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June 24, 2022

Report on recent US international tax developments 24 June 2022

United States (US) Senate Majority Leader Chuck Schumer and Senator Joe Manchin met again on 22 June over a slimmed-down reconciliation package, but there is no clarity on if or when there will be a bill and what it would include. The press reported the following day that Senator Manchin said a deal is not particularly close and indicated he is non-committal on the extension of enhanced Affordable Care Act premium tax credits that are due to expire.

Earlier in the week, Biden administration officials called for a prescription drugs, energy, and deficit reduction package to fight inflation. In response to a question about whether a bill can be passed, National Economic Council Director Brian Deese said, “We’re hopeful we can move forward on that and other priorities in Congress as well.” He added that the Senate Majority Leader “is working with his caucus to try to get a final package in place and we’re hopeful that we’ll see progress on that in the coming weeks.”

While Senate Democrats have generally declined to comment directly on any ongoing talks about a legislative package, Democrats generally appear focused on crafting a health-energy-deficit reduction bill that would reduce costs for families.

The Senate has now adjourned for the Fourth of July recess and will next convene on 11 July. The House has a Committee Work Week next week and is out the following week. The two-week congressional break comes amid an uncertain outlook for a budget reconciliation bill and the USICA-COMPETES competitiveness conference committee.

The US Supreme Court on 21 June agreed to hear Bittner v. United States, a Fifth Circuit case on applying non-willful penalties for failure to report foreign financial accounts on FinCEN Form 114, otherwise known as an “FBAR” filing. The Court will address whether the US$10,000 penalty (as adjusted for inflation) imposed under 31 USC Section 5321 for non-willful violations of the statute applies per annual filing (i.e., a maximum of $10,000 per year as adjusted for inflation), or per account that should have been reported.

In Bittner, the Fifth Circuit held that a separate violation occurred for each foreign account not timely reported on an FBAR, and imposed a penalty of US$2.72 million over five years. Bittner argues the penalty should apply on a per-filing basis, which would reduce the penalty to $50,000, consistent with the Ninth Circuit’s decision in United States v. Boyd. In Boyd, the court held that the non-willful penalty applies on a per-filing basis, not on the number of foreign accounts.

An Internal Revenue Service (IRS) official in the Large Business and International Division this week was quoted as saying that the Government plans to expand its transfer pricing audit coverage in terms of both companies and issues. The official said the audit expansion will depend on adding more personnel, disclosing that the IRS is currently hiring in transfer pricing. Another government priority is improving the Advance Pricing Agreement (APA) and Mutual Agreement Procedure programs, she said, with the former potentially including more selectivity in accepting APAs into the program. The official further said the IRS is working on updating its APA and competent authority revenue procedures, although no timeline was given.


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

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


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