Yesterday the Trump Administration announced the outline of its tax reform proposal. The proposal combines elements of President Trump’s original tax reform proposal announced during the campaign and of the House Republicans’ tax reform proposal (which is sometimes referred to as the “Blueprint”).
Last week, in McKelvey v. Commissioner¸ the U.S. Tax Court held that the extension of a typical variable prepaid forward contract (“VPFC”) did not give rise to a taxable exchange to the obligor because a VPFC is solely an obligation, and not property, within the meaning of section 1001 of the Internal Revenue Code. The Tax Court also noted this result is consistent with the usual treatment of a VPFC as an “open transaction”. This decision is very good news for an obligor under a VPFC (that is, the party required under the contract to deliver cash or stock at the end of the term of the VPFC), that wishes to extend a VPFC without tax consequences. If the decision is upheld on appeal under the Tax Court’s reasoning, the case would seem to apply equally an obligor that extends a conventional option, and could even provide a basis for debtors to argue that a modification of their debt does not give rise to an exchange (and thus, does not give rise to cancellation of indebtedness income) notwithstanding Treasury regulations section 1.1001-3. However, the Tax Court’s reasoning in McKelvey is in some tension with other authorities and, if taken at face value, could create opportunities for significant tax deferral on a wide variety of financial products.
On April 6, 2017, the Internal Revenue Service (the IRS) added three new frequently asked questions to its Foreign Account Tax Compliance Act (“FATCA”) compliance page, which is available only online. These additional FAQs clarify recent temporary regulations (the “Temporary Regulations”) requiring that a beneficial owner withholding certificate contain a foreign taxpayer identification number (“TIN”) and, in the case of an individual beneficial owner, such individual beneficial owner’s date of birth. The FAQs provide temporary relief for calendar year 2017, describing less stringent requirements that are effective through December, 2017. Continue Reading
After numerous UK tax changes affecting asset managers over the past few years – not least the wholesale re-vamping of the tax treatment of carried interest and other fund participations for investment fund managers – the UK government’s budget last week (8 March 2017) was a relatively uneventful affair for those in the investment management sphere.
The U.S. Treasury Department and the Internal Revenue Service published on January 18, 2017 final regulations (the “Final Regulations”) reducing from ten years to five years the recognition period for the corporate-level tax imposed on certain property dispositions by a real estate investment trust (“REIT”) or a regulated investment company (“RIC”) under Section 337(d), and otherwise generally adopting the approach set forth in prior temporary and proposed regulations. The need to have a recognition period for corporate-level tax in this circumstance is related to General Utilities repeal as applied for RICs and REITs, and the five-year recognition period established in the Final Regulations was indirectly mandated by the provisions of the PATH Act addressing General Utilities repeal and which we have previously discussed. The Preamble to the Final Regulations states that the intention of the change is to conform the Final Regulations to the PATH Act. Continue reading the discussion for further background and context for the Final Regulations.
In our previous post published on 6 December 2016 we described the OECD’s BEPS Project in the context of the publishing of the draft Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the “Convention”).
One area that the OECD has itself acknowledged requires further consideration is in relation to BEPS Action 6, the final report on which was published in October 2015, which seeks to prevent access to treaty benefits in inappropriate circumstances (“treaty shopping”).
The final report on Action 6 included various proposals designed to prevent treaty shopping, including the proposed introduction into double tax treaties of:
- a limitation on benefits (LOB) rule that limits the availability of treaty benefits to entities that meet certain conditions
- a general anti-abuse rule which looks at the principal purpose of the transactions or arrangements in question (the principal purpose test, or PPT),
with the OECD recommending that as a minimum standard either (i) a PPT, or (ii) a PPT with either a “simplified” or “detailed” LOB provision should be adopted.
The European Commission has expressed a general preference for the PPT rather than the LOB provisions. HMRC have indicated that the UK will not adopt the LOB.
The Proskauer Tax Department is pleased to announce that Stephen Pevsner has joined as a partner in our London office.
Stephen’s practice focuses on UK and international M&A and private equity transactions, corporate reorganizations, and new business formations. Offering a broad range of corporate tax strategy experience, his clients include global corporations, investment banks, and private equity sponsors and investors. In addition to his wealth of transactional knowledge he also has substantive experience advising on the formation of private investment funds and the establishment of investment management and advisory limited partnerships.
According to Chambers UK, Stephen is a notable practitioner in the corporate tax field, praised for “his ability to master the intricacies of tax law and understand the commercial aspects of the deal”.
Please click here for Stephen’s complete biography and contact information.