tax dispute resolution quarterly · 2020. 2. 27. · by katie leblanc, joyce liu, and ashby corum,...
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© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 672357
ContentsLB&I campaigns
IRS launches compliance campaigns for large corporate exams
IRS practice and procedure
Moving pieces at the IRS
Maximizing the domestic production deduction: Asset sales of trades or businesses
Accounting for income taxes implications of section 987 regs
New fractions rule regulations: A step in the right direction
Enforcement trends
New FBAR due date, but reporting rules remain in place
Physician member of surgery center has passive income, no SECA
© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 672357
Global tax disputes
Resolving U.S. and Canadian double-tax cases
2017 U.S. transfer pricing documentation deadline affected by new IRS rules
Global Tax Disputes Update Quarterly March 2017
Income tax implications of ‘Brexit’
OECD & BEPS
Treaty benefits for investment vehicles in post-BEPS world
BEPS Action 13: Latest country implementation update
UK: Transfer pricing dispute resolution, new BEPS recommendation remedies
State & local tax
The collateral constitutional damage of killing Quill
State, local tax changes for first quarter 2017
2017 Corporate income tax trends
Copy-CATs: Commercial activity taxes proposed in three states
By Timothy McCormally and Lawrence Mack, Washington National Tax
The IRS has been forced to implement fundamental changes in how the agency’s Large Business & International (LB&I) Division is organized and identifies issues and taxpayers for its enforcement efforts. LB&I’s new structure is part of an IRS-wide ‘‘Future State’’ initiative that, beginning in 2014, charged each operating division with reconciling its ‘‘concept of operation’’ with both budget reality and the IRS’s vision of what it should look like in five years and beyond. In late 2015, LB&I became the first division to announce its new design, and the organizational structure became preliminarily effective in early February 2016. Although LB&I explained that its new structure was intended to reflect a new approach to enforcement—an ‘‘issues-based’’ approach—a major element of this reformation remained in development until earlier this year when LB&I released the first tranche of “compliance campaigns” to address issues affecting the country’s large and middle-market companies.
This article in the April 13 issue of Bloomberg BNA’s Daily Tax Report reviews the thinking behind LB&I’s new risk assessment and issue selection methodology and discusses several open questions about LB&I’s new process, critical transition issues, and what lies ahead for LB&I and the affected business taxpayers.
‘Needs must’: IRS launches compliance campaigns for large corporate exams
LB&I campaignsLarge Business and International campaign web seriesTo publicize and explain its new approach to corporate and individual examinations using compliance campaigns, the IRS Large Business & International (LB&I) division announced at the end of February that it would sponsor a series of webinars.
— KPMG LLP hosted the first webinar on March 7, during which LB&I’s Tina Meaux, assistant deputy commissioner, Compliance Integration, Kathy Robbins, director of the Enterprise Activities Practice area, along with KPMG’s Sharon Katz-Pearlman and Mike Dolan, talked about the new approach, how the campaigns will operate, and what a corporate taxpayer should expect.
— On March 28, Ernst & Young hosted LB&I’s Tina Meaux and Kathy Robbins to talk about the campaign process.
— Deloitte hosted the third in the series on April 20. LB&I’s Gloria Sullivan, director of Financial Institutions and Products in the Enterprise Activities Practice Area; and Barbara Harris, director of the Northeastern Compliance Practice Area, joined Kathy Robbins to discuss the Deferred Variable Annuity, Micro Captive Insurance, and Basket Transactions campaigns.
— The April 26 webinar, hosted by PwC, focused on S corporation losses and TEFRA linkage plan strategy, with LB&I’s Holly Paz, director of the Pass Through Entities (PTE) Practice Area; Cliff Scherwinski, deputy director of PTE; and Kimberly Edwards, director of the Western Compliance Practice Area.
© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 672357
IRS practice and procedure
© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 672357
By James Atkinson and Caitlin Siedlecki, Washington National Tax, and Patrick Heath, Accounting Methods and Credit Services
The transfer of a trade or business through an asset sale usually encompasses a wide range of property—tangible personal property, inventory on-hand, software, buildings, and a broad collection of other real and personal property. This January 2017 article explains why diligent review of the catalog of assets being conveyed in an asset sale (or a deemed asset sale) might reveal tax benefits in the form of the domestic production deduction.
Maximizing the domestic production deduction: Asset sales of trades or businesses
Moving pieces at the IRS
There are a number of moving pieces that are affecting the IRS. One major piece is the speculation and anticipation that tax reform may come early in the new administration. In addition to coping with the normal range of work that falls to the IRS when it is called upon to implement any significant change in the law, the IRS may be radically redefined by the GOP-developed “A Better Way” plan.
Mike Dolan’s “IRS Watch” column in the December 2016–January 2017 issue of the Journal of Tax Practice and Procedure highlights other pieces in flux, including personnel changes, the Large Business & International division’s campaign launch, and new procedures in IRS Appeals.
By Mike Dolan, Washington National Tax
© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 672357
Accounting for income taxes implications of section 987 regsBy Katie LeBlanc, Joyce Liu, and Ashby Corum, Washington National Tax
A January 2017 report explains why section 987 regulations issued in December 2016 can significantly change how a company measures the taxable income of a foreign branch with a functional currency different from its owner. The regulations generally are not effective until 2018 for calendar year taxpayers; however, for financial reporting purposes the issuance of the regulations should be viewed as a change in tax law with the effect recognized on December 7, 2016. Companies should assess and recognize the potential impact of the regulations in financial statements for the reporting period that includes the December 7, 2016, issuance date.
By James Sowell, Washington National Tax
Regulations proposed in November 2016 attempt to address issues raised in a 2010 comment letter from the American Bar Association Tax Section about applying the “fractions rule” under section 514(c) (9)(E) to commercial arrangements and transactions common in the investment fund industry. Treasury and the IRS intend the new rules to be taxpayer favorable by providing greater flexibility in applying the fractions rule. An article in the March 6, 2017, issue of Tax Notes argues that while proposed regulations represent a significant improvement to the current regulations, Treasury and the IRS should consider making those rules even more flexible.
New fractions rule regulations: A step in the right direction
© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 672357
Enforcement trends
© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 672357
New FBAR due date, but reporting rules remain in place By Steven Friedman and Timothy McCormally, Washington National Tax
It has been more than a year since the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued proposed changes to the rules for annually reporting foreign financial accounts on FinCEN Form 114, Report of Foreign Bank and Financial Accounts, (FBAR) and more than 18 months since Congress aligned the FBAR filing deadline with the deadline for filing individual income tax returns. The combination of the statutory change and regulatory amendments (if finalized) will transform the landscape for FBAR reporting, easing reporting requirements for some filers but imposing additional burdens on others. Because the penalties for noncompliance with the FBAR rules can be staggering—up to 100 percent of the highest amount held in the pertinent foreign financial accounts for willful failures—it is critical that owners of foreign financial accounts and individuals holding signatory authority over these accounts remain current on the FBAR rules.
This February article alerts taxpayers to the new filing deadline for calendar year 2016 FBAR reports, current limited exceptions to the annual filing requirements, the possible relief from penalties for previous failures to file, and the scope and current status of proposed changes for future FBAR filings.
© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 672357
Physician member of surgery center has passive income, no SECA By Deborah Fields, Karen Field, Paul Kugler, and Jeanne Sullivan, Washington National Tax
This February 2017 KPMG report examines Hardy v. Commissioner, a memorandum opinion of the Tax Court with potentially significant implications. The opinion, filed January 17, 2017, deals with a fairly common arrangement in which physicians have both a medical practice and an ownership interest in a separate medical facility. In this case, the taxpayer was a plastic surgeon who held a membership interest in a surgical center limited liability company (LLC) treated as a partnership for U.S. federal income tax purposes. The Tax Court held that the physician could treat his interest in the surgery center LLC as separate from his medical practice. Hence, his distributive share of income from the LLC was passive income for purposes of section 4692 and not subject to tax under the Self-Employment Contributions Act (SECA) because he was properly classified as an investor in the LLC.
© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 672357
State & local tax
© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 672357
The collateral constitutional damage of killing Quill
State, local tax changes for first quarter 2017
By Shirley Sicilian, Washington National Tax
Three states have now adopted rules—new statutes or new regulations based on existing statutes—expressly declining to follow U.S. Supreme Court precedent in Quill—a case in which the high court refused to allow a state to overrule an earlier U.S. Supreme Court case. At least 10 more states have similar laws under consideration in their legislature. State tax is not civil rights, and no one is suggesting that our federal government has any desire or need to step in and somehow enforce the U.S. Supreme Court’s decision in Quill. But the point is, these are decisions generally made at the federal level, and the question of whether state dissatisfaction with the federal rule justifies contrary state action is a weighty one. An article in the May issue of the Journal of Multistate Taxation and Incentives explores some of the ramifications of the states’ approach to challenging Quill.
This March 2017 KPMG report by KPMG’s State and Local Tax practice summarizes state and local tax developments for the first quarter of 2017 in table format.
© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 672357
2017 Corporate income tax trends
Copy-CATs: Commercial activity taxes proposed in three states
Every year, hundreds of bills are introduced in state legislatures that, if enacted, would significantly affect the state tax landscape for business taxpayers. Some of these bills are perennials (i.e., they pop up year after year); others reflect current policy considerations or the state’s fiscal condition. With 2017 legislative sessions around the country well underway, this March 2017 issue of TWIST-Q, a publication of the State and Local Tax group in KPMG LLP’s Washington National Tax practice, reviews some of the legislative proposals that would affect a wide range of businesses.
By Sarah McGahan, Washington National Tax
A brief report in the March 16 issue of Bloomberg BNA’s Daily Tax Report: State discusses the proliferation of draft commercial activity tax legislation modeled after Ohio’s, enacted more than 10 years ago. Three such bills have been introduced this session, though it’s unclear if they will join the small list of states that have followed Ohio’s lead.
Unclaimed property: Multistate compliance changes and reform effortsSweeping unclaimed property legislation passed in Delaware in early February and other proposed legislation in several states incorporating aspects of the 2016 Revised Uniform Unclaimed Property Act include modifications to state due diligence requirements, eligibility criteria, and enforcement practices.
Watch the one-hour March 29 webcast hosted by KPMG LLP’s National Unclaimed Property practice to learn more about the proposed and adopted legislative changes and how the changes will affect compliance obligations of companies in all industries.
© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 672357
Global tax disputes
© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 672357
Resolving U.S. and Canadian double-tax cases
2017 U.S. transfer pricing documentation deadline affected by new IRS rules
By Sean Foley, François Vincent, Steven Wrappe, Cameron Taheri, David Francescucci, and Anne Curry, Global Tax Pricing Services
This April 6, 2017, article in the Bloomberg BNA Transfer Pricing Report examines practice and guidance in the U.S. and Canadian government offices tasked with resolving double-tax disputes, detailing in particular how the process has evolved since the 1990s.
By Sean Foley, Harve Lewis, and Bob Clair, Washington National Tax
U.S. transfer pricing documentation may provide penalty protection if it is prepared contemporaneously with the filing of a U.S. income tax return—Form 1120, U.S. Corporation Income Tax Return, for C corporations. The deadlines for filing Form 1120 is changing this year for many C corporations. This KPMG April 2017 article alerts C corporations to consider when to file transfer pricing documentation to secure the pertinent penalty protection in light of the new deadlines.
© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 672357
Webcast: Global VAT challenges in digital economy An increasing number of jurisdictions are implementing rules aimed at cross-border sales of services, especially digital services, to ensure that VAT/GST is collected in the country of consumption. As a consequence, these jurisdictions require that non-resident vendors register for VAT locally and collect tax on business-to-consumer and, sometimes, on business-to-business sales of services and intangibles. In addition, some jurisdictions are now looking at imposing similar VAT obligations on remote retail sales of tangible personal property, creating a new set of challenges for online retailers and freight forwarders.
Watch a replay of this March 8 webcast that reviews the VAT/GST obligations applicable to cross-border sales of goods and services and provides insight into potential new VAT/GST obligations affecting online retail.
Responsible tax is everyone’s businessAs the world becomes more interconnected, discussion about who pays tax, both how and when, is likely to intensify. This is not easy terrain to navigate.
KPMG’s Global Responsible Tax Project seeks to provide a forum for all stakeholders across the world to have an open, honest debate about the key issues that are affecting and shaping globalization and taxation.
Global Tax Disputes Update Quarterly March 2017
Income tax implications of ‘Brexit’
With tax audit and dispute activity rising in almost every country, keeping up with trends and developments is more important than ever. This latest edition of the Global Tax Disputes Update offers you updates on key news, events, and thought leadership by Global Tax Dispute Resolution & Controversy professionals in KPMG member firms worldwide. Keeping you informed can be a crucial first line of defense in managing disputes around the globe.
What are U.S. GAAP income tax accounting implications of the United Kingdom’s notice that it will leave the European Union?
Read a March 2017 KPMG report explaining why companies need to provide clear and transparent disclosures about the withdrawal process and its potential effects.
© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 672357
OECD & BEPS
© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 672357
Treaty benefits for investment vehicles in post-BEPS world
BEPS Action 13: Latest country implementation update
UK: Transfer pricing dispute resolution, new BEPS recommendation remedies
By Michael H. Plowgian, Christopher A. Riccardi, Washington National Tax, and Martin L. Mueller, Jr., International Tax
Treaty policy traditionally has focused on preventing double taxation of income from cross-border investments and business. Recently, governments have increasingly focused on also guarding against opportunities for double non-taxation, treaty shopping, or deferral of income. An article in the March 2017 edition of TAXES, The Tax Magazine outlines the challenges to these policies posed by collective investment vehicles, defined to include not just mutual funds but also private equity funds, other alternative funds, and pension funds.
Updated weekly, this summary report in table format offers a snapshot of implementation of country-by-country (CbC) reporting and Master file / Local file documentation requirements around the world.
An April 10, 2017, KPMG report looks at BEPS Action 14 (making dispute resolution mechanisms more effective) and associated developments in transfer pricing.
© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 672357
© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 672357
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© 2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 672357