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January 27, 2023
2023-5106

Report on recent US international tax developments 27 January 2023

The US congressional Joint Committee on Taxation (JCT) will issue a “Blue Book” in the first half of 2023 on four pieces of tax legislation that were enacted by the 117th Congress, according to the JCT chief of staff this week. The Blue Book reportedly will cover provisions enacted by the Inflation Reduction Act which includes the new corporate alternative minimum tax and stock buyback excise tax – the American Rescue Plan Act of 2021, the CHIPS and Science Act of 2022, and the Infrastructure Investment and Jobs Act. The coming Blue Book will also cover the Consolidated Appropriations Act, 2023, which was enacted on 29 December 2022, as well as certain technical corrections. According to the tax press, the Blue Book likely will be released by the end of June 2023.

In August 2019, the United States (US) Treasury and Internal Revenue Service (IRS) released proposed regulations (REG-130700-14, Prop. Reg. Section 1.861-19) addressing cloud-based transactions, including characterization issues. The proposed regulations also requested comments on administrable rules for income sourcing from cloud services. According to a Treasury official quoted this week, the government is “seriously taking into account” requests from various commentators requesting that the government refrain from issuing guidance providing income sourcing rules on cloud transactions, as it drafts final regulations regarding cloud-based transactions. According to the tax press, a senior IRS official indicated that the proposed regulations would be finalized some time in 2023.

A US Treasury official this week indicated that the government is considering how the US can implement the OECD Crypto-Asset Reporting Framework (CARF). The official was quoted as saying that last year’s Infrastructure and Jobs Act, as well as prior law, give the IRS the necessary authority “to require reporting of most of the information” mandated by CARF.

The Organisation for Economic Co-operation and Development (OECD) on 10 October 2022 published their final report which details new and amended reporting requirements covering the reporting of crypto-assets and e-money, as well as revisions to the Common Reporting Standard. Introduction of CARF would bring crypto-currency and other crypto-assets into scope for reporting. The obligation would fall on intermediaries or other service providers which allow or make a platform available for the exchange of crypto-assets into currency or other assets, facilitate certain reportable payments or allow for the transfer of crypto-assets. The OECD is continuing to work on CARF. The Treasury official noted that CARF closely follows the US broker reporting rules.

Addressing other crypto asset reporting issues emanating from the Infrastructure Investment and Jobs Act, the official said that Internal Revenue Code1 Section 6050I amendments that add cryptocurrencies to the definition of cash in regard to currency transaction reports will not be addressed in the Section 6045 broker reporting guidance that is presently under regulatory review. The Section 6045 guidance will include related issues, the official indicated, but would not say whether it will include Section 6045A.

The IRS announced on its campaign webpage on 20 January that the Section 956 subpart F cash pooling campaign is no longer active. The campaign originally was announced in November 2017. The acting head of the Large Business and International (LB&I) division last November warned taxpayers, however, that having retired campaigns does not mean that those issues are no longer being reviewed and ongoing exams will continue to review issues even if a particular IRS issue campaign becomes inactive.

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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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Endnotes

  1. All “Section” references are to the Internal Revenue Code of 1986, and the regulations promulgated thereunder.
 
 

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