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In Moore v. U.S., Mr. and Mrs. Moore challenge the constitutionality of the transition tax under § 965. The Moores ask the Supreme Court to reaffirm a realization requirement for income taxable under the Sixteenth Amendment. The Moores argue that this realization requirement applies to § 965 and that §965, as a tax on unrealized gain, is unconstitutional. In contrast, the government argues that the transition tax is a permissible extension of tax regimes like Subpart F that already tax undistributed corporate earnings. (See our recent client alert on the case generally.)

A ruling on the realization requirement bears on whether Pillar Two might be constitutional in the United States. Specifically, a ruling that § 965 does not comply with a realization requirement, if not suitably cabined, could imperil the ability of the U.S. to implement Pillar Two legally, because Pillar Two might be viewed as similarly not complying with the realization requirement.  

Continue Reading Moore and Pillar Two: Possible Interactions
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Today, the Supreme Court decided to hear a case that could have wide-ranging implications on US taxation of income earned abroad. The case challenges a key international provision in the Tax Cuts and Jobs Act: the Section 965 transition tax. The case has attracted attention (including multiple Wall Street Journal writeups) for its potential impact on Biden’s proposal to impose a wealth tax on high-income Americans. But the case is also of interest to the corporate tax community.

Continue Reading Moore Money, Moore Problems

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.

On April 25, 2023, the IRS’s Advance Pricing and Mutual Agreement (“APMA”) Program issued new interim guidance for its review of taxpayer Advance Pricing Agreement (“APA”) requests. Notably, the guidance introduces an “optional pre-submission review” for taxpayers that wish to submit a prefiling memorandum before submitting a formal APA request. Based on the pre-submission review, APMA will give a preliminary opinion whether it believes that an APA is well-suited to achieve tax certainty for the proposed covered transactions. The new interim guidance also instructs APMA personnel on how to review formal taxpayer APA requests for acceptance to the program, or whether to suggest an “alternative workstream” such as the International Compliance Assurance Program (“ICAP”)[1] or a joint audit. 

Continue Reading APMA’s New Interim APA Guidance

This week, the FASB issued an amendment to a previously proposed Accounting Standards Update that would, if approved, “enhance the transparency” of public companies’ reporting of income taxes paid. FASB Accounting Standards Update (ASU) No. 2023-ED100.  In doing so, FASB seems to make a baby step toward embracing CbC reporting for book purposes.

Continue Reading Transfer-parency Pricing: New FASB Proposal

On February 1, 2023, the OECD Forum on Tax Administration published its Manual on the Handling of Multilateral Mutual Agreement Procedures and Advance Pricing Arrangements. (“Multilateral MAP and APA Manual” or the “Manual”). The Multilateral MAP and APA Manual provides new guidance to both tax administrations and taxpayers on how both multilateral MAPs and APAs can be negotiated and implemented under existing bilateral tax treaties in circumstances where a double tax issue cannot be adequately resolved without involving one or more third jurisdictions. The Multilateral MAP and APA Manual is similar in some ways to the Bilateral Advance Pricing Arrangement Manual (“Bilateral APA Manual”) that the OECD published in September 2022, which was the subject of a prior blog post. However, whereas the Bilateral APA provided specific, detailed, best practices to tax administrations and taxpayers reflecting decades of experience within a well-established process, the Multilateral MAP and APA Manual aims to provide a more basic awareness of how multilateral MAPs and APAs can be negotiated and implemented in appropriate cases.

Continue Reading OECD’s New Multilateral MAP and APA Manual Adapts Bilateral Processes for a Multilateral World

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
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In November, the IRS Office of Chief Counsel issued a generic legal advice memorandum (“GLAM”) AM-2022-006, titled “Realistic Alternatives and Tax Considerations in the Application of Sections 482 and 367(d).” As the title suggests, the GLAM analyzes the realistic alternatives principle, which was codified in section 482 by the Tax Cuts and Jobs Act (Pub. L. No. 115-97).

The realistic alternatives principle, of course, is not new and has been part of the section 482 regulations since 1993. See Treas. Reg. § 1.482-1(d)(3)(iv); 58 Fed. Reg. 5253, 5266, 5275 (Jan. 21, 1993). But the realistic alternatives regulatory provisions were short on practical substantive guidance. Thus, the GLAM provides new insight into how the IRS currently thinks the realistic alternatives principle ought to be applied. In sum, the GLAM applies concepts from the corporate finance discounted cash flow (“DCF”) valuation method to make its realistic alternative comparisons.

Continue Reading GLAM’s Realistic Alternatives Analysis Adopts Corporate Valuation DCF Concepts

On September 28, 2022, the OECD published the Bilateral Advance Pricing Arrangement (“BAPA”) Manual. The manual proposes best practices for jurisdictions to streamline, expedite and improve BAPA processes based on member surveys. Most notably, the BAPA manual encourages jurisdictions to conclude BAPAs within 30 months and to work to further reduce completion times to 24 months or less.

Continue Reading Prepare for Warp Speed: New Goal to Conclude APAs is 24–30 Months
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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