On March 9, 2023, the Biden Administration released the Fiscal Year 2024 Budget, and the “General Explanations of the Administration’s Fiscal Year 2024 Revenue Proposals,” which is commonly referred to as the “Green Book.” The Green Book summarizes the Administration’s tax proposals contained in the Budget. The Green Book is not proposed legislation, and each of the proposals will have to be introduced and passed by Congress. Most of this year’s proposals were previously proposed by the Biden Administration. However, there are a number of notable new proposals, including proposals to increase the stock buyback tax to 4%, increase the net investment income tax (“NIIT”) rate and additional Medicare tax rate from 3.8% to 5% for certain high income taxpayers, apply the wash sale rules to digital assets, and implement several changes to the international tax laws. This blog post summarizes some of the Green Book’s key proposals.
Corporate tax
IRS and Treasury Provide Guidance on the Excise Tax on Repurchases of Corporate Stock under Section 4501
On December 27, 2022, the Internal Revenue Service (“IRS”) and the U.S. Department of the Treasury (the “Treasury”) released Notice 2023-2 (the “Notice”), which provides guidance regarding the application of the 1% excise tax on corporate stock buybacks under recently enacted section 4501 (the “Tax”).[1] Taxpayers may rely on the Notice until proposed regulations are published. The Notice also contains a request for comments on the rules included in the Notice and rules not included in the Notice.
The Treasury and the IRS took a literal interpretation of the statute; thus, the Tax applies broadly to stock repurchases and other transactions that are not traditionally viewed as stock buybacks, including a repurchase of mandatorily redeemable preferred stock (even if such stock was issued before January 1, 2023). Special purpose acquisition companies (“SPACs”) will need to analyze whether a transaction is subject to the Tax under the general rules as the Notice does not include any special guidance for SPACs. However, SPACs did receive comfort that redemptions that take place in the same year as a “complete liquidation” under section 331 are not subject to the Tax.
President Biden Signs Inflation Reduction Act into Law
On August 16, 2022 President Biden signed the Inflation Reduction Act of 2022 (the “IRA”) into law.
The IRA includes a 15% corporate alternative minimum tax, a 1% excise tax on stock buybacks and a two-year extension of the excess business loss limitation rules. The IRA also contains a number…
HMRC Announces Welcome Changes to the QAHC Regime
By Stephen Pevsner & Philip Gilliland on
On 20 July 2022, the UK government published draft legislation for the Finance Bill 2022-2023.
Of particular interest are amendments to be made to the qualifying asset holding company (QAHC) regime that was introduced from 1 April this year.
The regime is part of the UK government’s attempt to increase…
A step closer to agreement on taxation of the digital world
On 8 October 2021, the OECD released a further statement in relation to the BEPS 2.0 proposals, aimed at addressing taxation of the modern digital economy. This is the latest development in the attempts to more equally share the tax revenue relating to digital services that have led to some…
UK Budget 2021
By Catherine Sear & Richard Miller on
The UK has now been in lockdown, on and off, for the best part of a year. With the COVID-19 vaccination programme now in full swing in the UK, and hopefully with light at the end of tunnel, attention has inevitably turned to the question of “how are we going…
COVID-19: OECD updates its guidance on residence and permanent establishments
By Stephen Pevsner & Philip Gilliland on
Background
From the beginning of the UK’s first lockdown in March of last year we have reported on the impact of the pandemic on individual and corporate tax residence and permanent establishment risk.
In April 2020 the OECD published guidance on the impact of COVID-19 on double tax treaties (DTTs),…
Advisers’ fees non-deductible where management decisions made by parent company
By Philip Gilliland & Stephen Pevsner on
The UK’s First-tier tax tribunal (FTT) has just released an interesting decision considering whether or not expenses incurred by a parent company on advisers’ fees that related to a proposed disposal by a group subsidiary and were charged on to its subsidiary were deductible as expenses of management of the…
IR35 extension to private sector – Finance Bill 2020 amendment on territorial scope
By Philip Gilliland & Stephen Pevsner on
There has been much discussion over the past year or so about the UK government’s proposal to make changes to the application of the off-payroll working (or IR35) tax rules to private sector end clients so as to shift certain employment status assessment and, depending on the circumstances, employment tax …
COVID-19: DAC 6 reporting delayed
By Philip Gilliland & Stephen Pevsner on
In light of COVID-19, and in response to requests from European trade associations, the European Commission has published its proposal to amend Directive 2011/16/EU which deals with various strands of administrative co-operation in the field of taxation. Significantly, the proposal includes an extension to the time limit for reporting information…