Law Office of Charles W. Cope, PLLC | Tax Insights Blog
Tax Insights Blog
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Mr. Cope monitors the development of U.S. tax law daily through postings on government websites, daily tax publications, monthly tax journals, tax newsletters, tax conferences and meetings of professionals organizations in New York and Washington. Each month he publishes the Tax Insights Blog, which describes and analyzes significant U.S. tax developments (e.g., judicial decisions, regulations, proposed tax legislation) having cross-border tax consequences.  The blog's content should be of interest to U.S. businesses with foreign operations and businesses headquarted outside the United States with U.S. investments or U.S. operations.

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  • The Congressional Research Service Reports on Consumption Taxes
    January 2014
    A recent report by the Congressional Research Service examines the potential consequences of the United States adopting a consumption tax as part of comprehensive tax reform legislation. The report is of interest because it describes some economic benefits of adopting such a proposal. It also discusses the groups of taxpayers that would benefit or be disadvantaged  if a consumption tax were to be adopted.
     
  • Federal District Court Allows the IRS to Collect Danish Income Tax
     
    January 2016
    A recent decision of the Federal District Court for the Northern District of Georgia offers an example of how the Internal Revenue Service may collect income tax from a citizen of another country residing in the United States pursuant to the terms of an income tax treaty. In Dileng v. Commissioner of Internal Revenue Service a Federal District Court refused to block the IRS from collecting Danish income tax as requested by the Skatteminsteriet (the “SKAT”) Denmark’s Ministry of Taxation. The SKAT requested the IRS to collect the tax pursuant to the terms of Article 27 (Administrative Assistance), of the 1999 Denmark-USA Income Tax Convention (the “Danish Treaty”).
     
  • IRS Issues Proposed Regulations Implementing CbC Reporting
    December 2015

    On December 22, 2015, The Treasury and the IRS issued proposed regulations under section 6038 to implement the country-by-country (“CbC”) reporting template described in Action 13: Transfer Pricing Documentation and Reporting of the Base Erosion and Profit Shifting Project of the G20 and OECD (the “Action 13 Final Report”). At this time, the IRS has not issued a form to collect the information required by the proposed regulations.
     

     
  • Tax Court Denies Treaty Benefits to Pakistani Medical Resident
    December 2015
    A recent decision of the Tax Court considers the scope of Article XII of the 1959 Pakistan-U.S. Income Tax Convention (the “1959 Pakistan Treaty”), which exempts from taxation, by the source state, certain income earned by professors and teachers. The Tax Court concluded that Article XII did not apply to income earned by a citizen of Pakistan who was present in the United States in connection with a training program for medical residents at a U.S. university.
  • The Congressional Research Service Reports on University Endowments
     
    December 2015
    A recent report prepared by the Congressional Research Service (“CRS”) examines the current taxation of college and university endowments and considers proposals for change.  In 2014, these endowments consisted of assets totaling more than $500 billion and earned an average return of more than 15 percent. When considering comprehensive tax reform, the Congress may look to impose a tax on the income earned by these endowments or limited deduction for contributions made to colleges and universities.   Accordingly, this report may offer insights into future tax policy affecting colleges and universities.
  • Treasury Places Additional Limits on Corporate Inversions
    November 2015
    On November 19, 2015, a few days before the merger of Pfizer and Allergan was announced, the U.S. Treasury and the IRS issued Notice 2015-79 (the “Notice”), which describes regulations that will be issued to further limit corporate inversions. The Notice supplements and complements earlier guidance on corporate inversions announced in Notice 2014-52 during September 2014. The Notice seeks to raise the tax cost of, and limit the tax benefits of, the inversion of a U.S. multinational group.  While the forthcoming regulations may discourage certain future transactions, absent legislative changes to section 7704 and section 163(j), corporate inversions are likely to continue as they offer U.S. multinationals significant opportunities for reducing their U.S. corporate income tax liability over the long-term.
     
  • The Second Circuit Clarifies the “Common Legal Enterprise” Doctrine
    November 2015
    In a recent decision, the  Court of Appeals for the Second Circuit found that certain documents sought by the IRS pursuant to a summons were protected from disclosure under the tax practitioner privilege and the work product doctrine. In particular, the Second Circuit found that there had been no waiver of the tax practitioner privilege when documents sought by the IRS were shared with another party because the taxpayer and that party were engaged in a “common legal enterprise.” As the IRS and taxpayers grow increasingly litigious, taxpayers may wish to consider whether tax opinions and tax memoranda may be shared with third parties in a manner that preserves the privilege under the common legal enterprise doctrine.
     
    KEYWORD: Tax Contoversy
  • Ohio District Court Rules against Taxpayers Seeking Injunction to Stop FATCA Reporting
    Ocotber 2015
    In a recent decision, Mark Crawford et al. v. United States Department of the Treasury, the U.S. District Court for the Southern District of Ohio ruled against a motion for preliminary injunction by Senator Rand Paul and six other plaintiffs.  These individuals requested that the district court enjoin the U.S. Treasury Department from enforcing the Foreign Account Tax Compliance Act (“FATCA”), the intergovernmental agreements (or “IGAs”) negotiated by the Treasury to implement FATCA and the Report of Foreign Bank and Financial Accounts (“FBAR”) administered by the U.S. Financial Crimes Enforcement network (“FinCEN”). The decision is significant because if a preliminary injunction were granted, the extensive global network created over the last several years to implement FATCA would have been brought to a standstill. The decision also is of interest because it is a rare challenge to a tax law based on U.S. constitutional law.
     
    KEYWORDS: FATCATax Contoversy
  • D.C. District Court Finds Denial of Treaty Benefits by IRS is Subject to Judicial Review
    September 2015
    On September 18, 2015, the United States District Court for the District of Columbia issued a memorandum opinion in Starr International Company v. United States holding that a decision by the U.S. competent authority to deny the benefits of the 1996 Switzerland-USA Income Tax Convention (the 1996 Treaty”) to the plaintiff, Starr International Company (“Starr”), was reviewable by the court. The decision overturns the position of the IRS announced last month in Rev. Proc. 2015-40 that the U.S. competent authority determines whether a taxpayer qualifies for such discretionary benefits in its “sole discretion.” If this decision is upheld by the Court of Appeals for the District of Columbia, non-U.S. taxpayers who are denied treaty benefits by the U.S. competent authority under the discretionary relief provision found in the limitation on benefits article of most U.S. income tax treaties will be able to look to the courts for relief.  Thus, in many cases, the courts would become the ultimate arbiter as to whether relief is available to a resident of another country under a U.S. income tax treaty.
  • Proposed Regulations Eliminate Foreign Goodwill Exception for Outbound Business Transfers
    September 2015
    Proposed regulations published on September 15, 2015 would significantly change a key rule concerning how the incorporation of a foreign branch of a U.S. corporation is taxed. Under regulations issued in 1986 a branch of a U.S. corporation that conducts an active trade or business outside the United States may be incorporated in a foreign corporation and the foreign goodwill associated with that active trade or business may be transferred to the foreign corporation free of U.S. tax.  These new proposed regulations seek to expand U.S. taxing jurisdiction by making the transfer of such foreign goodwill and going concern value taxable.  In the preamble to the proposed regulations, the Treasury and the IRS state that allowing foreign goodwill to be transferred tax-free would be “inconsistent with the policies of section 367 and sound tax administration.”
  • IRS Issues Guidance on Discretionary Grant of Benefits under Income Tax Treaties
     
    August 2015
     
    In Rev. Proc. 2015-40, issued August 13, 2015, the IRS provides guidance to taxpayer, including residents of other countries, requesting competent authority assistance under U.S. income tax treaties. The revenue procedure includes guidance on the circumstances in which the U.S. competent authority will consider granting discretionary relief under the limitation on benefits article of a U.S. income tax treaty. The guidance, is consistent with recently announced proposed amendments to the 2006 U.S. Model Income Tax Treaty. Significantly, the guidance also introduces a “purpose test” which is a new, and relatively undefined, concept for U.S. income tax treaties.
     
  • Treasury Tightens Rules on Transfers to Partnerships with Related Foreign Partners
    August 2015
    Notice 2015-54, issued on August 6, 2015, describes regulations that the Treasury and IRS will issue under section 721(c), section 482 and section 6662 addressing certain transfers of property, in practice principally intellectual property, to partnerships with related foreign partners that the Treasury and the IRS view unfavorably.  The regulations will complement and coordinate with tighter cost sharing regulations issued in 2011.
  • Altera Decision Raises the Bar for Treasury Regulations
    July 2015
    The recent decision of the Tax Court in Altera v. Commissioner characterizes a Treasury regulation issued under the Treasury’s general rule making authority, section 7805(a), as a “legislative regulation,” which, under the Administrative Procedure Act (“APA”) generally is subject to certain mandatory notice and comment requirements. In addition, under the APA and the relevant case law, legislative regulations generally are subject to a different standard of review by the courts than has been applied to tax regulations. The Tax Court found the regulations at issue in Altera to be “arbitrary and capricious” and therefore invalid. Should other courts adopt the Tax Court’s analysis when reviewing Treasury regulations, some existing Treasury regulations may be held invalid by the courts, and the Treasury and IRS will need to be more careful in following the APA’s requirements when promulgating regulations. This surprising decision is likely to be appealed to the Court of Appeals for the Ninth Circuit, and in the author’s view, it stands a good chance of being affirmed.
  • Patent Box Debuts in Washington in July
    July 2015
    Although the U.S. Congress has not been particularly attentive to the Base Erosion and Profit Shifting (“BEPS”) project of the G-20 and the OECD in the past, recent developments in Washington suggest Congressional attitudes may be changing. The International Tax Bipartisan Tax Working Group of the Senate Finance Committee issued its report (the “Report”) on July 7, 2015.  The Report recommends, inter alia, that the United States adopt an “innovation box.” In addition, on July 28, 2015, Rep. Charles Boustany, Jr. (R-La.) and Rep. Richard E. Neal (D-Mass.) introduced a discussion draft of patent box legislation – the “Innovation Promotion Act of 2015 – which would provide for a reduced rate of tax on “innovation box profit.”
  • Congressional Leaders Advise Treasury to Embrace BEPS With Caution
     
    June 2015
    On June 9, 2015, Senator Orrin Hatch, the chairman of the Senate Finance Committee, and Rep. Paul Ryan, the chairman of the House Ways and Means Committee, wrote to Jacob Lew, the Secretary of the U.S. Treasury, concerning U.S. involvement in the G-20 BEPS initiative (“BEPS”). Until recently, the U.S. Congress has shown little awareness of, or interest in, BEPS, but the Congress now appears to believe that BEPS may have an adverse effect on U.S. business and the U.S. fisc and is pressuring the Treasury to justify its participation in implementation of some of the BEPS recommendation
  • Appellate Court Limits Reach of U.S. Insurance Excise Tax
    June 2015
    A recent decision by the United States Court of Appeals for the District of Columbia, Validus Reinsurance, LTD v. United States, limits the scope of section 4371, which imposes an excise tax on premiums paid with respect to certain insurance and reinsurance policies written to cover U.S. risks.  The appellate court found that the U.S. excise tax cannot be imposed on premiums paid with respect to wholly foreign retrocessions. The case is of interest because it is an example of the courts reading a statute to circumscribe the IRS’s taxing jurisdiction.
    KEYWORD: FDAP Income
  • Treasury Releases Proposed Amendments to its U.S. Model Income Tax Treaty
    May 2015
    On May 20, 2015, the U.S. Treasury released a group of proposed changes to the 2006 U.S. Model Income Tax Convention of November 15, 2006 (the “Model Treaty”). The Model Treaty usually is the opening position of the United States in income tax treaty negotiations with other countries. In general, the Treasury’s proposed changes, if implemented, would significantly restrict the circumstances in which the U.S. is willing to grant treaty benefits to residents of another country. However, the news for U.S. treaty partners is not all bad; the Treasury now, as a general matter, is willing to offer “derivative benefits” to all potential treaty partners.
     
  • Federal Circuit Affirms That STARS Trust Lacks Economic Substance
    May 2014
    On May 14, 2015, the U.S. Court of Appeals for the Federal Circuit issued its opinion in Salem Financial, Inc. v. United States. The Court of Appeals affirmed the decision of the Court of Federal Claims that the STARS trust lacked economic substance and so denied the taxpayer foreign tax credits flowing through the trust, but reversed the lower court in finding that the taxpayer was entitled to a deduction for interest accrued on a related loan. The Court of Appeals also affirmed the decision of the lower court that the taxpayer was liable for interest and penalties. The case is of interest because it illustrates the expanding (and uncertain) scope of the economic substance doctrine and the enhanced role of the courts in making U.S. federal income tax law.
  • Corporate Tax Reform and Choice of Business Entity
    April 2015
    A recent report by the Joint Committee on Taxation provides data on the entities through which business is conducted in the United States. The data are significant in the context of the debate over corporate tax reform, because they support the view that legislation aimed solely at corporate tax reform is unlikely to win wide political support from the U.S. business community.
  • Circuit Court Addresses Proper Year of Deduction for Mutual Insurance Company Dividends
    April 2015
    On April 9, 2015, the Court of Appeals for the Federal Circuit issued its opinion in Mass. Mutual Life Ins. Co. v. United States. The case considers the proper year for the deduction of dividends paid by MassMutual to certain of its policyholders. In reaching its decision in favor of the taxpayer, the Court of Appeals for the Federal Circuit distinguishes the recent decision of the Second Circuit in New York Life Insurance Company v. United States, which also considered the proper year for the deduction of various dividends paid by that company to its policyholders.
     
    KEYWORD: Tax Accounting
  • International Tax Reform Considered by Senate Finance Committee
    March 2015
    On March 17, 2015, the Senate Finance Committee held a two-hour hearing on reforming the provisions of the Internal Revenue Code dealing with the taxation of cross-border income. Four individuals testified at the hearing: Pam Olson an attorney with PricewaterhouseCoopers holding the title United States Deputy Tax Leader & Washington National Tax Services Leader, Anthony Smith, Vice President of Tax & Treasurer of Thermo Fisher Scientific Inc., Rosanne Altshuler, Professor of Economics and Dean of Social and Behavioral Sciences of Rutgers University, and Steve Shay, Professor of Practice of Harvard Law School. Olson and Shay have held senior positions in the Treasury’s Office of Tax Policy in the past. Although international tax reform has been discussed for year in Washington and no substantive legislation has been enacted, the current discussion may build a consensus that will lead to legislation, most likely after the next Presidential election in 2016.
     
    The materials prepared for the hearing and the hearing itself identified various factors providing an impetus for international tax reform in the United States as well as the policy issues to be addressed in crafting tax legislation to respond to those factors. Although the Senate Finance Committee has not yet drafted a legislative proposal, the questions asked by the senators during the hearing as well as their comments provide some insights as to the broad outlines of any bipartisan legislation that may follow.
  • Fifth Circuit Reverses Tax Court in BMC Software
    March 2015
    In a recent case, BMC Software v. Commissioner the Fifth Circuit Court of Appeals considered whether an account receivable created pursuant to Rev. Proc. 99-32 and a closing agreement entered into in connection with a transfer pricing adjustment was related-party indebtedness for purposes of section 965. Section 965 encouraged repatriation of funds from CFCs by providing for a one-time 85 percent dividends received deduction for cash dividends paid by a CFC to electing US shareholders. Section 965(b)(3) decreases the amount of the dividend eligible for the deduction by the amount of the increase in related party indebtedness of the CFC measured as of October 3, 2004. The Fifth Circuit’s decision reverses a 2013 decision of the Tax Court and concludes that the account receivable was not indebtedness for purposes of section 965(b)(3).
    KEYWORD: Transfer Pricing
  • United States Held Liable for Making False Statements to Foreign Tax Authority
    February 2015
    In a recent case, Aloe Vera of America Incorporated, et al. v. United States of America,  the United States was found liable for making false statements to the Japanese tax authority during a joint audit of a group of taxpayers. The opinion also reports that, in connection with the joint audit, the Japanese National Tax Administration (“NTA”) leaked information concerning the audit to Japanese media, which caused the taxpayer’s Japanese subsidiary to experience a decline in sales. This case is notable, not only because it sheds light on the simultaneous examination program authorized by U.S. income tax treaties, but because it shows the potential hazards, to the IRS and U.S. taxpayers, of exchanging taxpayer information with treaty partners.
  • Obama Administration’s Budget Addresses Some BEPS Action Items
     
    February 2015
    On February 2, 2015 the Obama administration released the description of the revenue proposals in its fiscal 2016 budget, commonly referred to as the “Green Book.”  From an international tax perspective, this year’s Green Book is notable because there are several new revenue proposals that align with action items under consideration by the OECD and the G20 as part of the BEPS (Base Erosion and Profit Shifting) initiative.  Below we discuss several of the Administration’s latest proposals in the context of the corresponding BEPS action items.
     
  • Tax Court Finds Oil Field Worker Cannot Exclude Income Earned in Russia
    January 2015
    A recent Tax Court case, Joel B. Evans v. Commissioner illustrates some of the conditions the U.S. citizen must satisfy in order to claim the benefits of section 911 and exclude foreign earned income from U.S. tax.
  • New House Rule Puts Dynamic Scoring of Tax Legislation in the Spotlight
     
    January 2015
    On January 5, 2015, the House of Representatives adopted H. Res. 5, which provides certain basic procedural rules for the 114th Congress.  Included in the resolution is a provision requiring “the Congressional Budget Office and Joint Committee on Taxation, to the extent practicable, to incorporate the macroeconomic effects of ‘major legislation’ into the official cost estimates used for enforcing the budget resolution and other rules of the House.” Incorporating macroeconomic effects into official cost estimates of legislation is popularly known as “dynamic scoring.” This approach to estimating tax revenue has been discussed for many years but has never been officially adopted. Should significant tax legislation be proposed during the 114th Congress, dynamic scoring of that legislation could have a significant impact on how such legislation is perceived by members of Congress and the public.
    KEYWORD: Federal Budget
  • Joint Committee Report Questions Obama’s Corporate Inversion Proposal
    December 2014
    In December 2014, the staff of the Joint Committee on Taxation released a report entitled: Description of Certain Revenue Provisions Contained in the President’s Fiscal Year 2015 Budget Proposal. The report includes an analysis of President Obama’s proposal to limit the ability of U.S. corporations to expatriate through a corporate inversion transaction. The report is noteworthy because it raises some fundamental policy questions about expansion of U.S. anti-inversion rules.
  • Microsoft’s Cost Sharing Audit Moves to the Courts at Year-end
    December 2014
    On December 11, 2014, the IRS filed a petition in the United States District Court for the Western District of Washington to enforce a summons served on Microsoft Corporation (“Microsoft”) to produce certain data and documents that the IRS has requested in connection with an audit of Microsoft for the tax years 2004 – 2006.  The audit concerns two regional cost-sharing agreements entered into by Microsoft with certain foreign affiliates. This petition, as well as other public documents, illuminate the government’s attack on these cost-sharing arrangements, which have significantly reduced Microsoft’s U.S. income tax liability. The Microsoft audit is but one example of the IRS’s attack on cost-sharing arrangements entered into by major U.S. technology companies.
  • Atheists and Agnostics Lack Standing to Challenge the Parsonage Allowance
     
    November 2014
    The Court of Appeals for the Seventh Circuit ruled on November 13, 2014 that the Freedom from Religion Foundation (the “Foundation”) and its two co-presidents lack standing to challenge the constitutionality of the “parsonage allowance” of section 107,which provides a tax benefit to “ministers of the gospel” by excluding certain housing-related compensation from gross income. The case is significant because it illustrates the hurdles that taxpayers must be overcome in order to challenge the constitutionality of a federal tax statute.  The decision also shows the plaintiffs a way to overcome the standing issue, so a court very likely will eventually have to address the constitutionality of the allowance.
    KEYWORD: Standing
  • District Court Decision Illustrates Limitations on IRS Summons Power
    November 2014
    A recent case in the United States District Court for the District of Delaware, United States v. Veolia Environment North American Operations, Inc., discusses some of the defenses that a taxpayer has to a summons issued by the IRS to a taxpayer to produce documents in the course of an audit. The decision also provides an example of the complex and lengthy nature of discovery in U.S. courts.
    KEYWORD: Tax Contoversy
  • IRS Offers More Guidance on Economic Substance Doctrine
    October 2014
    On October 10, 2014, the IRS issued Notice 2014-58 providing additional guidance concerning the economic substance doctrine and related penalties. The guidance defines “transaction” for purposes of applying the economic substance doctrine and “similar rule of law” for purposes of the accuracy-related penalty of section 6662(b)(6).  The Notice states that is an “amplification” of an earlier notice, Notice 2010-62, and is retroactive to March 31, 2010.
     
  • Treasury Loses FOIA Case in D.C. District Court
    October 2014
    The District Court for the District of Columbia ruled against the government in a recent case involving disclosure of an internal government investigation under the Freedom of Information Act (“FOIA”). In Cause of Action v. Treasury Inspector General for Tax Administration, the nonprofit organization, Cause of Action, brought suit under FOIA requesting, inter alia, all documents pertaining to any investigation by the defendant into the unauthorized disclosure of “return information” (as defined in section 6103) to anyone in the Executive Office of the President. The court found that none of the three exemptions to FOIA that the Treasury Inspector General for Tax Administration (“TIGTA”) argued were applicable applied in this case and remanded the case to the Treasury Department for disclosure.
    KEYWORD: FOIA
  • Treasury Acts Creatively to Limit Corporate Inversions
    September 2014
    On September 22, 2014, the Treasury and the IRS issued Notice 2014-52, which announces regulations that will be issued to limit some of the benefits of corporate inversions. The regulations described in the notice will have an effective date of September 22, 2014, with no provision to grandfather inversion transactions currently in progress. The regulations will (i) tighten the anti-inversion rules of sections 7874 and 367 and (ii) expand the scope of sections 304, 956 and 7701(l) to address transactions that some inverted corporate groups may implement to reduce their U.S. federal income tax liability, particularly when moving cash between members of the group.
     
    The most likely effect of these regulations is to discourage certain types of inversions, i.e., transactions motivated primarily by a desire to access cash accumulated in non-U.S. subsidiaries of the U.S. group without paying additional U.S. tax, transactions with a marginal business purpose, and inversions accomplished by a spinoff (“spinversions”).  The regulations described in the notice would not significantly limit the opportunity that an inversion provides a multinational group to develop and grow non-U.S. operations beneath the new foreign holding company thereby avoiding U.S. tax on those earnings over the long run. U.S. multinational groups with substantial non-U.S. operations, particularly in the technology and life sciences industries, are likely to continue to find inversions accomplished through the acquisition of smaller foreign companies to be attractive should a suitable partner be available.
     
  • Court of Federal Claims Rules for Mexican National in Refund Suit
    August 2014
    The case of Maria Esther Montiel v. United States (“Monteil”) considers the question of how to determine the limitation period for filing a refund claim when a nonresident alien erroneously files an original tax return as a U.S. resident and later determines that she should have filed as a nonresident alien. As discussed below, the Court of Federal Claims concluded that there was a triable issue as to whether it had subject matter jurisdiction on the facts in Montiel.
     
  • Joint Committee on Taxation Estimates Federal Tax Expenditures for 2014-2018
     
    August 2014
    On August 5, 2014 the staff of the Joint Committee on Taxation released a report entitled estimates of federal tax expenditures for fiscal years 2014-2018. The report is of interest because discussions of U.S. corporate tax reform often center on reducing the U.S. corporate tax rate while expanding the corporate tax base. An expansion of the corporate tax base would ordinarily result in a reduction in corporate tax expenditures.
  • Representative Levin Releases Discussion Draft of Legislation to Limit Benefits of Corporate Inversions
     
    August 2014
    On July 31, 2014, Representative Sander Levin (Democrat, Michigan) released a discussion draft of legislation that, if enacted into law, would limit certain tax benefits that often flow from corporate inversions.  The legislation is known as the “Stop Corporate Earnings Stripping Act of 2014.” The discussion draft focuses on three areas: (i) tightening the “earnings stripping” rules of section 163(j), (ii) expanding the scope of section 956, and (iii) taxing the “decontrol” of a controlled foreign corporation.
     
  • U.S. Senate’s Hearing Illuminates Taxation of “Basket Options”
    July 2014
    The U.S. Senate’s Permanent Subcommittee on Investigations of the Committee on Homeland Security and Governmental Affairs (the “Subcommittee”) issued a report on July 22, 2104 entitled Abuse of Structured Financial Products: Misusing Basket Options to Avoid Taxes and Leverage Limits (the “Report”). The Report is the result of an extensive inquiry by the Subcommittee’s members and staff, including a public hearing held on July 22, into transactions in the form of options contracts entered into by Deutsche Bank AG (“Deutsche Bank”) and Barclays Public Limited Company (“Barclays”) with certain hedge funds. Although such transactions are no longer offered by these banks, the amount of tax at issue appears to be significant (although many of the tax years may be closed).  The Report is another illustration of the strategy of the Subcommittee to publicize significant tax-aggressive transactions in an effort to discourage other large taxpayers from taking aggressive tax positions in the future.
  • The Corporate Inversion Debate Intensifies
    July 2014
    During July the debate in Washington over whether and how to address the growing number of “inversions” of U.S. corporations intensified. The impetus was a letter sent by the Secretary of the Treasury, Jacob Lew, to Representative Dave Camp, the Chairman of the House Ways and Means Committee, Senator Ron Wyden, the chairman of the Senate Finance Committee, Representative Sander Levin, ranking member, House Ways and Means Committee and Senator Orrin Hatch, ranking member, Senate Finance Committee. The letter triggered various responses discussed below.
  • IRS Releases Facts Sheet on Its Offshore Voluntary Disclosure Program
    June 2014
    In June 2014, the IRS released a fact sheet showing the results of its offshore voluntary disclosure program. The program, which remains in effect today, has produced $6.5 billion in tax revenue from approximately 45,000 taxpayers since its inception in 2009.
     
    KEYWORD: Tax Compliance
  • Joint Committee on Taxation Estimates Revenue Loss if Section 965 is Revived
    June 2014
    Section 965 was enacted in 2004 to encourage U.S. multinationals to repatriate offshore funds by providing for a temporary, one-time reduced rate of tax on dividends paid by controlled foreign corporations. In light of recent estimates that U.S. multinationals now have more than $1 trillion of earnings deferred from U.S. tax in controlled foreign corporations and the desire to fund various legislative initiatives, Sen. Orrin Hatch requested the Joint Committee on Taxation (the “JCT”) to provide a revenue estimate assuming section 965 was reenacted in 2014. In a letter dated June 10, 2014, the JCT estimated that such a proposal would not raise revenue; rather it would have a revenue cost of $95.8 billion for the period 2014 - 2024.
     
    KEYWORD: Federal Budget
  • Tax Court Fails to Find Taxable Transfer of Goodwill Between Related Companies
    June 2014
    In a recent decision, Bross Trucking, Inc. et al. v. Commissioner, the Tax Court rejected the government’s argument that there had been a taxable transfer of goodwill between related, family-owned businesses. The case is significant because it distinguishes between goodwill of a corporation and goodwill of a corporation’s shareholder. The case also illustrates the propensity of the IRS to argue that related taxpayers have made a taxable transfer of valuable intangibles between themselves, when in fact no taxable transfer has occurred.
     
    KEYWORD: Transfer Pricing
  • Senator Levin Introduces Legislation to Further Limit Corporate Inversions
     
    May 2014
    In reaction, at least in part, to Pfizer’s proposed merger with AstraZeneca (now abandoned), on May 20, 2014, Senator Carl Levin (Democrat, Michigan) introduced the “Stop Corporate Inversions Act of 2014.” The proposed legislation, which would be effective from May 8, 2014 if enacted into law in its current form, would further limit opportunities for a U.S. company to acquire a smaller non-U.S. (foreign) company in order to create a corporate structure with a foreign parent.
  • Government Prevails in Money Market Stripping Case
     
    May 2014
    On May 9, 2014, the U.S. Court of Federal Claims issued a decision in favor of the government in Principal Life Ins. Co. v. United States. The case considers the taxation of a dividend stripping transaction involving shares of a money market fund. The case is significant because it clarifies when and how tax basis is allocated when rights to receive future dividends are separated from the underlying shares.
     
     
    KEYWORD: Basis
  • Senator Paul Continues to Block Senate Hearings to Approve New Tax Treaties
     
    May 2014
    Senator Rand Paul (Republican, Kentucky), in a letter dated May 7, 2014, to Senate Majority Leader Harry Reid (Democrat, Nevada), stated his opposition to five treaties or protocols approved by the Senate Foreign Relations Committee last year. His letter states that he will object to any unanimous consent request, motion or waiver of any rule in relation to these treaties or any related measure. Senator Paul’s opposition to the treaties makes it difficult for these treaties to be approved by the full Senate, because most Senate business is conducted by unanimous consent of the members.
     
  • IRS Provides Statistics on Competent Authority Activity in 2013
     
    May 2014
    On April 30, 2014, the Large Business and International Division of the IRS released statistics on activity in the Office of the United States Competent Authority (“USCA”) during 2013.  In general, the statistics show the IRS’s increased resources devoted to the USCA have increased the number of cases resolved.
     
  • U.S. Senate’s Hearing on Caterpillar Highlights U.S. Multinationals’ Tax Conundrum
    April 2014
    The U.S. Senate’s Permanent Subcommittee on Investigations of the Committee on Homeland Security and Governmental Affairs (the “Subcommittee”) issued a report on April 1, 2104 entitled Caterpillar’s Offshore Tax Strategy (the “Report”). The Report is the result of an extensive inquiry by the Subcommittee’s members and staff, including a public hearing held on April 1, of a business restructuring implemented by Caterpillar beginning in 1999. The Report includes responses to the Subcommittee by Caterpillar, Caterpillar’s auditor, PWC, and expert reports and testimony. The Report, which runs 95 pages, is worth reading because it catalogs in some detail the issues that U.S. multinationals face when implementing a business restructuring that increases their offshore presence while deferring income that would otherwise be subject to current U.S. tax. The final part of this article addresses the tax conundrum that successful US companies, such as Caterpillar, face in today’s tax environment and how some have addressed it.
  • IRS Provides Guidance on Taxation of Transaction Involving Virtual Currencies
    March 2014

    Last year the General Accounting Office of the U.S. government recommending that the IRS provide additional guidance on tax issues raised by the use of virtual currencies in the real economy. On March 25, 2014, the IRS responded to that request with Notice 2014-21, which outlines general tax principles applicable to the taxation of transactions involving virtual currencies.
    KEYWORD: Currency
  • Court Rules for Insider Trader Seeking Deduction for Taxed Income Later Forfeited
    March 2014
    On March 12, 2014 the Court of Federal Claims granted a motion for partial summary judgment in favor of the taxpayers in the case of Joseph P. Nacchio and Anne M. Esker v. United States. The taxpayers have filed suit seeking a credit pursuant to section 1341 of the Code. That section allows a credit for amounts included in income in a prior year under “a claim of right” when that income is later determined not to be the taxpayer’s. The amounts at stake in the case are significant and the facts are unusual because the taxable income at issue was derived from criminal activity.
    KEYWORD: Amended Returns
  • President Obama’s Budget Would Tighten U.S. Subpart F Rules
    March 2014
    On March 4, 2014, the Obama administration released its fiscal 2015 budget. The revenue proposals of the budget are contained in in a document commonly referred to as the Green Book. The 2015 Green Book, which contains 297 pages of proposed tax increases and tax expenditures, includes 17 international tax reform proposals that would significantly raise taxes on U.S. multinationals.  While the proposals are unlikely to garner much political support in the near future, some of them may enter into the mix of any political compromise needed to fund a revenue neutral reduction in the corporate tax rate – should serious corporate tax reform discussions materialize after the Congressional elections in the fall.
  • Chairman Camp’s Latest Tax Reform Proposal
    February 2014
    On February 26, 2014, Representative Dave Camp (Rep. MI), the Chairman of the House Ways and Means Committee, released a bill to reform the Internal Revenue Code, entitled “The Tax Reform Act of 2014.” The bill, which is labeled a discussion draft, is a more comprehensive version of a discussion draft of a tax bill released in 2011. The bill, if it were to become law, would significantly change U.S. international tax rules.
  • IRS Transfer Pricing Audit Roadmap Provides Guidance to Agents and Taxpayers Alike
    February 2014
    The IRS released its Transfer Pricing Audit Roadmap on February 14, 2014.  The document is described as a “toolkit that is organized around a basic audit time-line and that provides advice and links to useful reference material.” The roadmap is a first in the area of transfer pricing. With the included links, the roadmap is a significant document that should be reviewed by any multinational with controlled transactions involving U.S. companies in its group.
    KEYWORD: Transfer Pricing
  • Loving Shows Limits of IRS’s Authority to Write Regulations
    February 2014
    On February 11, 2014 the U.S. Court of Appeals for the District of Columbia issued its opinion in Sabrina Loving, et al. v. IRS[1] ruling that the IRS lacks statutory authority under 31 U.S.C. § 330 to issue regulations governing tax-return preparers. Although the scope of the IRS’s authority to issue regulations was clarified and broadened by the Supreme Court’s 2011 decision in Mayo Foundation for Medical Education and Research v. United States,[2] the decision in Loving shows that the IRS’s authority to issue regulations is not without limits, even in cases where the facts are sympathetic to the government’s position.
    KEYWORD: Judicial Review
  • IRS Provides Additional Guidance on Corporate Inversions
    January 2014
    On January 17, 2014 Treasury and the IRS published temporary regulations under section 7874, the Code’s anti-inversion provision, implementing guidance previously announced in Notice 2009-78. The temporary regulations generally define “disqualified stock” i.e., stock that is not taken account in applying the section 7874 ownership test. These temporary regulations follow the 2009 notice for the most part and are effective retroactively to September 17, 2009. The temporary regulations contain a taxpayer-favorable de minimis rule that previously had not been announced, as well as surprising news that the IRS and Treasury are considering expanding the scope of section 7874.
  • New Economic Studies Likely to Influence Corporate Tax Reform Debate
    January 2014
    On January 6, 2014, The Congressional Research Service (CRS) issued two reports to Congress that are likely to influence the corporate income tax reform debate in the United States. One report addresses differences in corporate tax rates among countries, and a second report addresses various economic considerations arising from reducing the U.S. corporate tax rate and increasing the corporate tax base. Both reports contain numerous implications for corporate tax reform.
  • New Proposed Regulations Would Further Tighten U.S. Taxation of Dividend Equivalents
    December 2013
    On December 5, 2013 the Treasury and the IRS issued proposed regulations under section 871 (m) (the “2013 Proposed Regulations”) addressing the taxation of cross-border payments of “dividend equivalents” (i.e., payments that are not in the form of a dividend but have the economics of a dividend). These regulations replace proposed regulations issued in January 2012 (the “2012 Proposed Regulations”). Also on December 5, the IRS finalized temporary regulations issued in 2012.  These regulations (the “Final Regulations”) are effective for payments made through December 31, 2015. Thus, for the next two years the current rules governing the taxation of dividend equivalents continue in effect.
    KEYWORD: FDAP Income
  • IRS Proposes Revisions to Procedures for Requesting Assistance of U.S. Competent Authority
    November 2013
    On November 22, 2013, the IRS released Notice 2013-78 (the “Notice”) which, if finalized, would replace Rev. Proc. 2006-54, the revenue procedure that currently governs requests for the assistance of the U.S. competent authority in resolving tax treaty issues.  The Notice formalizes some previously informal policies and announces some new ones.  Overall, the Notice is positive for U.S. taxpayers in a number of ways.
  • Update on Discussions on Improving the India-USA Tax Relationship
    November 2013
    Speaking at a luncheon in Washington on November 22, 2013, Mr. Mike Danilack of the IRS updated practitioners on the current state of the relationship between the U.S. competent authority and his counterpart in India, Mr. Akhilesh Ranjan.
  • Senator Baucus Offers Discussion Draft for Comprehensive International Tax Reform
    November 2013
    On November 19, 2013, Senator Max Baucus (Dem, MT), Chairman of the Senate Finance Committee, released a discussion draft of international business tax reform legislation (the “discussion draft”). As we have discussed in earlier posts, the Senate Finance Committee previously had released a series of "tax reform option papers" identifying various tax issues.  The committee now is releasing a series of “discussion drafts” presented as bills in draft form to amend current law.  International tax reform was the first topic released. The staff of the Joint Committee on Taxation also prepared a "technical explanation" of the discussion draft. We review the current state of international corporate tax reform and then discuss some highlights of the discussion draft as well as some of its possible implications.
  • IRS Issues Draft FFI Agreement Implementing FATCA
    October 2013
    On October 30, 2013 the IRS has issued Notice 2013-69, whic h include a draft model FFI agreement.
    KEYWORD: FATCA
  • Court of Federal Claims Follows Tax Court and Rejects the STARS Transaction
    September 2013
    On September 20, 2013, the U.S. Court of Federal Claims issued an opinion in favor of the government in the case of Salem Financial, Inc. v. United States.The case involved a cross-border tax-advantaged financing transaction, known as STARS, which was co-marketed to Salem Financial by Barclays Bank PLC and the U.S. accounting firm KPMG LLP. In Bank of New York Mellon Corporation v. Commissioner of Internal Revenue the Tax Court considered the STARS transaction and denied the taxpayer the purported tax benefit (foreign tax credits) on grounds that the transaction, while compliant with the statute, failed to satisfy the economic substance doctrine.  The case is of interest because it illustrates the expanding scope of the economic substance doctrine and the enhanced role of the courts in making U.S. federal income tax law.
     
  • Senator Levin Reacts to BEPS
    September 2013
    In earlier posts we have discussed the activities of the Permanent Subcommittee on Investigations (the “Subcommittee”) of the U.S. Senate Homeland Security and Government Affairs Committee, which is chaired by Senator Carl Levin (Democrat, Michigan ), including the Subcommittee's hearings on tax planning carry out by various U.S. multinationals. We have also noted the ongoing work of the OECD and the G-20 countries in combating BEPS -- base erosion and profit shifting -- and mentioned the muted U.S. response to that effort so far. Senator Levin has proposed legislation to respond to BEPS.
  • Transfer Pricing Adjustment Has Unintended Consequences for Taxpayer
    September 2013
    Taxpayers often exploit the complexity of the Internal Revenue Code to their advantage, while the government may be less likely to do so.  In the recent case of BMC Software Inc. v. Commissioner,[1] the tax law’s complexity proved to be an ally of the government, however.  BMC involved a multi-year transfer pricing adjustment in favor of the government that, the Tax Court concluded, also reduced the taxpayer’s dividends received deduction for dividends paid to the taxpayer by a foreign subsidiary during one of the years for which the adjustment was made. We discuss below the convoluted path to this result.
    KEYWORD: Transfer Pricing
  • IRS Concludes That Dividends Paid by Cypriot Corporation Qualify under Section 1 (h) (11)
    September 2013
    In a Chief Counsel Advice memorandum, CCA 201343019, issued September 10, 2013, the Office of Associate Chief Counsel (International) considered whether a dividend paid by a Cypriot corporation to a U.S. shareholder was “qualified dividend income” (QDI) for purposes of section 1(h)(11). The CCA is significant because Cypriot corporations are common in many private equity (as well as other investment) structures, and the government previously had not addressed how to apply section 1(h)(11) to dividend paid by a foreign corporation that has no U.S. source income.
  • IRS to Issue Guidance on Sale of Partnership Interests by Non-U.S. Persons
    August 2013
    The IRS plans to issue guidance under section 864 relating to sales of certain partnership interests by non-U.S. persons.  This guidance likely is intended to bolster the position taken by the IRS in Rev. Rul 91-32.
  • More FATCA Guidance Issued in August 2013
    August 2013
    In August 2013 the IRS and Treasury issued additional guidance on FATCA implementation relating to registration and other matters.
    KEYWORD: FATCA
  • Recent Case Demostrates Timing Matters When Claiming Deductions
    August 2013
    On August 1, 2013, the Court of Appeals for the Second Circuit affirmed a district court decision in the case of New York Life Insurance Company v. United States ("New York Life").  The District Court had agreed with the government that New York Life had prematurely accrued certain policyholder dividends. The case is significant because it offers insights into the application of the "all events” test, which is the well-known and widely applied U.S. tax accounting rule for determining the proper year for the deduction of a liability.
    KEYWORD: Tax Accounting
  • First Circuit’s Opinion in Sun Capital is Disquieting for Investors in Private Equity
    July 2013
    On July 24, 2013 the Court of Appeals for the First Circuit issued an opinion in Sun Capital Partners III, et. al. v. New England Teamsters & Trucking Industry Pension Fund finding that one of the three appellee private equity funds had a “trade or business” for purposes of determining whether the funds were liable for pension liabilities of a bankrupt company that the funds owned. This decision has been disquieting to investors in private equity funds (especially those in the First Circuit) because it is the first case to find such funds as having a trade or business under the pension law and thus potentially liable for certain pension liabilities of their portfolio companies. 
  • IRS Eases Some FATCA Deadlines
    July 2013
    Acknowledging that “certain elements of the phased timeline for the implementation of FATCA present practical problems for both U.S. withholding agents and FFIs [Foreign Financial Institutions]” the IRS issued Notice 2013-43 on July 12, 2013 extending the deadlines under the FATCA final regulations for U.S. withholding agents and participating foreign financial institutions to begin their due diligence, withholding, and reporting requirements. The final FATCA regulations will be amended to reflect the content of the notice.
    KEYWORD: FATCA
  • New U.S. Corporate Tax Return Data Offer Insights on Inbound Investment
    July 2013
    On July 9 the IRS released a report reviewing and analyzing corporate tax return data for 2010 (the “Report”). This is the latest year for which the IRS has released such data. The Report is of interest because it offers insights into the reported activities of non-U.S. companies carrying on business in the United States. A non-U.S. (foreign) corporation that is engaged in a U.S. trade or business during the taxable year is required to file a Form 1120-F (U.S. Income Tax Return of a Foreign Corporation) for that year.
  • D.C. Circuit Rules for Unlucky Korean Gambler
    July 2013
    On July 9, 2013 the Court of Appeals for the D.C. Circuit, reversing the Tax Court, issued an opinion in favor of the taxpayers in the case of Sang J. Park and Won Kyung O v. Commissioner.The issue in Park was how to compute the Korean taxpayers’ gains from playing slot machines in the United States. Overall Mr. Park lost money playing slot machines while in the United States, but the IRS asserted Mr. Park was taxable on each bet he had won, with no deduction for his many lost bets.  The government argued that because nonresident aliens are taxed on a gross basis on their FDAP income (i.e., they are denied deductions) this was the correct result. The court did not agree.
    KEYWORD: FDAP Income
  • U.S. Announces National Action Plan on Preventing the Misuse of Companies and Legal Arrangements
    June 2013
    On June 18, 2013 the Obama administration published the “U.S. National Action Plan on Preventing the Misuse of Companies and Legal Arrangements.” The purpose of the U.S. action plan is to combat the criminal misuse of business entities by enabling law enforcement and tax authorities enhanced access to beneficial ownership information of business entities.
  • Recent Developments in U.S. Tax Reform

    June 2013
    This posts reviews developments in the movement for U.S. corporate tax reform in June 2013
  • U.S. Senate Subcommittee Holds Hearings Criticizing Apple’s Tax Planning
    May 2013
    On May 21, 2013, the Permanent Subcommittee on Investigations (the “Subcommittee”) of the U.S. Senate Homeland Security and Government Affairs Committee held a hearing that examined how Apple Inc. “has used a variety of offshore structures, arrangements, and transaction to shift billions of dollars in profits away from the United States and into Ireland, where Apple has negotiated a special corporate tax rate of less than two percent.” The hearing included testimony by Apple’s CEO, Tim Cook, the U.S. Treasury’s Assistant Secretary for Tax Policy, Mark Mazur, an IRS official responsible for transfer pricing enforcement, and others. The subcommittee and some of those testifying made specific recommendations for tax reform.
     
     
  • Supreme Court Holds U.K. Windfall Profits Tax is Creditable
    May 2013
    On May 20, 2013, the U.S. Supreme Court issued its opinion in PPL Corp. et al. v Commissioner of Internal Revenue, which settles a split between the Third Circuit and the Fifth Circuit as to whether the United Kingdom's "windfall tax" on privatized U.K. companies is a credible tax under U.S. federal income tax law.  By finding the tax to be creditable, the Supreme Court allowed PPL a foreign tax credit for the windfall tax paid by PPL’s privatized U.K. subsidiary.  The credit reduced PPL’s U.S. tax liability with respect to the repatriated earnings of the subsidiary.
     
  • GAO Recommends IRS Issue Guidance on Taxation of Virtual Currencies
    May 2013
    In May 2013, the U.S. Government Accountability Office (the “GAO”) issued a report to the Senate Finance Committee (the “Report”) recommending that the IRS provided additional guidance on the tax issues raised by virtual economies and currencies. The Report was released to the public in June 2013, after the IRS was given the opportunity to review the Report and respond to its findings. As discussed below, the Report is significant because it focuses attention on the growth of virtual economies and virtual currencies and tax issues raised by each.
    KEYWORD: Currency
  • Two Bankers Associations Sue to Delay Effective Date of Expanded Deposit Interest Reporting
    April 2013
    On April 18, 2013 the Florida and Texas Bankers Associations filed a complaint in United States District Court for the District of Columbia seeking (i) a declaratory judgment that final regulations issued by the IRS and Treasury in 2012 under section 6049 were promulgated in violation of the Administrative Procedure Act (“APA”) and the Regulatory Flexibility Act (“RFA”), and (ii) an order staying the enforcement of those regulations.The regulations require banks and other financial institutions to report to the IRS annually interest paid on deposits by nonresident aliens resident in certain countries with which the United States has in effect an income tax or other convention or bilateral agreement requiring the exchange of tax information.
    KEYWORD: FATCA
  • Tenth Circuit Refuses to Quash IRS Subpoena for Bank Account Data Requested Under Mexican Treaty
    April 2013
    A recent order and judgment by the Tenth Circuit issued in the case of Solomon Juan Marcos Villareal v. United States of America illustrates how the IRS can use a summons to obtain U.S. financial data beneficial to a non-U.S. tax authority’s investigation of a non-U.S. taxpayer and then share that information with the tax authority pursuant to the terms of an income tax treaty or TIEA.
     
  • IRS Releases Draft FATCA Registration Form
    April 2013
    In April, the IRS released for review and comment a draft of Form 8957 (Foreign Account Tax Compliance Act (FATCA) Registration). The form is available at: http://www.irs.gov/file_source/pub/irs-utl/13f8957.pdf/ .
    KEYWORD: FATCA
  • The Obama Administration Releases Its Fiscal Year 2014 Budget
    April 2013
    On April 10, 2013, President Obama delivered his administration's proposals for the federal government's 2014 budget to the U.S. Congress. The budget addresses both federal spending and federal revenue (i.e., taxes). Each year, the tax proposals included in the budget are published separately in a book with a green cover, which is referred to colloquially as the "Greenbook." This year's Greenbook has two main components: (i) a traditional budget proposal, i.e., proposed tax increases, and (ii) a framework for revenue-neutral tax reform.
  • Tax Court Considers Taxation of the Golfer Sergio Garcia
    March 2013
    Nearly two years ago, in our July 2011 column, we discussed Goosen v. Commissioner, a case concerning the taxation of endorsement fees paid to professional golfer Retief Goosen, a U.K. tax resident and non-domiciliary. On March 14, 2013 the Tax Court issued an opinion in in a similar case involving another professional golfer, Sergio Garcia, a citizen of the Spain and a Swiss tax resident. The Garcia case is significant because it includes an interpretation of the artistes and sportsmen article (Article 17) of the Convention between the United States of America and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income (the “Swiss Income Tax Treaty”).
  • Bank of New York Mellon Loses in Tax Court
    February 2013
    On February 11, 2013, the U.S. Tax Court issued a decision in favor of the government in a case involving a tax-advantaged financing transaction entered into between Barclays Bank, PLC (“Barclays”) and the Bank of New York in 2001. The case is significant because it further elucidates how the Tax Court will apply the evolving economic substance doctrine in order to disallow tax benefits to participants in a transaction that otherwise follows the letter of the statutory law. The case also illustrates the increasing influence of the courts in U.S. tax matters, particularly those transactions that are complex or involve areas of the tax law that are less well developed.
  • Differences between India and the United States on Significant Treaty Issues Continue
    February 2013
    The U.S. tax press reports that the U.S. competent authority, Mike Danilack, while speaking at a tax conference in California in early February 2013, announced that, after consultations with his counterparts in India, he was pessimistic that India and the United States could conclude bilateral APA's given their current positions on some significant transfer pricing issues. Danilack said that India and the United States disagree on some fundamental points, including choice of transfer pricing method (cost-plus v. profit split) and the appropriate treatment of risk in a transfer pricing analysis.
  • Ways and Means Tax Reform Proposals Would Affect Non-U.S. Persons
    January 15, 2013
    Over the last couple of years, Dave Camp (Republican, Michigan), the chairman of the House Ways and Means Committee has released discussion drafts of several bills addressing reform of various part of the Internal Revenue Code. As discussed in our December 2011 column, in October 2011 Chairman Camp introduced a discussion draft of a bill addressing international tax reform that would move the United States to a territorial system for the taxation of foreign income. More recently, in January 2013, Chairman Camp released a discussion draft of a bill that would reform the taxation of derivatives and other financial products. The Ways and Means Committee held hearings on that bill in March. Also, in March Chairman Camp released a discussion draft of a bill addressing small business tax reform. Even though the prospect for bipartisan action on tax reform does not appear rosy at this time, Chairman Camp hopes to stimulate serious discussion of significant U.S. federal income tax policy and technical issues and build consensus for change over the longer term.
  • Supreme Court Requires Chevron Deference in Review of Treasury Regulations
    January 2011
    In an opinion issued on January 11, 2011, the US Supreme Court, in Mayo Foundation for Medical Education and Research v. United States, upheld the validity of a U.S. Treasury regulation that defined the term "student" to exclude medical residents for purposes of determining whether those individuals were employees and their wages were therefore subject to tax under the Federal Insurance Contributions Act (FICA). The opinion is significant because in reaching its decision the Supreme Court addressed an apparent conflict in its prior decisions as to the degree of deference that US courts should accord US Treasury Regulations that come before them for review.
     
    KEYWORD: Judicial Review