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February 20, 2022

U.S. Tax This Week for February 18

Ernst & Young's U.S. Tax This Week newsletter for the week ending February 18 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

EY highlights changes to 2021 Form 990-T and its schedules and instructions in annotated Form 990-T and analyzes changes to Form 4720

EY has prepared an annotated version of Form 990-T (Exempt Organization Business Income Tax Return), Schedule A, and their instructions. The annotated form and instructions show what changes the IRS has made for tax year 2021. These documents (attached to this Alert) highlight and explain changes from tax year 2020. Due to the limited changes to Form 4720 and instructions from 2020 to 2021, this Alert just summarizes those changes, rather than attaching an annotated version of the form. EY Tax Alert 2022-0273 has details.

IRS rules that water utility's proposed ratemaking method complied with normalization rules

In PLR 202206010, the IRS ruled that a public utility acted consistently with the normalization rules by proposing to include the portion of its net operating losses (NOLs) attributable to accelerated depreciation in calculating the deferred tax liability (DTL) used to offset its rate base. The IRS also found that the Commission would violate the normalization rules by determining excess accumulated deferred income tax (EADIT), which is also used in calculating rates, without including the utility's NOL deferred tax asset (DTA). EY Tax Alert 2022-0272 has details.

Upcoming Webcasts

Domestic tax quarterly webcast series: A focus on state tax matters (February 23)
During this EY Webcast, Joe Crosby, CEO of MultiState, a full-service state and local government relations company, will join us to discuss important state and local tax policy considerations that are emerging in 2022. EY state and local tax professionals from around the country will join in these discussions, bringing unique insights from each region.

BorderCrossings (February 24)
During this EY webcast, part of an ongoing monthly series, EY transfer pricing and tax professionals will help you stay informed and able to adopt a more proactive stance in developing and defending your transfer pricing policies and practices.

The outlook for global tax policy and controversy in 2022 (March 1)
During this EY Webcast, the panelists will discuss the findings reported in the EY 2022 Tax Policy & Controversy Outlook, focusing on significant tax law and administration trends and highlighting leading practices for organizations as they navigate tax developments around the world in the year ahead.

The indirect tax technology journey - Now. Next. Beyond. (March 2)
During this EY 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

Internal Revenue Service

— Feb 17: IRS provides new FAQs on transition relief for certain domestic partnerships and S corporations completing Schedules K-2 and K-3 (Tax Alert 2022-0288)

— Feb 15: EY-annotated Form 990 highlights changes to 2021 Forms 990 and 990-PF, schedules and instructions (Tax Alert 2022-0271)

— Feb 15: IRS adds two FAQs on COVID-19-related Higher Education Emergency Grants (Tax Alert 2022-0270)


— Feb 17: Uruguay's Executive Branch increases income limit to apply for simplified personal income tax regime (Tax Alert 2022-0287)

— Feb 17: Uruguay extends application of reduced VAT rate (Tax Alert 2022-0286)

— Feb 17: Canada's Department of Finance releases proposed measures regarding avoidance of tax debts and audit authorities (Tax Alert 2022-0285)

— Feb 17: Thailand signs Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (Tax Alert 2022-0284)

— Feb 17: Vietnam signs Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (Tax Alert 2022-0280)

— Feb 15: The Latest on BEPS and Beyond for February 2022 (Tax Alert 2022-0269)

— Feb 15: Australian Parliament passes bill to reform electronic signing of documents, virtual and hybrid meetings (Tax Alert 2022-0268)

— Feb 14: Ukraine implements new VAT rules for nonresidents supplying electronic services to Ukrainian customers (Tax Alert 2022-0265)

— Feb 14: Spain’s Tax Audit Plan for 2022 reveals intensified focus on conduit entities and beneficial ownership along with an increased use of technology (Tax Alert 2022-0264)

— Feb 11: Australia introduces bill on 17% patent box for medical and biotech technologies (Tax Alert 2022-0256)

— Feb 11: OECD releases Pillar One public consultation document on draft nexus and revenue sourcing rules (Tax Alert 2022-0254)

— Feb 11: Spain proposes improvements to tax treatment of carried interest and inpatriates regime (Tax Alert 2022-0252)


— Feb 16: Ways & Means subpanel holds infrastructure hearing (Tax Alert 2022-0277)

— Feb 16: What to expect in Washington (February 16) (Tax Alert 2022-0276)

— Feb 14: HELP Subcommittee hearing on the health care workforce shortage (Tax Alert 2022-0266)


— Feb 17: Delaware's temporary COVID-19 income tax relief for teleworkers applies through December 31, 2021 (Tax Alert 2022-0289)

— Feb 16: California Franchise Tax Board TAM discusses application of P.L. 86-272 to activities conducted over the internet (Tax Alert 2022-0281)

— Feb 11: North Carolina violated US Constitution by basing deductibility of debt owed by affiliated corporations on whether affiliates are subject to state franchise tax (Tax Alert 2022-0257)

Recent Newsletters

State and Local Tax Weekly
   Highlights of this edition include:

North Carolina violated US Constitution by basing deductibility of debt owed by affiliated corporations on whether affiliates are subject to state franchise tax In Philip Morris USA, Inc., the North Carolina Office of Administrative Hearings (NC OAH) determined that the North Carolina Department of Revenue (NC DOR) violated the US Constitution's commerce clause to the extent it denied a franchise tax deduction for debt owed to an out-of-state corporation by affiliated corporations not doing business in North Carolina but allowed the deduction for debt owed by affiliates that conducted business in the state

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

IRS Weekly Wrap-Up

Revenue Rulings

 2022-4Section 1274.—Determination of Issue Price in the Case of Certain Debt Instruments Issued for Property

Internal Revenue Bulletin

 2022-08Internal Revenue Bulletin of February 22, 2022

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.