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30 June 2023

U.S. International Tax This Week for June 30

Ernst & Young's U.S. International Tax This Week newsletter for the week ending June 30 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 Supreme Court on 26 June granted certiorari on an appeal from the Ninth Circuit in Charles G. Moore v. United States. In Moore, the taxpayer argues that the transition tax under IRC Section 965 is unconstitutional, violating the Apportionment Clause of the Fourteenth Amendment and the Due Process Clause of the Fifth Amendment, because it is a direct tax on unrealized income. Shareholders of foreign corporations that have been subject to the transition tax under IRC Section 965 should monitor the Moore case and consider whether action is necessary to preserve their ability to take a position similar to the taxpayer in Moore. The Ninth Circuit in June 2022 affirmed a lower court in rejecting the taxpayer's argument.

The House and Senate are out of session for two weeks for the Fourth of July recess, returning the week of 10 July. Recall that the House Ways and Means Committee, on 13 June, approved three tax packages: the Tax Cuts for Working Families Act, Small Business Jobs Act, and Build It in America Act. The three bills, combined into the American Families and Jobs Act, fulfill Chairman Jason Smith's (R-MO) commitment to develop a tax-based economic package. The tax package is expected to come before the House sometime after the 4 July holiday.

The bills are not expected to be enacted in their current form, given that the Tax Creation and Jobs Act "pre-cliffs" relating to expensing of R&D costs, interest deduction limitations under IRC Section 163(j), and 100% expensing of manufacturing equipment remain stalled as Democrats insist on expanding the Child Tax Credit. Democrats also strongly oppose rolling back clean energy provisions from the Inflation Reduction Act that Republicans hope to use as revenue offsets for the released tax package.

In the meantime, the Biden Administration this week released statistics that show a major increase in construction spending for manufacturing facilities resulting from the Infrastructure Investment and Jobs Act, Inflation Reduction Act, and CHIPS Act. According to the 27 June analysis, they "each provided direct funding and tax incentives for public and private manufacturing construction."

The IRS released Announcement 2023-18 on 29 June, confirming that taxpayers are not required to report the new excise tax imposed under IRC Section 4501 on repurchases of corporate stock during a covered corporation's tax year on any returns filed with the IRS. Taxpayers also are not required to make any payments of such tax before the time specified in forthcoming regulations. The stock repurchase excise tax applies to repurchases made after 31 December 2022.

An OECD official this week was quoted as saying that rules for simplifying Amount B in Pillar One for routine distribution transactions will be released soon. The official said the Amount B rules were "now in the approval phase." Amount B is aimed at simplifying and streamlining the transfer pricing of in-country baseline marketing and distribution activities, while ensuring outputs consistent with the arm's-length principle. The OECD on 8 December 2022 released a public consultation on Amount B under Pillar One.

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EY Guides and Publications

BEPS 2.0 | Pillar Two Developments Tracker
This Tracker is intended to provide a summary listing of administrative and legislative developments around the world relating to the implementation of the global minimum tax rules being developed under Pillar Two of the OECD/G20 BEPS 2.0 project. It provides an overview of developments in various jurisdictions, including the dates on which the relevant authorities, institutions, or legislative bodies have made public announcements or released official documents related to Pillar Two.

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Upcoming Webcasts

How BEPS 2.0 could impact the wealth & asset management industry (July 13)
Although it is generally expected that the Organisation for Economic Co-operation and Development’s BEPS 2.0 initiative will have a limited direct impact on the investment fund industry, the Pillar Two model rules’ reliance on the accounting consolidation rules to determine whether a group exists will pose additional challenges when determining the scope of these rules. This EY webcast will examine how the Pillar Two rules may apply to the wealth & asset management industry and will highlight practical considerations.

Latest guidance related to IRA and IIJA tax incentives and grants (July 14)
Now that companies have begun claiming tax credits and grants under the Inflation Reduction Act of 2022 (IRA) and the Investment, Infrastructure and Jobs Act (IIJA), many have questions about the incentives’ requirements, as well as their applicability, timing and disbursement process (which may be time-sensitive). During this EY Webcast, we will review recent guidance issued by administrative authorities to help you identify, secure and comply with the requirements for these tax credits, grants and other subsidies. Please join our panelists for an in-depth discussion of these incentives.

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Recent Tax Alerts

United States

Africa

Asia

Canada & Latin America

Europe

Middle East

Oceania

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Recent Newsletters

ITS/Washington Dispatch
   Highlights of this edition include:

US Congress

  • House Ways and Means Republicans release tax package
  • Congressional JCT provides revenue estimates for BEPS 2.0 Pillar Two

Treasury and IRS news

  • IRS waives addition to tax for a corporation’s failure to make estimated tax payments of its CAMT
  • IRS plans further IP guidance

Tax Treaties

  • US Senate approval of US-Chile tax treaty brings treaty closer to entry into force

OECD Developments

  • BEPS 2.0 Project enters critical stage
  • OECD releases 2023 update on peer review of preferential tax regimes

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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: 2023-1179

 

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