February 23, 2023
U.S. Tax This Week for February 24
Ernst & Young's U.S. Tax This Week newsletter for the week ending February 24 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.
Top of the Week
OECD publishes Manual on Handling of Multilateral Mutual Agreement Procedures and Advance Pricing Arrangements
On 1 February 2023, the OECD published a Manual on the Handling of Multilateral Mutual Agreement Procedures and Advance Pricing Arrangements. The MoMA is part of the tax certainty work program of the Forum on Tax Administration (FTA) and has been produced jointly by members of the FTA MAP Forum and its focus group on exploring potential for wider use of multilateral MAPs and multilateral APAs. The MoMA was approved by the Inclusive Framework on Base Erosion and Profit Shifting (BEPS) and all members of the FTA. EY Tax Alert 2023-0355 has details.
IRS issues initial guidance on credits for solar and wind facilities in low-income communities
In Notice 2023-17 (Notice), the IRS establishes the Low-Income Communities Bonus Credit Program (program), which increases the investment tax credits (ITCs) under IRC Section 48(e) for certain solar and wind facilities placed in service in low-income communities. Taxpayers can obtain increased credits by applying and being granted a portion of the annual capacity limitation (set at 1.8 gigawatts per year for calendar years 2023 and 2024), which will be divided among four categories of facilities. The Notice gives initial information on the program, application process and criteria for receiving an allocation. Further guidance will be issued on the specific application procedures. EY Tax Alert 2023-0333 has details.
EY Guides and Publications
QUEST Economic Update highlights key US and global economic trends - February 21, 2023
EY's Quantitative Economics and Statistics (QUEST) group has developed the attached publication summarizing the latest key economic and employment trends in a short, easy-to-read format. Developments such as growth trends in US gross domestic product (GDP), US employment and Federal Reserve activity are highlighted, as are economic trends outside the United States that may affect US businesses.
What multinationals need to do to prepare for the OECD's BEPS 2.0 Pillar 2 project
In an article first published in Tax Notes Today International, Jason Yen, a Principal in the International Tax and Transaction services practice of Ernst & Young LLP's National Tax Department in Washington, outlines key steps multinational companies can take to prepare for the OECD's BEPS Pillar 2 project. Yen observes that the Pillar 2 tax focuses on revenue, not profits, so more companies than originally thought may be impacted. He notes that the Pillar 2 tax can apply to smaller companies, and even those that may not be profitable. He cautions that any company with operations in a country that has talked about adopting Pillar 2 needs to be paying attention, because the effect may not be limited to income generated in the country adopting the rules. Instead, the Pillar 2 rules may apply even outside of the jurisdiction in which they're imposed, noting that profits generated in a country like the United States could be subject to these rules if other countries adopt them.
BEPS 2.0: New Administrative Guidance and implementation activity on Pillar Two (February 28)
Following significant activity at the end of 2022, the OECD has released much-anticipated technical guidance on the Pillar Two rule. The global activity around implementation of Pillar Two has also ramped up as countries look to have global minimum tax rules take effect in 2024. Please join us for “BEPS 2.0: New Administrative Guidance and implementation activity on Pillar Two,” the next in the series of EY global webcasts focusing on the dynamics of the BEPS 2.0 project.
Corporate alternative minimum tax: what the latest interim guidance could mean for companies (February 28)
During this EY Webcast, Ernst & Young professionals will discuss the technical aspects, implications and uncertainties of Notice 2023-7.
Domestic tax quarterly webcast series: A focus on state tax matters (March 1)
During this EY Webcast, Ernst & Young professionals will provide information on major tax law changes in the 50 states and District of Columbia, as well as current state and local tax topics of interest.
Are you Pillar Two-ready? | Banking and Capital Markets: Current industry insights (March 8)
During this EY Webcast, Ernst & Young professionals will examine the latest guidance from the Organisation for Economic Co-operation and Development (OECD) on the BEPS 2.0 project as it relates to the banking and capital markets industry.
Pillar Two administrative guidance and safe harbors: implications for US multinationals (March 9)
Recent administrative guidance from the Organisation for Economic Co-operation and Development (OECD) on the Global Anti-Base Erosion (GloBE) rules under Pillar Two addresses many critical issues for US multinationals but also raises many (unanswered) technical questions. The OECD’s transitional safe harbor rules, released at the end of 2022, could help relieve compliance burdens for US companies. During this EY Webcast, Ernst & Young professionals will provide a detailed discussion of these developments and practical approaches to help manage the reporting and tax-rate implications.
State & local tax developments in the real estate industry (March 10)
At the federal level, policymakers continue to debate the SALT deduction cap for US federal income tax purposes. At the same time, states continue to rapidly enact new pass-through entity taxes to address the SALT cap. State tax measures targeting high-net-worth individuals and corporate profits are also gaining steam with coordinated efforts by some state lawmakers. Please join our panel of experienced SALT professionals for a discussion of these topics.
Recent Tax Alerts
Internal Revenue Service
— Feb 21: IRS issues final regulations updating electronic filing rules for partnerships, corporations, employers and some exempt organizations (Tax Alert 2023-0338)
— Feb 20: IRS issues initial guidance on credits for solar and wind facilities in low-income communities (Tax Alert 2023-0333)
— Feb 17: IRS issues interim guidance for insurance providers on CAMT and invites comments (Tax Alert 2023-0321)
— Feb 16: IRS and Treasury outline application process and other requirements for claiming IRC Section 48C credits for qualifying advanced energy projects (Tax Alert 2023-0308)
— Feb 16: New pilot phase for CAP program participants will allow IRS review (Tax Alert 2023-0301)
— Feb 22: UK resumes priority processing of Family Visa applications in the Settlement category (Tax Alert 2023-0350)
— Feb 22: PE Watch | Latest developments and trends - February 2023 (Tax Alert 2023-0349)
— Feb 22: TradeFlash | February 2023 (Tax Alert 2023-0347)
— Feb 22: Azerbaijan relaxes documentation requirements, new work permit exemptions (Tax Alert 2023-0346)
— Feb 22: Dominican Republic issues extension stamps to eligible individuals in lieu of new passports (Tax Alert 2023-0345)
— Feb 21: Hong Kong expands scheme on exempting eligible visitors from the Employment Visa requirement (Tax Alert 2023-0339)
— Feb 20: Cyprus | Update of EU list of non-cooperative jurisdictions may trigger withholding tax and other implications (Tax Alert 2023-0332)
— Feb 20: Netherlands extends residence permit exemption for certain highly skilled foreign nationals (Tax Alert 2023-0331)
— Feb 20: Costa Rica's President signs law that eliminates 10% tax on imported beer (Tax Alert 2023-0330)
— Feb 20: Hong Kong to further revise its foreign source income exemption regime to expand scope of disposal gain (Tax Alert 2023-0329)
— Feb 20: Kenya's Court of Appeal declares National Social Security Fund Act of 2013 proposing increase to monthly contributions constitutional (Tax Alert 2023-0328)
— Feb 20: Spain's Large Business Unit to soon accept only digital signatures for work and residence permit applications (Tax Alert 2023-0327)
— Feb 20: Ireland extends Temporary Protection status for Ukrainian citizens and residents (Tax Alert 2023-0326)
— Feb 17: OECD releases revised methodology for BEPS Action 14 peer reviews and updates on reporting of MAP and APA statistics (Tax Alert 2023-0322)
— Feb 17: Brazil's Federal Supreme Court restarts analysis on imposition of ICMS on transfers between branches of same legal entity (Tax Alert 2023-0320)
— Feb 17: Panama's Tax Authority publishes resolution that modifies Service Rendering and Sales Report for VAT purposes (Tax Alert 2023-0318)
— Feb 17: Kenya publishes draft National Green Fiscal Incentives Policy Framework (Tax Alert 2023-0313)
— Feb 16: Switzerland significantly increases safe harbor interest rates for 2023 (Tax Alert 2023-0309)
— Feb 16: Northwest Territories budget 2023-24 discussed (Tax Alert 2023-0305)
— Feb 16: US stock buyback excise tax has potential implications for Canadian public companies (Tax Alert 2023-0304)
— Feb 16: Canada releases semi-annual list of trade compliance verification priorities (Tax Alert 2023-0303)
— Feb 16: Brazilian Supreme Court overrules use of res judicata in cases where such use is against the Supreme Court's holding (Tax Alert 2023-0302)
— Feb 16: US Department of State to launch pilot program for domestic visa renewal (Tax Alert 2023-0297)
— Feb 16: Chinese authorities resume visa issuance and 72/144-hour visa-free transit policy for South Korean nationals (Tax Alert 2023-0296)
— Feb 16: South Africa's President announces significant immigration changes expected in the future (Tax Alert 2023-0295)
— Feb 16: Malaysia introduces new Multiple Entry Visa for business visitors and other travelers (Tax Alert 2023-0294)
— Feb 16: UAE announces launch of new re-entry permit service for residence visa holders who stay outside the UAE for six months or more (Tax Alert 2023-0293)
— Feb 16: Bulgaria introduces major changes relating to EU Blue cards (Tax Alert 2023-0292)
— Feb 16: Germany's updated EU list of non-cooperative jurisdictions may trigger significant German tax consequences for business relationships with Russia (Tax Alert 2023-0291)
— Feb 16: Spain releases final List of Non-Cooperative Jurisdictions for Tax Purposes (Tax Alert 2023-0290)
— Feb 17: Senate Commerce Committee hearing on pharmacy benefit managers (Tax Alert 2023-0323)
— Feb 17: Senate Health, Education, Labor Pensions Committee hearing on health care workforce shortages (Tax Alert 2023-0316)
— Feb 17: Senate Finance holds trade hearing (Tax Alert 2023-0315)
— Feb 17: What to expect in Washington (February 17) (Tax Alert 2023-0314)
— Feb 16: Senate Judiciary Committee advances five bipartisan bills addressing prescription drug costs (Tax Alert 2023-0300)
— Feb 21: Kentucky enacts reductions to individual income tax rates, corporate rate remains unchanged (Tax Alert 2023-0341)
— Feb 21: Wisconsin Governor's proposed budget includes tax provisions (Tax Alert 2023-0340)
— Feb 21: New Hampshire law prohibits nonresident state income tax on residents working remotely for out-of-state employers (Tax Alert 2023-0334)
State and Local Tax Weekly
Highlights of this edition include:
— Texas Comptroller summarizes federal internal use software statutes and regulations incorporated-by-reference into Texas law for purposes of the state's R&D credit The Texas Comptroller of Public Accounts (Comptroller) issued a memo summarizing federal statutes and regulations related to Internal Use Software it recognizes as incorporated-by-reference for purposes of the state's franchise and sales/use tax R&D credits under 34 TAC §§ 3.340 and 3.599, following the amendment of these rules in 2022 (hereafter, "current rules").
— Income/Franchise, Sales & Use, Business Incentives, Property Tax, Controversy, Payroll & Employment Tax, Miscellaneous Tax, Unclaimed Property, Value Added Tax, Unclaimed Property
IRS Weekly Wrap-Up
| ||2023-19||Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates|
| ||2023-20||Interim Guidance Regarding Certain Insurance Related Issues for the Determination of Adjusted Financial Statement Income under Section 56A of the Internal Revenue Code|
Internal Revenue Bulletin
| ||2023-08||Internal Revenue Bulletin of February 21, 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.