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November 4, 2022
Report on recent US international tax developments – 4 November 2022
A United States (US) Treasury official this week conceded that taxpayers may not see much guidance in regard to the new corporate alternative minimum tax and stock buyback tax provisions when those provisions come into effect on 1 January 2023. The provisions were enacted in August as part of the Inflation Reduction Act. “You may have to kind of do your best until you hear from us. I know that’s not the easiest message to hear, but I think that might be where we are,” the official said. According to the Treasury official, no decision has yet been made on the form of future guidance. In regard to the stock buyback provision, the official acknowledged that guidance is needed on the “timing and methods of payment,” and suggested that could come in the form of something other than formal guidance.
An Internal Revenue Service (IRS) official was quoted as saying taxpayers should not expect the Government to implement a transition period or delay in the implementation date for the final Internal Revenue Code1 Section 1446(f) regulations (TD 9926) that were released in October 2020. Section 1446(f) imposes a new withholding tax on transfers by non-US persons of interests in partnerships that are engaged in a US trade or business. The IRS announced in Notice 2021-51 that it would amend the regulations under Section 1446(a) and Section 1446(f) to defer the applicability date of certain provisions by one year to 1 January 2023. The affected provisions related to withholding include: (i) on transfers of interests in publicly traded partnerships (PTPs); (ii) on distributions made with respect to PTP interests; and (iii) by non-publicly traded partnerships on distributions to transferees who failed to withhold properly.
An IRS official this week was quoted as saying that taxpayers should expect more penalties to be asserted in transfer pricing cases. The official said the agency is continuing to review cases more closely, including those with transfer pricing documentation, to determine if penalties are warranted. An official earlier said the IRS hopes the increased penalties will result in taxpayer’s providing better transfer pricing documentation reports.
US House Ways and Means Committee ranking member Kevin Brady and committee member Kevin Hern wrote to Treasury Secretary Janet Yellen requesting the retention of all documents and communications related to the OECD2 BEPS3 2.0 Pillar One Agreement. In a letter that was released on 31 October, the Republican committee members wrote: “The lack of a sufficient response and information from the Administration to date is disappointing and unacceptable.” According to the lawmakers, Congress must know what companies “will be affected, what jurisdictions will be losing taxing rights, and what jurisdiction will be gaining taxing rights under the current proposals” so it can evaluate the impact of the proposal on the US fiscal position. The letter requested a response by 10 November 2022.
For additional information with respect to this Alert, please contact the following:
Ernst & Young LLP (United States), International Tax and Transaction Services, Washington, DC