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August 28, 2022
2022-1292

U.S. Tax This Week for August 26

Ernst & Young's U.S. Tax This Week newsletter for the week ending August 26 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.

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Top of the Week

Inflation Reduction Act has implications for tax-exempt entities

The Inflation Reduction Act (H.R. 5376) (the Act), signed into law on August 16, 2022, contains provisions affecting tax-exempt entities, including: a 15% corporate alternative minimum tax (CAMT) based on adjusted financial statement income (AFSI) for corporations with profits exceeding $1 billion ($1 billion of unrelated business taxable income (UBTI) for tax-exempt corporations); tax credit opportunities under new IRC Section 6417 to encourage investment in clean energy; expanded incentives for energy-efficient construction by tax-exempt entities; and increased IRS funding to improve IRS enforcement and taxpayer compliance. EY Tax Alert 2022-1281 has details.

Tax Court increases Medtronic royalty rate under unspecified method

On August 18, 2022, the Tax Court issued its second opinion in Medtronic, Inc. and Consolidated Subsidiaries v. Commissioner (Medtronic III). In this opinion, the Tax Court rejected the principal transfer pricing analysis of both the IRS and Medtronic Inc. (Medtronic US), instead applying an unspecified method proposed in the alternative by Medtronic to determine the royalty rate for license agreements between Medtronic US and its Puerto Rican subsidiary (MPROC). Using this method, the Tax Court increased the wholesale royalty rate to 48.8% for devices and leads for years 2005 and 2006. EY Tax Alert 2022-1288 has details.

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Upcoming Webcasts

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.

Breakdown of CHIPS and Science Act of 2022: what companies can do now (August 31)
During this EY Webcast, Ernst & Young professionals will share the issues and opportunities related to both the incentives and loans and the Advanced Manufacturing Investment Credit provisions included in the Act.

International tax talk quarterly series with the EY Global Tax Desk Network (September 13)
During this EY Webcast, Ernst & Young professionals will address significant tax developments in the APAC region.

BEPS 2.0 developments: What to watch out for in country implementation (September 15)
During this EY Webcast, Ernst & Young professionals will discuss the recent activities in the global negotiations and the emerging implementation activities in countries. The panelists will also share updates on latest developments and outlook for country implementation and discuss the current status and outlook for Pillar One and Two.

Tax in the time of COVID-19: Update on legislative, economic, regulatory and IRS developments (September 16)
During this EY Webcast, Ernst & Young professionals will discuss how businesses can navigate the tax policy environment and continue to effectively operate their tax function in this time of crisis and change. Panelists will provide updates on: (i) the US economy and tax policy; (ii) breaking developments; and (iii) what’s happening at the IRS.

Accounting for income taxes: A quarterly perspective (September 20)
During this EY Webcast, Ernst & Young professionals moderated by Angela Evans, Partner, Tax Accounting and Risk Advisory Services (TARAS), will discuss ongoing issues and regulatory trends in the tax accounting arena. Topics will include recent tax legislation with tax accounting implications and a review of current income tax accounting concepts.

Domestic tax quarterly webcast series: A focus on state tax matters (September 22)
During this EY Webcast, Ernst & Young professionals will discuss state and local tax disruptions in an ever-changing world. The discussion will focus on top-of-mind issues impacting state and local taxes.

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Recent Tax Alerts

Courts

— Aug 24: Tax Court increases Medtronic royalty rate under unspecified method (Tax Alert 2022-1288)

Internal Revenue Service

— Aug 23: IRS announces plan to delay effective date for aspects of IRC Section 871(m) regulations and further extend transition relief (Tax Alert 2022-1280)

— Aug 19: Inflation Reduction Act boosts IRS funding for enforcement and modernization (Tax Alert 2022-1268)

International

— Aug 25: China Mainland border reopens for APEC Business Travel Card holders and foreign students (Tax Alert 2022-1291)

— Aug 25: Peru enacts law establishing a tax on online gaming and sports betting (Tax Alert 2022-1290)

— Aug 25: Belgium limits R&D tax credit (Tax Alert 2022-1287)

— Aug 24: The East African Community updates its Common External Tariff 2022 to align with the World Customs Organization (Tax Alert 2022-1284)

— Aug 24: Canada's Department of Finance releases draft income tax technical amendments (Tax Alert 2022-1283)

— Aug 24: Canada's luxury tax takes effect September 1 (Tax Alert 2022-1282)

— Aug 22: German Ministry of Finance issues official guidance on withholding tax for software development services (Tax Alert 2022-1276)

— Aug 22: Ethiopia issues new investment incentives regulation (Tax Alert 2022-1275)

— Aug 19: Portugal issues clarifications and further details on the contribution on single-use packaging made of plastic or multi-material with plastic in Portugal (Tax Alert 2022-1269)

Legislation

— Aug 23: Inflation Reduction Act has implications for tax-exempt entities (Tax Alert 2022-1281)

States

— Aug 24: Puerto Rico's Act 52 of June 30, 2022 analyzed (Tax Alert 2022-1289)

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IRS Weekly Wrap-Up

Final Regulations

 TD 9965Requirements Related to Surprise Billing

Notices

 2022-35Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates
 2022-36Penalty Relief for Certain Taxpayers Filing Returns for Taxable Years 2019 and 2020
 2022-37Extension of the Phase-in Period for the Enforcement and Administration of Section 871(m)

Internal Revenue Bulletin

 2022-35Internal Revenue Bulletin of August 29, 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.

 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

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