September 25, 2022
U.S. International Tax This Week for September 23
Ernst & Young's U.S. Tax This Week newsletter for the week ending September 23 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.
House Republican leaders on 23 September are unveiling their "Commitment to America'" platform, a blueprint of post-election Republican priorities if Republicans take control of the House in January following the November mid-term election. With regard to taxation, the plan is expected to be anchored in ensuring that the Tax Cuts and Jobs Act (TCJA) tax rates (i.e., individuals and small businesses) remain permanent. Preview documents call for continuing "proven pro-growth tax policies that increase take-home pay, reduce the cost of living, boost local businesses, and encourage innovation." In a related action, Representative Vern Buchanan, one of three members vying for the Ways and Means chairmanship in the next Congress should Republicans take control of the House, introduced the TCJA Permanency Act (H.R. 8913) to make permanent the 2017 tax cuts for individuals and small businesses.
The Internal Revenue Service (IRS) has provided guidance on applying noncompulsory payment rules in the foreign tax credit regulations published in January 2022 to amended tax decrees between multinational enterprises and the Puerto Rico Tax Authority. Notice 2022-42 "assures taxpayers" that the IRS will not view a change to an existing decree made before 31 December 2022 that results in the imposition of lower Puerto Rico taxes than would apply without the decree "as resulting in noncompulsory payments." The goal of the notice is to provide certainty and "aid Puerto Rico's transition away from the excise tax and modified [effectively connected income] tax, which will no longer be creditable" beginning in 2023.
IRS officials this week fanned out to offer the United States (US) Government's position on a number of issues and future regulations.
An IRS official said it will soon begin publishing notices related to the Inflation Reduction Act, with the new corporate alternative minimum tax, one percent stock buy-back and green energy provisions at the top of the list of priorities. The official added that guidance related to the TCJA is no longer a focus, except for that related to IRC Section 174 research and experimentation expense amortization regarding changes in accounting methods and ad hoc guidance as issues are identified.
Taxpayers should also expect the release of proposed regulations under IRC Section 367(d) before year-end that would limit a royalty inclusion for intellectual property that left the US and was subsequently repatriated. An IRS official said the proposed regulations "would provide high-level situations where you could turn off that royalty after [the IP] has been repatriated."
Finally, taxpayers reportedly should expect additional transfer pricing penalties, with the goal to get taxpayers to provide better documentation reports. A government official said, "We're not doing enough of asserting penalties where the documentation reports just are not sufficient and not reasonable." While penalties will only be asserted in a limited number of cases, the official indicated the IRS would look at the "reasonableness of the selection of the method and the reasonableness of the application" in deciding whether to impose a penalty.
Recent Tax Alerts
— Sep 22: Holders of debt instruments may be required to include certain non-credit card debt-related fees in gross income for tax years beginning on or after January 6, 2022 (Tax Alert 2022-1425)
— Sep 16: USCIS enters next phase of expanding premium processing for previously filed EB-1 and EB-2 National Interest Waiver I-140 petitions (Tax Alert 2022-1396)
— Sep 20: Angola and Mauritius execute a double taxation agreement (Tax Alert 2022-1407)
Canada & Latin America
— Sep 21: Colombia introduces environmental taxes in Tax Reform Bill (Tax Alert 2022-1415)
— Sep 19: Colombia temporarily shuts down online visa application platform (Tax Alert 2022-1405)
— Sep 16: Dominican Republic’s General Directorate of Internal Taxes submits preliminary bill on implementation of mandatory electronic invoicing (Tax Alert 2022-1389)
— Sep 21: Eligible Ukrainian and Belarussian nationals may now apply for National Visas from within Poland (Tax Alert 2022-1416)
— Sep 21: Key legislative developments for 2023 and 2024 included in the Netherlands budget proposals (Tax Alert 2022-1410)
— Sep 19: France to implement new VAT e-invoicing requirements from 1 July 2024 (Tax Alert 2022-1401)
— Sep 16: Denmark suspends visa facilitation agreement with Russia (Tax Alert 2022-1385)
— Sep 16: Saudi Arabia issues results and decisions following comments received on public consultation to modify Transfer Pricing Bylaws (Tax Alert 2022-1388)
— Sep 21: Global Tax Policy and Controversy Watch | September 2022 edition (Tax Alert 2022-1421)
— Sep 21: The Latest on BEPS and Beyond | September 2022 (Tax Alert 2022-1411)
— Sep 19: OECD holds public consultation meeting on Progress Report on Amount A of Pillar One (Tax Alert 2022-1400)
IRS Weekly Wrap-Up
Internal Revenue Bulletin
| ||2022-39||Internal Revenue Bulletin of September 26, 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.