The Senate this week adjourned for their scheduled Presidents Day recess through 23 February and will reconvene in session on 26 February. Upon their return to Washington, the Senate is likely to focus on the government funding deadlines of 1 March and 8 March, respectively, and possibly the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024), passed by the House on 31 January. Senate Republicans say the bill, which addresses various TCJA business provisions such as restoring IRC Section 174 R&D expensing and the IRC Section 163(j) interest limitation as well as the Child Tax Credit, will require a Finance Committee markup to proceed. The House begins the Presidents Day recess next week and will return on 28 February.

There has been little additional news on Senate prospects for H.R. 7024 aside from Finance Committee Chairman Ron Wyden (D-OR) urging the Majority Leader to bring the measure up later this month when the Senate reconvenes.

The IRS is continuing to send letters to certain US-based subsidiaries of foreign-owned corporations requesting information about their intercompany transaction pricing. The letters (Letters 6607 and 6608) have gone out mostly to corporations that distribute goods in the United States and, in limited instances, to corporations that manufacture goods in the United States. These letters stem from the corporations' alleged use of certain transfer pricing strategies that the IRS may deem improper.

The letters are in response to information reported on Form 1120, U.S. Corporation Income Tax Return, and Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade of Business, when taxpayers report losses or low margins for tax years 2017 through 2021. The letters say that losses or low margins indicate that the intercompany transaction pricing might not comply with Section 482.

The IRS announced (IR-2023-194) last October that it planned to send letters to approximately 150 US-based subsidiaries. The IRS updated this number to 180 in January 2024. A Global Tax Alert provides details.

An IRS official this week provided further insight on finalization of proposed foreign currency regulations that were issued in November 2023. According to the official, the government hopes to finalize the "high-priority" rules by the end of 2024. The official was also quoted as saying that another set of proposed foreign currency regulations could be issued, noting that 2016 proposed regulations on recognition and deferral of Section 987 gain or loss were not reproposed and portions could be reconsidered in a new package of proposed rules.

Treasury on 15 February announced that the US government had reached agreement with Austria, France, Italy, Spain and the United Kingdom to extend through 30 June 2024 the October 2021 moratorium on unilateral measures, including digital services taxes. Treasury described the further extension as coming "in light of the continuing multilateral negotiations at the G20/OECD Inclusive Framework."