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08 January 2023

U.S. International Tax This Week for January 6

Ernst & Young's U.S. International Tax This Week newsletter for the week ending January 6 is now available. Prepared by Ernst & Young's International Tax Services group, this weekly update summarizes important news, cases, and other developments in international taxation.

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Spotlight

The Internal Revenue Service (IRS) issued interim guidance (Notice 2023-7) on 27 December 2022 addressing the application of the corporate alternative minimum tax (CAMT), enacted under the Inflation Reduction Act of 2022. Notice 2023-7 describes rules that the IRS intends to include in proposed regulations pertaining to: certain issues regarding Internal Code Revenue (IRC) subchapters C and K; "troubled corporations"; groups of corporations that file consolidated returns; depreciation of IRC Section 168 property; and the treatment of certain federal income tax credits under the CAMT. Taxpayers may rely on the interim guidance pending the release of the proposed regulations.

Notice 2023-7 also provides a safe harbor method for determining applicable corporation status and notes that further interim guidance may be forthcoming and may be oriented toward particular industries encountering unintended adverse consequences under the CAMT.

The IRS also issued interim guidance (Notice 2023-2) that addresses the 1% excise tax on certain corporate stock repurchases under new IRC Section 4501. While the excise tax under the statute applies primarily to repurchases by publicly-traded domestic corporations and foreign corporations that inverted on or after 20 September 2021, the Notice includes a broad (and unexpected) anti-abuse rule that could subject certain repurchases made by any publicly-traded foreign corporation to the excise tax if the repurchase was "funded" by a domestic affiliate. Affected foreign corporations should consider the application of this rule to their cash pooling and other intercompany funding arrangements.

The excise tax applies to repurchases after 31 December 2022. Notice 2023-2 provides interim guidance until proposed regs are issued. On 28 December 2022, the IRS published Draft Form 7208, Excise Tax on Repurchase of Corporate Stock, which when finalized will be used to report stock repurchases for calculating the 1% stock buyback excise tax.

Taken together, Notice 2023-2 and draft Form 7208 will affect many, if not most, covered corporations, including those that do not have ongoing stock repurchase programs.

The IRS further issued final regulations (TD 9971) on 29 December 2022 under IRC Section 897(l) regarding the exception from the Foreign Investment in Real Property Tax Act (FIRPTA) tax available to qualified foreign pension funds and qualified controlled entities. The final regulations also include rules for certifying that a qualified foreign pension fund is not subject to withholding on certain dispositions of, and distributions with respect to, certain interests in US real property. The new rules retain the general approach of the proposed regulations, with certain modifications including definitional clarifications and transition rules (for background, see Tax Alert 2019-1075), and affect certain holders of interests in US real property and withholding agents.

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Upcoming Webcasts

BEPS 2.0: New OECD releases and ongoing implementation activity (January 12)
During this EY Webcast, Ernst & Young professionals will examine the latest OECD releases on both Pillars and explore the growing legislative activity as jurisdictions begin to incorporate global minimum tax rules into their domestic law. Please join EY professionals for this webcast.

Tax in a time of transition: Legislative, economic, regulatory and IRS developments (January 20)

Previously this Webcast was Tax in the time of COVID; same series, new name.

During this EY Webcast, Ernst & Young professionals will provide updates on: (i) the US economy and tax policy; (ii) what’s happening at the IRS; and (iii) breaking developments.

How life sciences tax departments are preparing for sustainability (January 24)
During this EY Webcast, Ernst & Young professionals will explore sustainability tax trends and global developments in the life sciences sector. EY teams of life sciences and sustainability tax thought leaders will discuss, and share their perspectives on emerging trends and hot topics relevant to this market.

International tax talk quarterly series: With the EY Global Tax Desk Network (January 24)
During this EY Webcast, Ernst & Young professionals will highlight developments that could affect multinational companies operating in Hong Kong and mainland China.

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Recent Tax Alerts

United States

Asia

Canada & Latin America

Europe

Middle East

Multinational

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IRS Weekly Wrap-Up

Internal Revenue Bulletin

 2023-01Internal Revenue Bulletin of January 3, 2023
 2023-02Internal Revenue Bulletin of January 9, 2023

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Additional Resources

EY’s Tax News Update, 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’s Tax and Law Guides. — Tax and Law Guides | EY - Global 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.

Document ID: 2023-0037

 

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