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January 12, 2023
2023-0075

U.S. Tax This Week for January 13

Ernst & Young's U.S. Tax This Week newsletter for the week ending January 13 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

Proposed regulations would make major changes to domestically controlled QIE rules under IRC Section 897, and certain controlled commercial entity rules under IRC Section 892

In proposed regulations (REG-100442-22; Proposed Regulations) published December 29, 2022, the United States (US) Treasury addressed whether qualified investment entities (QIEs), which include real estate investment trusts (REITs), are considered domestically controlled for purposes of the Foreign Investment in Real Property Tax Act (FIRPTA) rules of IRC Section 897. In a move that is bound to create significant controversy, the Proposed Regulations would apply a look-through approach to certain C corporations to determine whether foreign persons directly or indirectly hold a QIE's stock. In particular, look-through treatment would apply to a privately held domestic C corporation that has "foreign persons" (as defined in the Proposed Regulations) owning, directly or indirectly, 25% or more of the fair market value of its stock. EY Tax Alert 2023-0059 has details.

New law significantly increases complexity of SSAP No. 101 for insurance companies

The Corporate Alternative Minimum Tax (CAMT) included in H.R. 5376, "An Act To Provide For Reconciliation Pursuant To Title II Of S. Con. Res. 14," commonly known as the "Inflation Reduction Act of 2022" (the Act, enacted on August 16, 2022) is a new 15% tax based on a corporation's "book" income and is expected to raise approximately $222.2 billion over 10 years. The CAMT will substantially increase the complexity of the Internal Revenue Code (IRC)2 and may cause statutory accounting for income taxes to be significantly more challenging. EY Tax Alert 2023-0087 has details.

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Upcoming Webcasts

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

Internal Revenue Service

— Jan 11: Updated EY publication includes income tax law changes enacted at the close of Q4 2022 (Tax Alert 2023-0074)

— Jan 10: Final regulations issued for qualified foreign pension funds contain some favorable clarifications (Tax Alert 2023-0066)

— Jan 09: Proposed regulations would make major changes to domestically controlled QIE rules under IRC Section 897, and certain controlled commercial entity rules under IRC Section 892 (Tax Alert 2023-0059)

— Jan 09: Interim guidance on stock buyback excise tax offers mixed bag for corporate taxpayers (Tax Alert 2023-0054)

— Jan 09: January 30, 2023 | Deadline for REIT shareholder demand letters (Tax Alert 2023-0053)

— Jan 09: Acting IRS Commissioner affirms continued participation in ICAP (Tax Alert 2023-0049)

— Jan 05: Final rules for qualified foreign pension funds bring changes that withholding agents will need to operationalize (Tax Alert 2023-0036)

— Jan 05: IRS pushes back new broker reporting requirements for digital assets until final regulations are released (Tax Alert 2023-0035)

International

— Jan 11: Peru enacts preferential depreciation rates for buildings, construction and hybrid and electric vehicles (Tax Alert 2023-0073)

— Jan 11: Peru extends VAT exemption for specific goods and services and introduces a temporary early VAT recovery regime (Tax Alert 2023-0072)

— Jan 11: Korea enacts new global minimum tax rules to align with OECD BEPS 2.0 Pillar Two (Tax Alert 2023-0069)

— Jan 11: Korea enacts 2023 tax reform bill (Tax Alert 2023-0068)

— Jan 11: Canada Revenue Agency announces changes to its administrative policies for certain employee taxable benefits (Tax Alert 2023-0064)

— Jan 10: Costa Rica announces new COVID-19-related restrictions for travelers arriving from China Mainland, Hong Kong, Macau and Taiwan (Tax Alert 2023-0062)

— Jan 10: Italy issues 2023 Budget Law (Tax Alert 2023-0061)

— Jan 10: Brazil's new transfer pricing rules and their impact on customs valuation discussed (Tax Alert 2023-0060)

— Jan 09: Australia-India Economic Cooperation and Trade Agreement enters into force (Tax Alert 2023-0058)

— Jan 09: Algeria introduces Finance Law 2023; key measures applicable to companies (Tax Alert 2023-0057)

— Jan 09: Danish Supreme Court issues rulings on beneficial ownership (Tax Alert 2023-0056)

— Jan 06: Peruvian Government amends Income Tax Law Regulations for implementing FMV rules for valuation of securities (Tax Alert 2023-0047)

— Jan 06: Morocco announces temporary prohibition on the entry of travelers from China Mainland (Tax Alert 2023-0045)

— Jan 06: Spain announces new COVID-19 testing requirements for travelers arriving from China Mainland (Tax Alert 2023-0044)

— Jan 06: Malaysia announces new COVID-19-related entry requirements for inbound travelers (Tax Alert 2023-0043)

— Jan 06: Ireland announces new requirements for certain applicants under the Atypical Working Scheme (Tax Alert 2023-0042)

— Jan 06: Costa Rica's Tax Authority publishes income tax brackets for tax year 2023 (Tax Alert 2023-0041)

— Jan 05: Expired Portuguese permits and visas automatically extended until December 31, 2023 (Tax Alert 2023-0032)

— Jan 05: Turkey implements Accommodation Tax (Tax Alert 2023-0031)

— Jan 05: Spain implements temporary bank levy (Tax Alert 2023-0030)

Legislation

— Jan 11: What to expect in Washington (January 11) (Tax Alert 2023-0070)

States

— Jan 10: Colorado's new plastic bag fee, effective January 1, 2023, creates new compliance obligations and issues (Tax Alert 2023-0065)

— Jan 06: Federal mileage rates and luxury vehicle limit increase for 2023 (Tax Alert 2023-0048)

— Jan 06: Ohio expands sales tax bad debt deduction to allow for debts written off as uncollectible by credit account lenders (Tax Alert 2023-0046)

— Jan 05: Sales and Use Tax Quarterly Update for first quarter of 2023 (Tax Alert 2023-0033)

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Recent Newsletters

State and Local Tax Weekly
   Highlights of this edition include:

— Ohio expands sales tax bad debt deduction to allow for debts written off as uncollectible by credit account lenders. On Dec. 22, 2022, Governor Mike DeWine signed House Bill 223 (HB 223), which allows vendors to deduct sales tax remitted for bad debts on private-label credit accounts when the debt is written off as uncollectible by the credit account lender or by a person succeeding to those accounts. The expansion of the deduction for sales tax remitted on bad debt (bad debt deduction) is effective July 1, 2023.

— Income/Franchise, Sales & Use, Business Incentives, Property Tax, Controversy, Payroll & Employment Tax

ITS/Washington Dispatch
   Highlights of this edition include:

Treaty news

  • United States, Croatia sign income tax treaty

Treasury and IRS news

  • IRS issues interim guidance on application of new corporate alternative minimum tax
  • IRS releases guidance on new stock buyback excise tax
  • IRS issues final revised qualified intermediary agreements effective beginning in 2023
  • IRS releases additional guidance for brokers on transfers of interests in publicly traded partnerships
  • IRS issues proposed rules on single-entity treatment of consolidated groups
  • FinCEN continues to extend certain signature authority reporting (FBAR, Form 114)

OECD developments

  • OECD releases public consultation document on Pillar One Amount A and Digital Services Taxes
  • OECD releases consultation document on tax certainty for the Pillar Two GloBE rules
  • OECD releases consultation document on Pillar Two GloBE Information Return
  • OECD/G20 Inclusive Framework releases document on safe harbors and penalty relief under Pillar Two GloBE rules
  • OECD releases public consultation document on Amount B of Pillar One on baseline marketing and distribution functions
  • OECD's 2021 MAP statistics show US continues to decrease case inventory
  • OECD releases corporate tax statistics and the 2022 revenue statistics and consumption tax trends

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IRS Weekly Wrap-Up

Internal Revenue Bulletin

 2023-02Internal Revenue Bulletin of January 9, 2023

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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