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Tax Law Roundup current law developments in U.S. taxation

Category Archives: International

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Temporary Regulations Address Allocation of Creditable Foreign Tax Expense

Posted in International, Partnership/LLC, Tax Credits

The IRS published temporary and proposed regulations on allocations of creditable foreign tax expenditures (CFTEs).  The regulations make various technical changes to the existing regulatory safe harbor for allocating CFTEs.  The regulations are effective on February 4, 2016. The existing regulations provide special rules for foreign tax expense allocations when those expenses are eligible for… Continue Reading

IRS Issues More Anti-Inversion Rules

Posted in International

Following on its prior Notice 2014-52 anti-inversion guidance, the IRS has issued new Notice 2015-79 to further limit (i) inversion transactions that are contrary to the purposes of the Section 7874 anti-inversion rules and (ii) the benefits of post-inversion tax avoidance transactions.  The Notice also describes corrections and clarifications to the prior Notice 2014-52.  According… Continue Reading

IRS Will Extend Some FATCA Transition Rules

Posted in FATCA, General, International

In new Notice 2015-66 the IRS said it plans to amend FATCA regulations to reduce certain collateral restrictions on grandfathered obligations and extend the following transition rules: (1) the date for when withholding on gross proceeds and foreign passthrough payments will begin; (2) the use of limited branches and limited foreign financial institutions (limited FFIs);… Continue Reading

Proposed Regulations Tighten Outbound Transfers of Foreign Goodwill

Posted in International

Today the IRS issued proposed regulations that eliminate the “foreign goodwill exception” under the Section 367(d) regulations and also limit the scope of property that is eligible for the so-called “active trade or business” exception generally to certain tangible property and financial assets. Thus, upon an outbound transfer of foreign goodwill or going concern value,… Continue Reading

New IRS Guidance Expands Application of Section 956 to Controlled Foreign Corporations that Own Partnerships

Posted in International, Lending

Yesterday the IRS published two sets of regulations addressing when a US owner of a Controlled Foreign Corporation (CFC) has a deemed repatriation through the use of a CFC-owned foreign partnership. The regulations are based on Section 956, which in essence deems a repatriation to the extent a CFC invests in “U.S. property” – which… Continue Reading

New Restrictions on Transferring Appreciated Property to Partnerships With Related Foreign Partners

Posted in International, Joint Venture, Partnership/LLC

The IRS issued Notice 2015-54 stating that it plans to issue regulations under Section 721(c) to ensure that U.S. taxpayers do not use partnerships to shift built-in gains to non-U.S. affiliates. In 1997 Congress authorized the IRS to issue regulations to turn off the normal tax-free rules for partnership contributions if there could be a… Continue Reading

New Option for Late FBARs – Just File It!

Posted in Compliance, FBAR, International

An often overlooked filing obligation is the annual June 30 requirement to file the FBAR form for taxpayers with foreign bank accounts aggregating over $10,000. Late FBARs are a consistent problem and the IRS has a long history of complicated solutions. The latest (and greatest) is the “just file it!” approach, as long as the… Continue Reading

BE-10 Filings For Foreign Subsidiaries: the Countdown is On

Posted in Compliance, International

The countdown is on: every five years, the U.S. Department of Commerce’s (DoC) Bureau of Economic Analysis (BEA) conducts a survey of U.S. corporate entities with foreign affiliates. The DoC conducts these surveys to produce statistics about U.S. direct investment abroad and ultimately to help formulate international financial and monetary policy. The deadline for this… Continue Reading

IRS Issues Internal FBAR Penalty Guidance To Ensure Consistency

Posted in FBAR, International

Shortly before the annual June 30 FBAR filing deadline, the IRS issued penalty guidance for those that miss the foreign bank account reporting deadline. The purpose of the new penalty guidance is to improve the IRS’s administration and application of FBAR penalties. The guidance is immediately effective for all open cases. The IRS observes that… Continue Reading

The House Joins the Senate Finance Committee in Proposing FIRPTA Reform

Posted in International, Legislative, Real Estate

FIRPTA real estate tax reform continues its momentum with the recent release of bill text for H.R. 2128, the latest House bill introduced by Kevin Brady (R-Texas) and J Crowley (D-NY). In connection with the filing of the bill, Brady stated that H.R. 2128 is similar to the changes approved by the Senate Finance Committee and… Continue Reading

Treasury Releases Select Draft Provisions for Next U.S. Model Income Tax Treaty

Posted in International, treaty

The Treasury Department announced draft changes for the U.S. Model Income Tax Treaty — the baseline text used by the Treasury Department when it negotiates tax treaties. The current U.S. Model was last updated in 2006. The proposed changes in the draft provisions are intended to combat so-called Base Erosion or Profit Shifting (BEPS), which… Continue Reading

Senate Finance Committee Proposes FIRPTA Reform

Posted in International, Real Estate, REITs

Today was an important step in moving forward US tax reforms to encourage international investment in U.S. real estate.  The Senate Finance Committee passed 17 different tax bills for consideration by the entire Senate.  This package includes a FIRPTA reform bill sponsored by Senators Robert Menendez (D-NJ) and Michael Enzi (R-WY) to reduce the burden… Continue Reading

IRS Treats U.S. Fund Manager as Agent of Foreign Investor – Subjecting Investor to US Trade or Business Taxation

Posted in Financial Products, International, Lending

In CCA 201501013, the IRS found that an offshore fund making loans to U.S. borrowers was engaged in a U.S. trade or business where multiple loans owned by the fund were originated by an agent of the fund.  This conclusion is consistent with an earlier 2009 memorandum that similarly found that the activities of agents… Continue Reading

Treasury Takes Action Against Corporate Inversions

Posted in Corporate, International

Earlier this week, the Treasury Department and the IRS announced that they would issue regulations that substantially limit the U.S. tax benefits of corporate inversions (and certain post-inversion transactions).  The regulations described in Notice 2014-52 and in the IRS “Fact Sheet” will make it more difficult for U.S. corporations to satisfy the ownership thresholds necessary… Continue Reading

Cross-Border Interest Expense Apportionment Regulations Finalized

Posted in International, Partnership/LLC

The IRS issued cross-border interest apportionment final regulations.  These adopt the approach from the 2012 temporary regulations, requiring a 10% corporate partner to apportion its interest expense by reference to the value of the partnership’s assets.  Thus, regardless of special allocations in the partnership, a 20% corporate partner would be treated as owning a straight… Continue Reading

New FBAR Amnesty Program Changes Help Some, Hurt Some

Posted in International, Procedure

The IRS has significantly expanded the streamlined amnesty programs for persons who did not timely comply with Foreign Bank Account Reporting (FBAR) rules.  Although these changes broaden the base of taxpayers qualifying for the 0% or new 5% penalty, certain taxpayers will see their penalty go up to 50% where it becomes public that the… Continue Reading

More FATCA Transition Relief and Clarification

Posted in FATCA, International

New Notice 2014-33 sets forth calendar years 2014 and 2015 as a transition period for IRS FACTA implementation enforcement for withholding agents, foreign financial institutions and certain other withholding responsibilities.  However, an entity that has not made good faith efforts to comply with the new requirements will not be given any relief from IRS enforcement… Continue Reading

IRS Updates FATCA Q&A

Posted in FATCA, General, International, Procedure

On April 18 and again on May 1, the IRS issued newly updated Frequently-Asked-Questions for FATCA compliance following their recent comprehensive regulations on the topic.  The FATCA rules create a series of documentation rules and a potential 30% withholding tax on payments to non-U.S. financial entities.  The Q&A guidance includes answers to common questions relating… Continue Reading

New FATCA Regulations Incorporate Taxpayer Comments and Clean Up Existing Rules

Posted in FATCA, International, Procedure

Today the IRS announced two new sets of regulations on the FATCA rules.  In general, FATCA creates 30% withholding on certain distributions to certain Foreign Financial Institutions (FFIs) unless those FFIs comply with onerous rules to disclose certain investor information to the U.S. government. The new regulations are T.D. 9657 and T.D. 9658. The new… Continue Reading

Sen. Baucus Reveals International Tax Reform Draft

Posted in General, International, Legislative, Real Estate, REITs

Today Sen. Baucus of the Senate Finance Committee released a discussion draft for international tax reform.  The proposal is the first in a series on how to reform international tax rules with more drafts expected later this week.  This action by the Senate is in contrast to the recently expected delays by the House.  Feedback… Continue Reading

IRS Releases FATCA Model Agreement for Foreign Financial Institutions

Posted in Compliance, General, International, Securities

The IRS continues its string of guidance on the Foreign Account Tax Compliance Act (FATCA) by issuing Notice 2013-69, which (1) includes a model participating FFI agreement and (2)  provides guidance to Foreign Financial Institutions (FFIs) and branches of FFIs treated as reporting financial institutions under an applicable Model 2 intergovernmental agreement (IGA) (reporting Model 2… Continue Reading

New IRS On-Line FATCA Registration System

Posted in Compliance, FATCA, International

The latest Foreign Account Tax Compliance Act (FATCA) guidance is the on-line registration system.  The IRS also published a 4-page overview and 75 pages of instructions for the new registration system.  Prior Tax Law Roundup articles describe FATCA and the related deadlines. FATCA Online Registration System Overview  The IRS describes the system as follows: Under… Continue Reading

Developing a Tax Strategy to Invest in US Real Estate

Posted in International, Joint Venture, Passthrough Entity, Real Estate, REITs

Article by Steven Schneider, John Grumbacher, and Bob Towsner of Goulston & Storrs PC as published in AFIRE News Introduction Most non-US persons do not directly invest into US real estate. Instead, both tax and non-tax considerations generally drive investments through various intervening entities, depending on the optimal tax structure for the particular investor and… Continue Reading

Treasury Delays FATCA Implementation by Six Months

Posted in Compliance, Funds, International

The Treasury issued a Notice to give taxpayers six more months to comply with the complex FATCA requirements needed to avoid 30% withholding on certain payments to a Foreign Financial Institution (FFI) and certain Non-Financial Foreign Entities (NFFE).  The recently finalized FATCA regulations have phased-in implementation from January 1, 2014 through 2017.  Under the new… Continue Reading