill that postpones inflation accounting and announces new corporate income tax exemptions on gains in case of conversions into Turkish Lira (Tax Alert 2022-0108)

— Jan 20: Italian Tax Authorities provide clarifications on VAT treatment of derivatives (Tax Alert 2022-0107)

— Jan 20: Malaysia announces foreign-sourced income exemptions for resident taxpayers until 2026 (Tax Alert 2022-0106)

— Jan 19: UK's new digital Right to Work check rules come into effect April 6 (Tax Alert 2022-0105)

— Jan 19: Canada Revenue Agency provides update on home office expense deduction (Tax Alert 2022-0102)

— Jan 19: The Latest on BEPS and Beyond for January 2022 (Tax Alert 2022-0100)

— Jan 18: Brazil enacts legal framework for foreign exchange market (Tax Alert 2022-0097)

— Jan 18: Poland's new law facilitating employment of foreigners to go into effect in late January 2022 (Tax Alert 2022-0094)

— Jan 14: Uruguay proposes excise tax on e-cigarettes (Tax Alert 2022-0089)

— Jan 14: Uruguay issues decree establishing threshold for net worth tax (Tax Alert 2022-0088)

— Jan 14: Switzerland plans to implement OECD minimum tax rate for large multinational companies from 2024 (Tax Alert 2022-0087)

— Jan 14: European Commission builds on “Fit for 55” energy and climate package with new measures (Tax Alert 2022-0085)

— Jan 14: European Commission proposes new set of measures to address deforestation, waste management and soil health (Tax Alert 2022-0084)

— Jan 14: Korea enacts 2022 tax reform bill (Tax Alert 2022-0082)

— Jan 14: Italy issues 2022 Budget Law (Tax Alert 2022-0081)

— Jan 14: PE Watch | Latest developments and trends, January 2022 (Tax Alert 2022-0072)


— Jan 19: What to expect in Washington (January 19) (Tax Alert 2022-0101)


— Jan 19: Kentucky Department of Revenue submits income tax regulation on financial institution apportionment for final review (Tax Alert 2022-0110)

— Jan 18: St. Louis, Missouri extends indefinitely earnings tax guidance for remote workers (Tax Alert 2022-0098)

— Jan 13: Sales and Use Tax Quarterly Update for first quarter of 2022 (Tax Alert 2022-0074)

— Jan 13: Law firm clients | Virginia Tax Commissioner evaluates effect of Maryland SALT-cap workaround on Virginia taxpayers holding interests in PTEs doing business in Maryland (Tax Alert 2022-0069)

Recent Newsletters

State and Local Tax Weekly
   Highlights of this edition include:

Michigan enacts elective flow-through entity tax, Department of Treasury issues instructions for electing into the tax. On Dec. 20, 2021, Governor Whitmer signed into law HB 5376 (Mich. Pub. Act 21-135), allowing a flow-through entity (FTE) to elect to be taxed at the entity level (an "electing FTE").

IRS lists substances subject to reinstated Superfund excise tax, offers procedural guidance and suspends Notice 89-61. In Notice 2021-66 (released Dec. 14, 2021), the IRS provided guidance on Superfund excise taxes, which are reinstated as of July 1, 2022, under the recently enacted federal Infrastructure Investment and Jobs Act (P.L. 117-58) (IIJA) (see Tax Alert 2021-2059).

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

ITS/Washington Dispatch
   Highlights of this edition include:

— Legislation

— Tax Cuts and Jobs Act

— Tax compliance

— Foreign tax credit

— Capital markets

— Tax treaties

— Withholding

— Transfer pricing

— BEPS 2.0 (US)

— Foreign Account Tax Compliance Act (FATCA)

— IRS forms

— Miscellaneous


— United Nations

IRS Weekly Wrap-Up

Revenue Procedures

 2022-10Rulings and determination letters
 2022-13Proceedings for Determination of Employment Status

Revenue Rulings

 2022-03Section 1274.—Determination of Issue Price in the Case of Certain Debt Instruments Issued for Property


 2022-05Administrative, Procedural, and Miscellaneous
 2022-06Determination of Substantially Equal Periodic Payments
 2022-07Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates

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.