October 23, 2022
U.S. International Tax This Week for October 21
Ernst & Young's U.S. Tax This Week newsletter for the week ending October 21 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.
A senior Internal Revenue Service (IRS) official this week said at the American Bar Association (ABA) Taxation Section meeting that the release of proposed foreign tax credit (FTC) regulations is "weeks, not months" away. Final FTC regulations were released in December 2021 and technical corrections to those rules were issued in July 2022. The coming proposed regulations reportedly will address major issues of concern to taxpayers, according to the official, including the cost recovery rule, royalty payments, and country-specific issues. With regard to royalties, Treasury officials over the summer indicated they were considering a safe harbor for certain royalty payments that taxpayers have suggested would not be eligible for a foreign tax credit under the final rules.
The official also reportedly said that proposed previously taxed earnings and profits (PTEP) regulations would be issued in the first half of 2023. On 20 October, the IRS announced the withdrawal of the 2006 proposed PTEP regulations under IRC Section 959 and related basis adjustments under IRC Section 961. The preamble indicates that the "proposed regulations were never finalized, never went into effect, and did not indicate that taxpayers could rely on them. Withdrawing the proposed regulations at this point will help prevent possible abuse or other misuse of them — such as inappropriate basis adjustments in certain stock acquisitions to which section 304(a)(1) applies — while the Treasury Department and the IRS continue to develop the new proposed regulations. The IRS may, where appropriate, challenge taxpayer positions giving rise to inappropriate results."
In regard to the recently enacted Inflation Reduction Act's corporate alternative minimum tax (CAMT), another IRS official at the 14 October ABA meeting was quoted as saying the US has not yet decided whether there will be a large package of guidance released or multiple smaller packages, or what form the guidance will take. He indicated that the IRS is finalizing its list of priorities that it needs to address with regard to the CAMT, noting there are many sub-issues that will require guidance. The official did not offer a timeline, but acknowledged taxpayers will need guidance by Q1 2023 to determine whether they are subject to the CAMT.
Another official said that the IRS Office of Chief Counsel has organized a group of subject matter experts across multiple associate offices in the IRS National Office who will craft the CAMT guidance.
Further, the IRS reportedly plans to reconsider its Advance Pricing Agreement (APA) revenue procedure guidance in light of the recent Sixth Circuit Court of Appeals decision in Eaton Corp. & Subs. v. Commissioner, which upheld the Tax Court's opinion. In August 2022, the Sixth Circuit ruled that the IRS had the burden of proving that there were grounds to cancel the APAs at issue under generally applicable contract-law principles and that the IRS failed to meet that burden. The Sixth Circuit also held the IRS could not impose Section 6662 penalties on Eaton Corporation's self-reported adjustments.
According to an IRS official: "The Tax Court in its decision basically invited us to rewrite the revenue procedure if we want to achieve the result we want."
US corporate income tax compliance: Insights from Tax Year 2021 and planning for the next age of compliance (October 26)
During this EY Webcast, Ernst & Young professionals will discuss lessons learned from this year’s dynamic compliance environment – and how to plan for the 2022 federal, international and state tax filing season – and beyond.
BorderCrossings . . . With EY transfer pricing and tax professionals (October 27)
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.
Recent Tax Alerts
— Oct 20: USTR announces next steps in statutory four-year review of China 301 tariffs (Tax Alert 2022-1596)
— Oct 20: US Implements new technology export controls on China (Tax Alert 2022-1591)
— Oct 18: South Africa deposits its instrument of ratification in respect of the MLI (Tax Alert 2022-1575)
— Oct 14: Japan significantly relaxes entry restrictions for foreign nationals (Tax Alert 2022-1561)
Canada & Latin America
— Oct 20: Curaçao publishes first unilateral decree for the avoidance of double taxation (Tax Alert 2022-1590)
— Oct 20: Colombia’s modified tax reform bill approved in first debate (Tax Alert 2022-1584)
— Oct 19: Peru Tax Authority publishes new High Risk Schemes under GAAR (Tax Alert 2022-1579)
— Oct 17: Argentine Government issues new exemptions on foreign exchange controls in relation to exports of knowledge-based economy activities (Tax Alert 2022-1568)
— Oct 17: Uruguay’s Executive Branch approves conditions for employees of Free Trade Zone users to work remotely (Tax Alert 2022-1563)
— Oct 14: Mexico ratifies MLI; timeline for entry into force will be triggered once instrument of ratification is deposited in the OECD (Tax Alert 2022-1558)
— Oct 20: Cyprus Tax Authority issues clarification regarding Competent Authority Agreement with United States for exchange of CbC reports (Tax Alert 2022-1589)
— Oct 19: Italian Court holds that lower mortgage registration tax and land registry fees applicable to resident close-ended investment funds are applicable to nonresident open-ended funds investing in Italian real estate used for commercial purposes (Tax Alert 2022-1582)
— Oct 19: Ireland introduces new Employment Permits Bill (Tax Alert 2022-1581)
— Oct 19: Czech Republic prohibits certain Russian nationals from entering for tourism, sports or cultural purposes (Tax Alert 2022-1580)
— Oct 18: UK Chancellor reverses most of the Growth Plan tax measures (Tax Alert 2022-1574)
— Oct 17: Luxembourg Draft Budget Law 2023 clarifies Reverse Hybrid Entity Rule (Tax Alert 2022-1569)
— Oct 14: Spanish tax authorities deem a series of consecutive intra-group share transfers as abusive and potentially subject to penalties in binding report (Tax Alert 2022-1559)
— Oct 14: New Zealand introduces range of new quasi-taxes to combat climate change (Tax Alert 2022-1555)
— Oct 20: OECD and UN | Tax Inspectors Without Borders publish Annual Report 2022 (Tax Alert 2022-1588)
— Oct 19: Global Tax Policy and Controversy Watch | October 2022 edition (Tax Alert 2022-1583)
— Oct 19: The Latest on BEPS and Beyond | October 2022 edition (Tax Alert 2022-1577)
— Oct 17: OECD publishes final Crypto-Assets Reporting Framework and amendments to Common Reporting Standard (Tax Alert 2022-1570)
IRS Weekly Wrap-Up
Internal Revenue Bulletin
| ||2022-43||Internal Revenue Bulletin of October 24, 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.