June 19, 2022
U.S. International Tax This Week for June 17
Ernst & Young's U.S. Tax This Week newsletter for the week ending June 17 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.
President Joe Biden expressed confidence this week that Congress can pass a reconciliation bill that addresses prescription drug pricing and clean energy tax credits, and there were meetings this week suggesting movement toward such a bill. "I believe I have the votes to do a number of things. One, prescription drugs. Reduce utility bills … I think we'll be able to get the ability to have a tax incentive for winterization," the President said in a 16 June interview. He also said, "we're going to be able to have a fair tax system" and will have the votes "to have a minimum tax on corporations of 15%" and "tax increases on [the] super wealthy."
Senate Majority Leader Chuck Schumer and House Speaker Nancy Pelosi met with the President this week to discuss "plans for fighting inflation" including reducing prescription drug and energy costs. The Majority Leader also reportedly met with Senator Joe Manchin, and there was a report of Democratic meetings with the Senate Parliamentarian over a possible reconciliation bill.
Meanwhile, Republican Senate Finance Committee members released the Middle-Class Savings and Investment Act on 14 June, proposing to address US inflation with tax cuts that would be paid for by extension of the SALT cap deduction. The proposal would raise the threshold for the net investment income tax for joint filers, raise the zero percent threshold for capital gains taxes, exclude the first $300 of interest income ($600 for joint filers) and increase the savers credit. The legislation, immediately panned by Democrats, was introduced by former Finance Committee Chairman Chuck Grassley and Senators John Barrasso, Steve Daines and James Lankford.
On the House side, Ways & Means Committee Republicans are advocating their own anti-inflationary measures, including repurposing unspent COVID relief funds, making Tax Cuts and Jobs Act provisions permanent, negotiating better trade agreements along the lines of the USMCA and increasing American energy production.
Democrats in Washington are not only up against the challenge of defending their economic proposals as inflation-fighting, including those being discussed by Senator Manchin and Senate Majority Leader Chuck Schumer for a reconciliation package, but are now competing with inflation proposals by Republicans eyeing a potential takeover of one or both chambers of Congress after the midterm elections.
Republican members of the House Ways and Means Committee sent a letter to Treasury Secretary Janet Yellen on 16 June, urging the Biden Administration to push back the effective date of the final foreign tax credit regulations issued in December 2021 to 1 January 2023. The committee members pointed to the "significant delays in providing necessary clarifying guidance" as the main impetus for requesting the delay.
Pascal Saint-Amans, Director of the OECD Centre of Tax Policy and Administration, this week urged "first-movers" on BEPS 2.0 Pillar Two, saying "a first mover [is needed] to start the domino effect." He said he was optimistic the European Union would act on Pillar Two soon, perhaps during the 17 June Economic and Financial Council meeting in Luxembourg. Addressing Pillar One, Saint-Amans said it was not delayed, but rather subject to an "extremely intensive negotiation."
How to navigate global TP controversy in life sciences — US focus (June 22)
During this EY Webcast, Ernst & Young professionals will explore life sciences transfer pricing controversy trends and developments in the US. Our team of life sciences and transfer pricing specialists will discuss and share their perspectives on emerging trends and hot topics relevant to this market.
BorderCrossings (June 30)
During this EY Webcast, Ernst & Young professionals will discuss the current scope and framework of the Pillar One and Pillar Two proposals, the impact on multinationals, a US legislative update on related matters, and next steps.
Recent Tax Alerts
— Jun 14: US lifts pre-departure COVID-19 testing requirement (Tax Alert 2022-0923)
— Jun 13: China no longer requires PU letters for foreign assignees and their family members traveling to Shanghai (Tax Alert 2022-0920)
Canada & Latin America
— Jun 16: Argentine Government proposes windfall corporate income tax (Tax Alert 2022-0935)
— Jun 13: Argentine Central Bank exempts certain individuals and legal entities from foreign exchange controls on exports of services (Tax Alert 2022-0915)
— Jun 15: European Court of Justice rules on use of statistical data for determination of customs value (Tax Alert 2022-0933)
— Jun 14: European Parliament rejects carbon legislation package, including more ambitious rules for EU Emission Trading System and new EU Carbon Border Adjustment Mechanism (Tax Alert 2022-0921)
— Jun 13: French Tax Administration encourages taxable persons to carry out VAT voluntary disclosure with respect to Intra-Community distance sales of goods (Tax Alert 2022-0917)
— Jun 10: Luxembourg Tax Authority issues guidance on defensive measure related to EU-listed non-cooperative jurisdictions (Tax Alert 2022-0903)
— Jun 10: Turkiye introduces Istanbul Finance Center (Tax Alert 2022-0904)
IRS Weekly Wrap-Up
Internal Revenue Bulletin
|Internal Revenue Bulletin of June 21, 2022
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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.