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November 17, 2023
2023-1909

U.S. Tax This Week for November 17

Ernst & Young's U.S. Tax This Week newsletter for the week ending November 17 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

United States | Proposed regulations on qualified business units include simplified elections for determining IRC Section 987 gain or loss, but restrict the recognition of losses

On November 9, 2023, the IRS and Treasury Department released proposed regulations (REG-132422-17) under IRC Section 987 (the Proposed Regulations) with guidance on determining taxable income or loss and currency gain or loss with respect to a qualified business unit whose functional currency differs from its tax owner (an IRC Section 987 QBU). The Proposed Regulations retain the basic approach and structure of the regulations finalized in 2016 and 2019, including the foreign exchange exposure pool (FEEP) method, while adopting simplifications, including elections to (1) treat all items of an IRC Section 987 QBU as marked items (subject to a loss suspension rule) (the Current Rate Election), and (2) recognize all foreign currency gain or loss with respect to an IRC Section 987 QBU on an annual basis (the Annual Recognition Election). EY Tax Alert 2023-1898 has details.

IRS announces hiring for Advance Pricing and Mutual Agreement Program

On November 8, 2023, an IRS official announced that the agency is actively hiring individuals to work in its Advance Pricing and Mutual Agreement (APMA) program. Peter Rock, a field operations director in the IRS's Large Business & International (LB&I) division, said at a conference sponsored by the Tax Executives Institute and San Jose State University that he "expect[s] to see a lot of growth" in the program as a result of additional funding from the Inflation Reduction Act, which was originally nearly $80 billion. EY Tax Alert 2023-1906 has details.

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Upcoming Webcasts

Year-end US information reporting changes (November 29)
Year-end US information reporting obligations necessitate being aware of IRS changes and incorporating any new requirements into existing systems, processes, and procedures. The past year saw updates to Forms 1099 and 1042-S reporting requirements, revised IRS tax forms, and new and complex proposed guidance related to digital assets reporting. Join this EY Webcast for a practical discussion of how to manage your information reporting processes.

Domestic tax quarterly webcast series: A focus on state tax matters (December 6)
During this EY Webcast, Ernst & Young professionals will provide you with 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.

2023 employment tax year in review (December 7)
During this EY Webcast, Ernst & Young professionals will discuss the following common areas of year-end payroll and employment tax concern: (i) 2023 and 2024 federal and state tax rates and limits; (ii) Forms W-2/1099-NEC reporting changes; (iii) Payroll and employment tax insights for 2023; (iv) State unemployment insurance and the federal unemployment insurance credit reduction; (v) State payroll and employment tax developments; (vi) Hybrid employees and multistate income tax considerations; and (vii) Highlights from our 2023 payroll year-end checklist.

Accounting for income taxes: A quarterly perspective (December 12)
During this EY Webcast, Ernst & Young professionals will address developments and issues in accounting for income taxes.

Spotlight on BEPS 2.0: developments and practical implications for US MNEs (December 13)
Jurisdictions are enacting and proposing legislation implementing the Pillar Two rules developed under the Organisation for Economic Co-operation and Development/G20’s project on addressing the tax challenges of the digitization of the economy (BEPS 2.0). Global minimum tax rules are set to take effect as soon as 2024, and many multinational entities (MNEs) still have a lot to do to prepare. Join this EY Webcast for an action-oriented panel discussion, moderated by EY’s Jose Murillo, National Tax Department Leader and former US Department of the Treasury Deputy Assistant Secretary (International Tax Affairs).

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Recent Tax Alerts

Internal Revenue Service

— Nov 16: Tax M&A Update for October 2023 (Tax Alert 2023-1902)

— Nov 13: IRS releases proposed rules on donor advised funds (Tax Alert 2023-1884)

— Nov 13: IRS increases standard deductions and exclusions for 2024, including estate and gift tax (Tax Alert 2023-1883)

— Nov 10: IRS releases 2024 inflation adjustments for fringe benefits and Form W-2/1099 information reporting penalties (Tax Alert 2023-1878)

International

— Nov 16: Kenya Tax Appeals Tribunal determines key role of management and control in determining residency (Tax Alert 2023-1908)

— Nov 16: US IRS launches new initiative to strengthen transfer pricing enforcement (Tax Alert 2023-1907)

— Nov 16: US IRS announces hiring for Advance Pricing and Mutual Agreement Program (Tax Alert 2023-1906)

— Nov 15: United States | Proposed regulations on qualified business units include simplified elections for determining IRC Section 987 gain or loss, but restrict the recognition of losses (Tax Alert 2023-1898)

— Nov 15: Kenya requires non-VAT-registered taxpayers to onboard on e-TIMS (Tax Alert 2023-1897)

— Nov 15: U.S. - Chile tax treaty ratified by Chilean Congress closer to entering into force (Tax Alert 2023-1895)

— Nov 15: Uruguay's Government enacts law for accountability for 2022, making some changes to tax regulations (Tax Alert 2023-1893)

— Nov 15: Denmark confirms automatic extension of residence permits issued pursuant to the Ukraine Special Act (Tax Alert 2023-1892)

— Nov 14: U.S. Federal Claims Court permits US citizens who are residents of France to claim a treaty-based foreign tax credit against US net investment income tax (Tax Alert 2023-1890)

— Nov 14: Cyprus enacts law implementing tax transparency rules for digital platforms (DAC 7) (Tax Alert 2023-1888)

— Nov 13: The Dutch House of Representatives further restricts Dutch 30%-facility (Tax Alert 2023-1885)

— Nov 10: Salvadoran Congress approves brief tax amnesty program (Tax Alert 2023-1880)

— Nov 10: Saudi Arabia issues drafts of new Income Tax Law and Zakat and Tax Procedures Law for public consultation (Tax Alert 2023-1877)

— Nov 10: China Mainland becomes a signatory to the Apostille Convention (Tax Alert 2023-1876)

— Nov 10: Kenya High Court ruling provides clarity on what constitutes manufactured tobacco (Tax Alert 2023-1875)

— Nov 10: Italy implements major changes relating to EU Blue Cards (Tax Alert 2023-1873)

Legislation

— Nov 17: What to expect in Washington (November 17) (Tax Alert 2023-1915)

— Nov 15: Senate Banking Committee grills banking regulators on Basel III, bank supervision, FDIC harassment scandal (Tax Alert 2023-1896)

— Nov 10: Senate Health, Education, Labor and Pensions Committee hearing on AI policy considerations in health care (Tax Alert 2023-1879)

States

— Nov 16: Salem, Oregon voters strike down new Safe Salem payroll tax (Tax Alert 2023-1901)

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Recent Newsletters

State and Local Tax Weekly
   Highlights of this edition include:

— IRS allows certain employers to withdraw employee retention credit claims. The IRS announced (IR-2023-193) a process allowing certain employers to withdraw their employee retention credit (ERC) claims.

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

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IRS Weekly Wrap-Up

Revenue Rulings

 2023-21Section 1274 — Determination of issue price in the case of certain debt instruments issued for property

Notices

 2023-76Update for weighted average interest rates, yield curves, and segment rates

Internal Revenue Bulletin

 2023-45Internal Revenue Bulletin of November 6, 2023
 2023-46Internal Revenue Bulletin of November 13, 2023
 2023-47Internal Revenue Bulletin of November 20, 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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