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June 5, 2022

U.S. Tax This Week for June 3

Ernst & Young's U.S. Tax This Week newsletter for the week ending June 3 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 GLAM addresses allocating and apportioning 'deferred compensation expense' for FDII deductions

In a new generic legal advice memorandum (new GLAM), the IRS Office of Chief Counsel (AM 2022-001) addressed how to properly allocate and apportion amounts it calls "deferred compensation expense" (DCE) under the IRC Section 861 regulations for calculating a taxpayer's deduction for foreign-derived intangible income (FDII). Reversing previous guidance, the IRS asserted that so-called DCE deductions should be allocated to FDII for the tax years in which the compensation becomes deductible under federal income tax accounting principles, even if the compensation is based on employees' service in years before FDII became effective. EY Tax Alert 2022-0854 has details.

New Jersey publishes proposed combined reporting regulations for public comment

On May 16, 2022, the New Jersey Division of Taxation (NJ DOT) published proposed combined reporting regulations (the "Proposed Regulations") in the New Jersey Register. Interested parties may submit comments until July 15, 2022. The Proposed Regulations would incorporate changes that the New Jersey Legislature made to the Corporation Business Tax Act (CBTA) in 2018 and 2020. EY Tax Alert 2022-0864 has details.

EY Guides, Surveys, and Reports

How the metaverse and Web3 are creating novel tax issues
Multinationals are already building their presence in the metaverse, aware it will be a key transactional space. But while the metaverse is expected to nurture a blossoming layer of commerce, significant questions remain over taxation. Corporations and governments face a broad range of metaverse challenges and the need to navigate an increasingly complex global tax landscape. Learn more in this new EY article, "How the metaverse and Web3 are creating novel tax issues."

Upcoming Webcasts

Are you ready for July 1? — Top five questions companies ask about Superfund tax implementation and selected issues (June 7)
During this EY Webcast, Ernst & Young professionals will discuss questions most commonly asked by companies preparing for the July 1 implementation date for Superfund chemicals excise taxes, which were reinstated by the Infrastructure Investment and Jobs Act (IIJA).

The indirect tax technology journey: Now. Next. Beyond. (June 9)
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. This webcast will focus on leading practices for global indirect tax technology selection and implementation.

Competent Authority procedures in cross-border controversy in the Americas (June 15)
During this EY Webcast, Ernst & Young professionals will discuss trends and developments in Advance Pricing Agreements (APAs) and Mutual Agreement Procedure (MAP) in selected jurisdictions in the Americas.

Accounting for income taxes: A quarterly perspective (June 21)
During this EY Webcast, Ernst & Young professionals will address developments and issues in accounting for income taxes.

Recent Tax Alerts

Internal Revenue Service

— May 31: IRS GLAM addresses allocating and apportioning 'deferred compensation expense' for FDII deductions (Tax Alert 2022-0854)

— May 25: Entity did not qualify as an insurance company — failed to distribute risk or sell typical insurance policies, Tenth Circuit affirms (Tax Alert 2022-0839)

— May 24: IRS issues guidance on employer leave-based donation programs to aid victims of war in Ukraine (Tax Alert 2022-0828)

— May 20: IRS again rules that IRC Section 481(a) adjustment relating to REIT's change in method of accounting is not gross income for purposes of income tests (Tax Alert 2022-0815)


— Jun 02: EY Canada's Tax Matters @ EY for June 2022 (Tax Alert 2022-0863)

— Jun 02: Nunavut budget 2022-23 discussed (Tax Alert 2022-0862)

— Jun 02: Turkey introduces continuous reporting requirement of certain information for property listings published on the internet (Tax Alert 2022-0861)

— Jun 01: The Netherlands announces 30% facility cap (Tax Alert 2022-0860)

— Jun 01: Spain tightens rules for taxation of long-term incentives under special tax regime for inbound employees (Tax Alert 2022-0859)

— Jun 01: Ireland launches consultation on Pillar Two implementation (Tax Alert 2022-0857)

— May 31: Recent updates to Quebec immigration discussed (Tax Alert 2022-0856)

— May 31: DHS announces procedures for Afghan Temporary Protected Status applications and offers Special Student Relief for Afghan F-1 students (Tax Alert 2022-0855)

— May 31: Australia's immigration policy as of July 1 discussed (Tax Alert 2022-0853)

— May 31: European Union to implement Entry and Exit System (EES) and European Travel Information and Authorisation System (ETIAS) (Tax Alert 2022-0852)

— May 26: UK announces new 25% energy profits levy (Tax Alert 2022-0846)

— May 26: Norway proposes changes to VAT rules on e-commerce (Tax Alert 2022-0845)

— May 26: Uruguay's Administrative Contentious Court rules acquisition costs for certain construction projects may qualify for partial deduction (Tax Alert 2022-0843)

— May 26: USCIS to implement premium processing for certain pending EB-1 and EB-2 Form I-140 petitions (Tax Alert 2022-0841)

— May 25: Uruguay extends reduced VAT rate for tourism sector (Tax Alert 2022-0840)

— May 25: Hong Kong Tax Authority clarifies multiple issues around profits tax (Tax Alert 2022-0837)

— May 25: Luxembourg Tax Authority revises MDR guidance (Tax Alert 2022-0836)

— May 25: Uganda issues Tax Amendment Bills for 2022 (Tax Alert 2022-0834)

— May 25: Swiss Parliament to debate tonnage tax bill (Tax Alert 2022-0833)

— May 25: Spanish National High Court issues new favorable decision on reclaims by non-Spanish sovereign funds (Tax Alert 2022-0830)

— May 24: UK delays reporting rules for digital platforms (Tax Alert 2022-0827)

— May 24: Japan implements sanction measures against Russia (Tax Alert 2022-0824)

— May 23: Australian Labor Party wins 2022 Federal Election | Overview of key policies (Tax Alert 2022-0822)

— May 20: Hong Kong Court rules booked trading profits are not necessarily subject to profits tax (Tax Alert 2022-0817)


— Jun 01: House Energy & Commerce Oversight and Investigations Subcommittee hearing on formula safety and supply (Tax Alert 2022-0858)

— May 31: What to expect in Washington (May 27) (Tax Alert 2022-0851)


— Jun 02: Puerto Rico's sales tax holiday for school uniforms and supplies will run from July 15 through July 16 (Tax Alert 2022-0865)

— Jun 02: New Jersey publishes proposed combined reporting regulations for public comment (Tax Alert 2022-0864)

— May 31: Tucson, Arizona enacts Minimum Wage Act | raises the minimum wage and imposes other wage payment rules (Tax Alert 2022-0848)

— May 26: Puerto Rico's Treasury Secretary announces sales and use tax holiday for hurricane-season purchases will take place from June 17-June 19, 2022 (Tax Alert 2022-0847)

— May 24: Minnesota legislation retroactively reduces 2022 SUI tax rates; revised SUI rate notices issued; credits may be posted to employer accounts (Tax Alert 2022-0831)

— May 24: Colorado makes elective pass-through entity tax retroactive to 2018 (Tax Alert 2022-0829)

— May 24: Remote workers create state tax issues that can impact company value (Tax Alert 2022-0825)

— May 23: Mississippi legislation to reduce 2022 SUI tax rates enacted; 2022 first- quarter return deadline extended due to late SUI rate notices (Tax Alert 2022-0823)

— May 23: Alabama law strengthens work search requirements for unemployment benefit claimants; 2022 employer SUI tax rates decrease but wage base remains unchanged (Tax Alert 2022-0818)

— May 20: Arizona's suit challenging constitutionality of ARPA provision can go forward, Ninth Circuit holds (Tax Alert 2022-0814)

Recent Newsletters

State and Local Tax Weekly
   Highlights of this edition include:

New Colorado law penalizes unreasonable or incomplete sales-and-use-tax refund claims. On April 21, 2022, Colorado Governor Jared Polis signed legislation (HB 22-1118) that imposes significant new penalties on refund claims for sales and use taxes paid by a purchaser to a vendor (Buyer's Claims).

— Income/Franchise, Sales & Use, Business Incentives, Payroll & Employment Tax, Upcoming Webcasts

IRS Weekly Wrap-Up

Final Regulations

 26 CFR Part 301Annual Information Return/Reports

Internal Revenue Bulletin

 2022-22Internal Revenue Bulletin of May 31, 2022
 2022-23Internal Revenue Bulletin of June 6, 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.