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26 February 2023

U.S. International Tax This Week for February 24

Ernst & Young's U.S. International Tax This Week newsletter for the week ending February 24 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

Taxpayers should expect initial guidance on how far back to apply basis adjustments to arrive at their "opening" books for the new corporate alternative minimum tax (CAMT), and on additional transaction types, according to an Internal Revenue Service (IRS) official this week. The IRS official was quoted as saying that the CAMT "is incredibly broad, and we took a lot of feedback from the bar when we were determining what we needed to address, so you can expect additional rounds of guidance" in regard to unaddressed areas. Among the areas that will be addressed, the official said, are IRC Section 351 transactions.

The IRS released final regulations (TD 9972) this week that amend the electronic filing rules for certain returns to reflect changes made by the Taxpayer First Act of 2019, which reduced the threshold for requiring taxpayers to file electronically, in most cases, from 250 annual returns to 10. The 10-return threshold applies to returns required to be filed in calendar years 2024 and later; the 250-return threshold applies to returns filed in calendar years 2022 and 2023. The regulations affect returns for partnership income, corporate income, unrelated business income and withholding tax, as well as certain information returns, registration statements, disclosure statements, notifications, actuarial reports and excise tax returns. Taxpayers will need to aggregate almost all information return types when determining whether they meet the 10-return threshold.

The preamble to the final regulations state that the IRS did not "adopt the suggestion to provide a blanket electronic-filing exemption for non-U.S. filers." The IRS indicated that its "preferred approach is to develop alternative authentication requirements for identity proofing in accordance with standards," and it is actively engaged to develop those procedures.

The IRS this week finalized regulations (TD 9973) that treat consolidated group members as a single US shareholder in certain cases for purposes of IRC Section 951(a)(2)(B). No changes were made to the underlying proposed regs issued in December 2022. The regulations are apparently intended to preclude consolidated taxpayers from asserting that a controlled foreign corporation's (CFC's) IRC Section 959(b) distribution, coupled with a shift in the IRC Section 958(a) ownership of the CFC's stock among consolidated group members, causes the lesser of the CFC's subpart F income and global intangible low-taxed income (GILTI) tested items to be included in the group's consolidated gross income.

The final regulations affect consolidated groups that own stock in foreign corporations and apply to the 2022 tax year for consolidated groups with a calendar tax year. The final regs could require certain consolidated groups that have a calendar tax year and carried out transactions during 2022 to include more in consolidated gross income than they anticipated. For a detailed look at the proposed regs, see EY Tax Alert 2022-1933.

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Upcoming Webcasts

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.

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.

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Recent Tax Alerts

United States

Africa

Asia

Canada & Latin America

Europe

Middle East

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IRS Weekly Wrap-Up

Internal Revenue Bulletin

 2023-09Internal Revenue Bulletin of February 27, 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: 2023-0364

 

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