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April 14, 2023

Report on recent US international tax developments 14 April 2023

The US House and Senate will be back in session on 17 April, after a two-week break. Rapidly approaching, the Biden Administration and Congress will need to reach agreement on the debt limit by around mid-year to avoid default, given that Treasury is already using extraordinary measures to borrow additional funds without breaching the debt ceiling. Before the break, President Biden indicated he would not negotiate spending cuts and wants no conditions on extending the debt limit. House Speaker Kevin McCarthy (R-CA) has said, however, there is no possibility congressional Republicans will accept a "clean" debt limit without spending cuts.

Congressional Republicans want a leaner budget that balances in 10 years, provided by reducing nondefense discretionary spending, reclaiming unspent COVID funds, strengthening work requirements for federal programs, and adding measures to lower energy costs.

The IRS issued proposed rules (REG-109309-22) this week that would obsolete Notice 2016-66 and identify transactions that are the same as, or substantially similar to, certain micro-captive transactions as listed transactions and other micro-captive transactions as transactions of interest. Material advisors and certain participants in these listed transactions and transactions of interest must file disclosures with the IRS or face penalties.

The IRS also released Announcement 2023-11, which explains that the rules are being proposed in light of certain court decisions holding that the Administrative Procedure Act requires the IRS to identify listed transactions through notice-and-comment rulemaking, and that the IRS intends to issue further regulations identifying other listed transactions, to be finalized in 2023.

A public hearing is scheduled for 19 July 2023; comments on the regulations may be sent to the IRS through 10 June 2023.

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


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