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June 7, 2024

Report on recent US international tax developments - 7 June 2024

IRS officials this week offered some insights into two of the more eagerly anticipated guidance projects: the corporate alternative minimum tax (CAMT) and the 1% stock buyback provision.

One IRS official confirmed that CAMT guidance is at a “very advanced stage” and “incredibly long.” According to the official, the proposed regulations will implement various issued notices as well as address new topics. Another IRS official said the coming regulations would address partnership issues, primarily: (1) the determination of distributor share when a corporation holds an interest in a partnership; and (2) the situation where an applicable corporation contributes property to a partnership with built-in gain or loss that is subject to tax nonrecognition, but not nonrecognition for financial statement purposes.

Another topic expected to be addressed in the proposed CAMT regs reportedly includes the situation where an applicable corporation has gains or losses that are diluted or the interest is increased, and whether they are still recognized if it occurs in a nonrecognition transaction.

In regard to stock buyback guidance, a government official this week disclosed that the procedural aspects of the IRC Section 4501 stock buyback final regulations are further along than those related to the substantive provisions. Treasury and the IRS on 9 April issued two sets of proposed regulations addressing the procedural (REG-118499-23) and substantive (REG-115710-22) aspects of the stock buyback provision, respectively.

The procedural stock buyback proposed rules address how covered corporations would have to report and pay the new excise tax on stock repurchases. The substantive proposed regulations on stock buybacks cover the application and calculation of the excise tax, including rules on the general application of, and exceptions to, the new excise tax.

The comment period for the procedural stock buyback regs is closed; the substantive stock buyback regs comment period will close on 11 June.

An OECD official this week said a BEPS Pillar One Amount B package will be finalized soon and is on track for implementation in 2025. He predicted an Amount B framework would have “broad buy-in” by countries. Pillar One Amount B — in two phases — is intended to simplify and streamline the application of the arm's-length principle to baseline marketing and distribution activities.

The OECD on 4 June published an updated FAQ document on the International Compliance Assurance Program (ICAP), addressing additional questions. Among other things, the new FAQs explain that a multinational enterprise can participate in ICAP even if its home jurisdiction is not a participant in the program. The ICAP handbook provides further details on the program. For more information, see Global Tax Alert 2024-1153.

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Contact Information

For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (United States), International Tax and Transaction Services, Washington, DC

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor