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.
As noted in our January 5, 2017 client alert, FinCEN issued Notice 2016-1, which extends the filing deadline for the Report of Foreign Bank and Financial Accounts, FinCEN Form 114 (FBAR), for certain individuals with signature or other authority over (but no financial interest in) employer-owned foreign financial accounts to April 15, 2018. Please click here for our full client alert.
The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the “Convention”) was released by the Organisation for Economic Co-operation and Development (“OECD”) on November 24, 2016. The Convention is the latest in an ongoing series of releases related to the OECD/G20 Project addressing Base Erosion and Profit Shifting (the “BEPS Project”), which is a major and continuing effort described as “aiming to realign taxation with economic substance and value creation, while preventing double taxation.” The Convention is the result of multilateral negotiation by over 100 member states (including the United States and the United Kingdom) and observers. While the Convention will not come into force at all until five countries have formally ratified the Convention, once in force the Convention will come into effect for an existing income tax treaty after both contracting parties to that treaty have signed the Convention and any other required home-country ratification processes are completed. The Convention is accompanied by a detailed explanatory statement describing its provisions. The OECD announced that a signing ceremony for the Convention will be held in June of 2017, although a list of expected signatories has not yet been released.
Continue reading for further background on the Convention and a discussion of issues relating to the Convention’s interaction with existing tax treaties, substantive highlights and timetable for implementation. A complete version of the Convention, and the explanatory statement, are linked here and also can be found on the OECD website, http://www.oecd.org. If you would like to discuss any details of the Convention or its impact on multinational enterprises, please contact any of the authors listed here or any member of the Proskauer Tax Department whom you usually consult on these matters.
In the U.S. general election held on November 8, 2016, Donald J. Trump was elected to become the 45th President of the United States. Republicans also retained their majorities in both the U.S. House of Representatives and the U.S. Senate for the new Congress convening in January, meaning that Rep. Paul Ryan (R-WI) is likely to remain the Speaker of the House and Sen. Mitch McConnell (R-KY) is likely to remain the Majority Leader of the Senate. For the benefit of non-U.S. readers, this result means that Republicans will control of all three lawmaking bodies of the U.S. federal government, although the current rules of the Senate give Senate Democrats some limited ability to block proposals and legislation in that body.
During 2016, the President-Elect and Congressional Republicans have issued white papers outlining their respective proposals for U.S. tax reform, both of which would affect the U.S. federal taxation of individuals and businesses both domestically and internationally. It is obviously too soon to say whether, when or in what form any tax reform legislation will be advanced in the next Congress. In the ordinary course the Treasury Department would release in early 2017 the new administration’s tax proposals (the “Green Book”); the Congress could introduce a bill embodying either a partial or comprehensive tax reform proposal at any time. Below is a summary of the most important elements of both tax reform proposals.
On October 13, 2016, the Treasury Department and the Internal Revenue Service issued final and temporary regulations under section 385 of the Internal Revenue Code. The final and temporary regulations recharacterize certain debt instruments as equity for all federal income tax purposes.
The final and temporary regulations narrow considerably the scope of the proposed regulations and will principally apply to debt issued by domestic corporations to foreign corporations that are part of the domestic corporation’s “expanded group” (generally corporations related by an 80% vote or value ownership test). Please click here for our client alert, which analyzes the new final and temporary regulations and their impact on related party debt issuances.