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August 21, 2022

U.S. International Tax This Week for August 19

Ernst & Young's U.S. Tax This Week newsletter for the week ending August 19 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 on 16 August signed the Inflation Reduction Act of 2022 (IRA) (H.R. 5376) passed by Congress earlier in the month. The legislation finances climate and energy provisions and an extension of enhanced Affordable Care Act subsidies with a 15% corporate alternative minimum tax (CAMT) on adjusted financial statement income for corporations with profits over US$1 billion, a stock buyback tax, a two-year extension of the excess business loss limitation through 2028, increased IRS enforcement funding, and Medicare's new ability to negotiate prescription drug prices.

The new CAMT will require applicable corporations to compute two separate calculations for federal income tax purposes and pay the greater of the CAMT or their regular tax liability (regular tax liability plus Base Erosion and Anti-abuse Tax (BEAT) liability). Companies will need to assess their structures to identify applicable corporations, taking into account the special rules for common employer groups and foreign-parented multinational groups.

The CAMT will apply to tax years beginning after 31 December 2022. The Act directs Treasury to issue guidance to resolve certain CAMT issues not addressed in the Act's text. Pending that guidance, companies will have to take positions and file returns based solely on the statute as enacted. See EY Tax Alert, US | Inflation Reduction Act includes 15% corporate minimum tax on book income, dated 16 August 2022 for details.

The stock buy-back provision in the IRA adds a new IRC Section 4501, which will impose a 1% excise tax on publicly traded US corporations for the value of any of its stock that is repurchased by the corporation during the tax year. The new provision applies to repurchases of stock after 31 December 2022. The term "repurchase" is defined broadly, and so the tax could apply not only to redemptions under stock repurchase programs but a range of corporate transactions. Publicly traded corporations considering redemptions or economically similar transactions therefore should consider its potential application after that date and possible action before that date.

Embedded in the IRA is $369 billion in climate and energy-related provisions, which are designed to: (i) incentivize and accelerate the buildout of renewable energy; (ii) advance the adoption of EV technologies; and (iii) improve the energy efficiency of buildings and communities. The Act's energy- and climate-related provisions are a monumental and unprecedented investment in the adoption and expansion of renewable and alternative energy sources. Many of the Act's provisions with respect to energy transition and renewable energy investments are expected to spur development and investment; however, the new rules can be very complex, and it is important for taxpayers to understand the rules and how they apply to their particular projects.

In addition, the IRA also allocates nearly $80 billion in new funding for the IRS. Of that $80 billion, more than $45 billion is for enforcement (including the determination and collection of "owed taxes"), more than $25 billion is for operations, nearly $5 billion for systems modernization, and over $3 billion for customer service, among other expenses. The Congressional Budget Office estimates the enforcement-related funding will raise $204 billion in additional revenue. The increased funding for IRS enforcement will likely shift the current audit landscape and significantly increase the IRS's scrutiny of transfer pricing cases. Accordingly, taxpayers should consider enhancing their transfer pricing documentation so they can support their intercompany tax positions. EY Tax Alert, US | Increased IRS funding from Inflation Reduction Act will likely affect transfer pricing cases, dated 18 August 2022 provides details.

The IRS this week in Notice 2022-34 announced that it is again deferring the applicability date of the final IRC Section 987 foreign currency regulations that were issued in 2016 for an additional year. According to the notice, Treasury and the IRS plan to amend the applicability date of the 2016 regulations and related 2019 final regulations to taxable years beginning after 7 December 2023.

Upcoming Webcasts

BorderCrossings (August 25)
During this EY Webcast, Ernst & Young 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 new stock buyback excise tax and its M&A implications (August 30)
During this EY Webcast, Ernst & Young professionals will discuss their initial impressions of the excise tax, including what they know and don't know, as well as steps that companies might take to prepare for its application.

Recent Tax Alerts


— Aug 17: Angola now requires appointments to file applications at three offices of immigration authorities (Tax Alert 2022-1240)


— Aug 18: Singapore announces new, higher salary requirements for Employment Pass and S Pass applicants (Tax Alert 2022-1254)

— Aug 17: Hong Kong delays implementation of OECD Pillar Two rules (Tax Alert 2022-1247)

— Aug 15: Hong Kong Court holds limited liability partnerships are entitled to intra-group stamp duty relief (Tax Alert 2022-1233)

Canada & Latin America

— Aug 18: Argentine tax authorities establish a one-time windfall corporate income tax prepayment (Tax Alert 2022-1261)

— Aug 18: Brazilian tax authority may use information from transfer pricing study in customs valuations (Tax Alert 2022-1253)

— Aug 18: Guatemala eliminates COVID-19 vaccination and testing requirements for inbound travelers (Tax Alert 2022-1251)

— Aug 17: Colombia and Brazil signed double tax treaty (Tax Alert 2022-1250)

— Aug 17: Salvadoran Minister of Finance submitted a bill to Congress to establish a tax amnesty program (Tax Alert 2022-1249)

— Aug 17: New Colombian Government submits tax reform bill to Congress (Tax Alert 2022-1243)

— Aug 16: Canada's Department of Finance releases general anti-avoidance rule consultation and paper (Tax Alert 2022-1235)

— Aug 12: Canada's Department of Finance releases draft legislation for remaining 2022 budget measures (Tax Alert 2022-1225)


— Aug 18: Switzerland opens public consultation on material aspects of the OECD's Pillar Two minimum corporate tax (Tax Alert 2022-1259)

— Aug 15: Spanish High Court confirms treaty exemption under Brazil-Spain Tax Treaty (Tax Alert 2022-1230)

— Aug 15: UK implements new Customs Declaration Service for imports as of 1 October 2022 (Tax Alert 2022-1229)

Middle East

— Aug 18: Dubai Customs launches Self-Audit Findings service (Tax Alert 2022-1252)


— Aug 18: Double tax treaty between Colombia and Japan will be effective January 1, 2023 (Tax Alert 2022-1255)

IRS Weekly Wrap-Up

Internal Revenue Bulletin

 2022-34Internal Revenue Bulletin of August 22, 2022

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.