I. Executive Summary

On February 15, 2024, the IRS and Treasury issued a supplemental notice to a prior notice from December 2022, to correct a petition requesting that the Superfund Chemical Tax apply to polyphenylene sulfide. While the supplemental notice is narrow in scope, the IRS and Treasury have requested

On January 17, 2024, Senate Finance Committee Chairman Ron Wyden (D-Ore.) and House Ways and Means Committee Chairman Jason Smith (R-Mo.) released a bill, the “Tax Relief for American Families and Workers Act of 2024” (“TRAFA” or the “bill”). All of the provisions in the bill are taxpayer favorable, except

In 2021, the Corporate Transparency Act was enacted into U.S. federal law as part of a multinational effort to rein in the use of entities to mask illegal activity, including proposed rules (effective January 1, 2024) requiring certain types of entities to file a report identifying the entity’s beneficial owners

Introduction

Section 1402(a)(13) of the Internal Revenue Code provides that the distributive share of “limited partners, as such” from a partnership is not subject to self-employment tax.[1]  Managers of private equity and hedge funds are routinely structured as limited partnerships to exclude management and incentive fees from self-employment

On July 11, 2023, the Senate Finance Committee released an open letter to the Digital Asset Community asking a variety of questions in connection with possible future legislation. Public comments must be emailed to the Senate Finance Committee staff at responses@finance.senate.gov by September 8, 2023. The questions are related to the following nine general areas.

  • Marking-to-market for traders and dealers;
  • Trading safe harbor;
  • Treatment of loans of digital assets;
  • Wash sales;
  • Constructive sales;
  • Timing and source of income earned from staking and mining;
  • Nonfunctional currency;
  • FATCA and FBAR reporting; and
  • Valuation and substantiation.

The balance of this blog describes each area, lists each question, and discusses certain of them.

On July 26, 2023, Senate Finance Chairman Ron Wyden (D-OR) introduced the Ending Tax Breaks for Massive Sovereign Wealth Funds Act (the “bill”), which would deny the benefits of section 892 of the Internal Revenue Code[1] to sovereign wealth funds whose foreign government holds more than $100 billion of investable assets,[2] and either (i) is not a party to a free trade agreement or income tax treaty in effect with the United States or (ii) is North Korea, China, Russia, or Iran.[3]  If the bill is passed, it would deny the benefits of section 892 to several of the largest sovereign wealth funds by assets.

Section 892 generally exempts foreign governments (including “integral parts”[4] of foreign governments and foreign governments’ sovereign wealth funds and other “controlled entities”[5]) from U.S. federal income tax on income received from investments in U.S. stocks, bonds, and other securities, financial instruments held in the execution of governmental financial or monetary policy, and interest on deposits in banks in the United States. However, section 892 does not exempt from U.S. federal income tax any income that is derived from the conduct of a “commercial activity”,[6] income received by a “controlled commercial entity” or received (directly or indirectly) from a “controlled commercial entity”,[7] and income derived from the disposition of any interest in a controlled commercial entity.

The bill would generally apply to income received after December 31, 2023. However, the bill contains three grandfather provisions that would apply until 2026.

First, any investment made before the enactment of the bill would be grandfathered until 2026.

Introduction

On May 3, 2023, the United States Tax Court held in ES NPA Holding, LLC v. Commissioner, T.C. Memo. 2023-55, that the taxpayer’s receipt of interests in a partnership in exchange for services rendered to the sole owner of the business before it became a partnership was for the benefit of the future partnership and, therefore, was a profits interest (rather than a capital interest). The taxpayer did not provide ongoing services to the partnership.

On May 2, 2023, the Department of the Treasury and Internal Revenue Service (“IRS”) issued proposed Treasury Regulations (REG-124064-19) that would, in certain cases, terminate the application of Section 367(d)[1] when intangible property is repatriated back to the United States.  The proposed Regulations represent a taxpayer-favorable position for taxpayers that have considered repatriating intangible property to the United States but are concerned about the possibility of excessive taxation under current tax law.

This blog post summarizes recent federal bills that have been introduced (but not yet passed), proposals by the Biden Administration, and guidance issued by the Internal Revenue Service with respect to the taxation of digital assets.

Summary of the Guidance:

The Responsible Financial Innovation Act (the “RFIA”) introduced

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.