On Wednesday, October 9, 2024, the Treasury Department and the Internal Revenue Service (“IRS”) released final regulations (TD 9994), confirming that the application of section 367(d) to intangible property (“IP”)—e.g., patents, copyrights, trademarks, licenses, etc.—is terminated when the IP is repatriated to the United States (“U.S.”) under certain circumstances. Continue Reading Repatriate Intangible Property to the U.S. and Turn Off Section 367(d) Inclusions
Last week, the US Treasury released long-awaited proposed regulations on the corporate alternative minimum tax or “CAMT.” In a press release, Treasury estimated “that around 100 of the largest and most profitable companies will pay the CAMT annually.” According to Janet Yellen, the new rules will help combat “egregious U.S. corporate tax avoidance” that has led, in her view, to artificially low tax liabilities. Transfer pricing practitioners take note: one tool that Treasury plans to use in this effort to combat “abuse” is Section 482.Continue Reading When Worlds Collide: Transfer Pricing and the CAMT
The IRS has made it clear once again that transfer pricing remains a key focus in its ongoing enforcement efforts.[1] And with significant additional resources to do so over the next decade, the IRS is likely to focus some of these resources on taxpayers who have not undergone a transfer pricing audit in recent years or, perhaps, ever. For example, while the IRS is onboarding the many new transfer pricing experts it hired in 2023, it has sent compliance alerts to certain U.S. subsidiaries of foreign corporations that distribute goods in the U.S. where the IRS thinks that these subsidiaries are not paying their fair share of tax on the profit they earn on their U.S. activity.[2] Taxpayers would be wise to take this time to prepare for an audit by reviewing their material intercompany transactions and undertaking a transfer pricing risk assessment.Continue Reading Transfer Pricing Audits: What Taxpayers Can Do to Prepare
In a recent case, the IRS sued a corporate taxpayer in district court for supposedly unpaid taxes—without issuing a notice of deficiency first. The taxpayer claimed that this move was improper, but the district court sided with the IRS. In an opinion issued in June, the court held that the deficiency process is essentially optional for the IRS.Continue Reading Liberty Global and the Burden of Proof
Mayer Brown announced today that Sonal Majmudar, former international tax counsel with the Internal Revenue Service (IRS), joined its Tax practice as a partner. Sonal will be resident in the firm’s Washington DC office. Her arrival bolsters Mayer Brown’s market-leading, global tax offerings, particularly with regard to transfer pricing controversies and high-stakes international disputes.
As companies prepare for the 2023 SEC filing season, they should also be ready for the inevitable press attention on the effective tax rates of high profile multinationals. In a Client Alert last year, we predicted a recurrence of press focus on whether companies are paying their fair share of tax. Since that time, numerous articles have appeared in the general and financial press, Senator Wyden has continued his attack on the tax positions on major pharmaceutical companies and activist shareholders have been initiating proxy battles to force enhanced public tax reporting.
Regardless of whether a company decides to publicly respond, every company should be ready for press about its global tax position. The need for preparation is obvious, but preparation will take on added significance as companies gear up for mandatory public disclosure of their country-by-country reporting in Europe. In this blog post, we revisit our recommendations to help companies prepare.Continue Reading Preparing for Bad Press (Redux): Tax Transparency Update
On September 13, Treasury proposed new regulations relating to taxpayers’ rights to access the IRS Independent Office of Appeals (“Appeals”). Appeals was designed to resolve disputes with the IRS in a fair and impartial manner. Taxpayers secured the right to take certain disputes to Appeals following the Taxpayer First Act of 2019. However, the proposed regulations seek to limit when taxpayers can go to Appeals, and the types of issues that can be raised.
The proposed regulations identify 24 types of issues that will not trigger Appeals rights. The most notable issues include regulatory validity challenges, challenges to IRS notices or revenue procedures, and certain tax treaty questions. In addition to issuing proposed regulations, the IRS has also already updated the Internal Revenue Manual to reflect the limitation on Appeals’ jurisdiction to determine issues based solely on validity challenges to regulations or IRS notices or revenue procedures.Continue Reading Not So Independent?: New Proposed Rules Constrain IRS’s Independent Office of Appeals
At a recent conference, individuals from the U.S. Treasury were very explicit in their desire to receive comments on the Progress Report on Amount A of Pillar One, which was released by the OECD on July 11, 2022. Comments are due on August 19, 2022. The next public consultation is September 12, 2022.
The Progress Report represents the current state of progress on Amount A. While many issues have been agreed to and the debate has been narrowed for others, work remains to be done by the Inclusive Framework to reach a final agreement on how exactly Amount A will be effectuated. Continue Reading Report on the Progress Report on Amount A of Pillar One – Comments Very Much Wanted
In 2018, the IRS reminded exam teams to perform a “diligent penalty analysis” in every transfer pricing case. Since then, we have observed that the agency is increasingly willing to impose penalties, even where reasonable minds differ as to the appropriate transfer pricing. Penalties are often raised late (at the very end of an audit or even after the dispute is in court) and can create an extra liability of hundreds of millions—or billions—of dollars. For all these reasons, it is worth your time to brush up on how these penalties work, as well as what you can do to defend against them.Continue Reading Turning the Screw: Penalties in Transfer Pricing Disputes
In a recent Legal Update[1], we discussed the emerging intersection between Tax and ESG and highlighted the various external stakeholders pressuring for greater visibility into the global tax positions of multinational companies (MNEs). One increasingly vocal stakeholder group is activist shareholders. Recently, a group of institutional investors of a Fortune 50 company initiated a shareholder proposal calling for the company to publicly disclose where and how much tax it pays around the world. This is only the latest in what is becoming a regular request by activist shareholders.
Continue Reading Tax Meets ESG: Shareholder Activism Expanding to Tax Transparency