Strategizing International Tax Best Practices – by Keith Brockman

Archive for the ‘TJCA’ Category

US states: status at 1/1/2020

The Tax Foundation has provided a useful reference to state law changes, as 35 states have major tax changes taking effect on 1/1/2020.

This is especially important as more states are still interpreting the Tax Act, and any impact for GILTI, Sec. 163(j) interest limitation, etc.

The reference provides a summary by state of the recent law changes and details.

https://files.taxfoundation.org/20200102161647/State-Tax-Changes-as-of-January-1-20201.pdf

OIRA: Primer / TCJA status

The Office of Information and Regulatory Affairs (OIRA, pronounced “oh-eye-ruh”) is a Federal office that Congress established in the 1980 Paperwork Reduction Act (44 U.S.C Chapter 35). OIRA is part of the Office of Management and Budget (OMB), which is an agency within the Executive Office of the President. In addition to reviewing government collections of information from the public under the Paperwork Reduction Act, OIRA reviews draft proposed and final regulations under Executive Order 12866 and develops and oversees the implementation of government-wide policies in the areas of information policy, privacy, and statistical policy. OIRA also oversees agency implementation of the Information Quality Act, including the peer review practices of agencies.

Current items, listed under Dept. of Treasury towards the bottom of the first referenced link, include a Final rule on Sec. 267A Hybrid payments, Proposed rule on Section 1502 guidance, and a Final rule on applying Sec. 163(j) interest limitation.

Regulatory actions include:

  • Notice  –  These are documents that announce new programs (such as grant programs) or agency policies.
  • Pre-rule (or advance notice of proposed rulemaking)  –  Agencies undertake this type of action to solicit public comment on whether or not, or how best, to initiate a rulemaking. Such actions occur prior to the proposed rule stage.
  • Proposed rule  –  This is the rulemaking stage in which an agency proposes to add to or change its existing regulations and solicits public comment on this proposal.
  • Final rule  –  This is the last step of the rulemaking process in which the agency responds to public comment on the proposed rule and makes appropriate revisions before publishing the final rule in the Federal Register to become effective.
  • Interim Final Rule  –  These interim rules are typically issued in conformity with statutory provisions allowing agencies to publish a final rule that becomes effective soon after publication, without going through the proposed rule stage. The “good cause” exception in the Administrative Procedure Act allows agencies to bypass public notice and comment on a rule when it would be impracticable, unnecessary, or contrary to the public interest. This process typically allows for public comment after the rule is published so that the agency still has an opportunity to consider public input and revise the rule accordingly.
  • Direct Final Rule  –  These rules are similar to interim final rules, except that there is no comment period after publication, on the ground that they are uncontroversial. Such rules are categorized simply as “final rules” for display purposes on the dashboard.

https://www.reginfo.gov/public/do/eoReviewSearch

https://www.reginfo.gov/public/

U.S. Sec 863(b) Prop Reg’s: Holiday Gifts

The U.S. Treasury Department and the IRS posted Sec. 863(b) proposed regulations re: foreign source income from sales of inventory/personal property and determining whether foreign source income is effectively connected with a trade or business in the U.S.

The proposed regulations are expected to be published in the Federal Register on December 30, 2019, thereby becoming applicable in Q4 for calendar-year taxpayers.  The document is attached for reference.

https://s3.amazonaws.com/public-inspection.federalregister.gov/2019-27813.pdf

Sec 162(m) Prop Regs

On December 20, 2019, Treasury released new Proposed Regulations re: Sec. 162(m), executive compensation.  This set of Regs replaces prior interim Regs released in 2018, and should be reviewed for Q4 year-end compliance.

https://www.federalregister.gov/documents/2019/12/20/2019-26116/certain-employee-remuneration-in-excess-of-1000000-under-internal-revenue-code-section-162m

US int’l developments

The Sec. 954(c)(6) CFC look-through rules were extended one year to the end of 2020, awaiting the President’s signature

Final Sec. 163(j) Regs were sent to OIRA

Final Sec 267(A) hybrid mismatch Regs were sent to OIRA

EY’s Global Tax Alert highlights these, and other, developments in the referenced link

https://www.ey.com/Publication/vwLUAssets/Report_on_recent_US_international_tax_developments_-_20_December_2019/$FILE/2019G_005869-19Gbl_Report%20on%20recent%20US%20intl%20tax%20developments%20-%2020%20Dec%202019.pdf

US Int’l developments

The US developments are centered around the new regulations for BEAT and Foreign Tax Credit (FTC).

The new BEAT regulations include:

  • Excludes non-recognition transactions re: Sec. 332, 351, 355, and 368
  • Allows foregoing a deduction, albeit it will be for all US federal tax purposes
  • Clarifies anti-abuse rules

The final FTC regulations include:

  • Reducing previously taxed E&P baskets to 10, from 16
  • Gross tested income is tiered up for purposes of allocating interest expense
  • Foreign tax redeterminations are addressed
  • Foreign branch rules are detailed

Additionally, Section 987 regulations are deferred by another year.

EY’s Global Tax Alert details the latest developments.

https://www.ey.com/Publication/vwLUAssets/German_Federal_Council_approves_Research_Allowance_Act/$FILE/2019G_005410-19Gbl_German%20Federal%20Council%20approves%20Research%20Allowance%20Act.pdf

US: TCJA Reg chronology

Pending developments this year are focused on the Tax Cuts and Jobs Act (TCJA).

This week expectations – Final FTC Regs, final and proposed BEAT Regs

This year (maybe) – Final and proposed Sec. 163(j) Regs (currently at 550 pages)

This year/January 2020 – Sec 267A final and proposed Regs, Sec 863(b) sourcing proposed Regs

by June 30, 2020 – Final FDII regulations, GILTI high-tax exclusion, Sec 250 participation exemption

EY’s Global Tax Alert provides further details, including OECD developments reported on previously

https://www.ey.com/Publication/vwLUAssets/Report_on_recent_US_international_tax_developments_-_15_November_2019/$FILE/2019G_005186-19Gbl_Report%20on%20recent%20US%20intl%20tax%20developments%20-%2015%20Nov%202019.pdf

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