June 30, 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.
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.
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.
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.
Recent Tax Alerts
— Jun 25: U.S. Senate approval of U.S.- Chile tax treaty brings treaty closer to entering into force (Tax Alert 2023-1138)
— Jun 30: South Africa further extends deadline for Zimbabwe Exemption Permit holders to change immigration status (Tax Alert 2023-1175)
— Jun 30: Kenya rolls out new tax return template to capture data on intercompany transactions for MNEs (Tax Alert 2023-1170)
— Jun 30: Rwanda presents the national budget for financial year 2023/24 (Tax Alert 2023-1169)
— Jun 28: Kenya High Court clarifies 'use of an asset' definition for purposes of claiming of investment allowance (Tax Alert 2023-1152)
— Jun 26: Japan promulgates 2023 tax reform enforcement order to implement IIR to align with OECD BEPS 2.0 Pillar Two (Tax Alert 2023-1140)
— Jun 22: Hong Kong simplifies application process for seeking tax residence certificates (Tax Alert 2023-1115)
— Jun 21: Taiwan amends the Assessment Rules for withholding tax mitigation regime (Tax Alert 2023-1106)
Canada & Latin America
— Jun 30: OECD releases 2023 report on tax transparency in Latin America (Tax Alert 2023-1174)
— Jun 29: Canada's Department of Finance releases transfer pricing rules consultation paper (Tax Alert 2023-1164)
— Jun 29: Canada announces new Tech Talent Strategy (Tax Alert 2023-1162)
— Jun 28: Canada enacts 2023 Budget implementation bill no. 1 (Tax Alert 2023-1151)
— Jun 26: Uruguay temporarily reduces VAT and IMESI rate for mineral and sparkling waters (Tax Alert 2023-1141)
— Jun 30: Spanish immigration authorities clarify foreign students’ ability to work in Spain (Tax Alert 2023-1176)
— Jun 29: Belgium-Netherlands tax treaty recently signed; ratification to follow (Tax Alert 2023-1163)
— Jun 29: European Union's framework agreement on social security for cross border telework comes into force as of 1 July (Tax Alert 2023-1159)
— Jun 29: Bulgaria proposes to continue measures addressing high energy prices affecting electricity providers (Tax Alert 2023-1158)
— Jun 28: Ireland brings public country-by-country reporting requirements into effect (Tax Alert 2023-1155)
— Jun 23: OECD releases 2023 update on peer review of preferential tax regimes (Tax Alert 2023-1136)
— Jun 23: European Commission proposes adjusted package for the next generation of 'own resources' (Tax Alert 2023-1133)
— Jun 23: Denmark postpones deadlines for certain annual corporate income tax returns and transfer pricing documentation (Tax Alert 2023-1129)
— Jun 29: Israeli court favors Tax Authority's position on deemed sale of IP (Tax Alert 2023-1167)
— Jun 23: UAE extends registration timeline for the mandatory unemployment insurance program (Tax Alert 2023-1135)
— Jun 26: Australian Treasury releases updated Exposure Bill and Explanatory Materials for Intangibles Integrity Measure (Tax Alert 2023-1145)
— Jun 22: Australian thin capitalization and subsidiary disclosure measures introduced into Parliament (Tax Alert 2023-1122)
Highlights of this edition include:
- 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
- US Senate approval of US-Chile tax treaty brings treaty closer to entry into force
- BEPS 2.0 Project enters critical stage
- OECD releases 2023 update on peer review of preferential tax regimes
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.