Posted tagged ‘congress’

International Tax Changes Take Flight

August 11, 2010

The House of Representatives passed, and the President signed into law, H.R. 1586, the “FAA Air Transportation Modernization and Safety Improvement Act,” which curiously became the chosen vehicle for Congress and the Administration to provide assistance to states with budget shortfalls while paying for that assistance with changes in a number of international tax provisions.  Text of the final bill is available here; pdf is here.  See here for our prior summary of the relevant international tax provisions.

Although the changes are largely similar to what was proposed in earlier legislation, it appears that Congress eliminated a number of earlier proposals from the final bill, including the limitation on distributions in leveraged spin-offs and the repeal of the “boot dividend” rule.  Of particular note, Congress eliminated the new sourcing rule that would have treated guarantee fees as U.S.-source income. Earlier this year, the Tax Court held that guarantee fees paid by a U.S. company to its Mexican parent were properly treated as non-U.S. source income and therefore not subject to U.S. withholding taxes.  Container Corp. v. Comm’r, 134 T.C. No. 5 (2010).  Our prior discussion of the Tax Court opinion is here, with additional commentary here.  It remains to be seen whether the removal of this provision reflects a permanent abandonment of the proposal or whether it will reappear in one of the several other legislative vehicles floating through Congress.

Certain Uncertainty: Congress Juggles Tax Proposals

August 4, 2010

By Jonathan Prokup

Although death and taxes might, according to Benjamin Franklin, be the only certainties in this world, Congress is surely striving to add another – that is, the certainty of uncertainty.  Congress, it seems, is committed to keeping taxpayers in as much doubt as possible for as long as possible about the status of a variety of important provisions that will affect both substantive tax liabilities and compliance obligations.

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The Extenders Bill Is Dead. Long Live The Extenders?

June 29, 2010

By Jonathan Prokup

Now that the tax extenders legislation has died, what’s next?  At least some of the provisions (e.g., the new tax regime for “carried interests”) are likely to find their way into future legislation.  But what about the tax extenders themselves, such as the look-through rule of section 954(c)(6) and the section 41 research credit?  Although many of the extensions involve tax expenditures (i.e., provisions that cost the Treasury money), they would almost certainly be offset by the bill’s revenue raisers, which were themselves styled as anti-abuse and loophole-closing provisions.  As a result, we probably have not seen the last of these measures.

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Reps. Waxman and Stupak: Beware IRC Sec. 6103?

April 1, 2010

By Jonathan Prokup

President Obama’s health-care legislation is becoming more of a tax issue on a daily basis.  In addition to the codification of economic substance (discussed here; see also yesterday’s TNT story featuring our own Phil Karter) contained in the reconciliation bill, the consequences of the legislation seem to be increasingly a matter of tax, rather than health-care, policy.

Of particular relevance here is the brewing confrontation between Reps. Waxman and Stupak and the companies who have announced substantial hits to their financial statements as a result of provisions in the health-care legislation. In response to these announcements, Reps. Waxman and Stupak have requested that companies provide documentation verifying their assessment of the impact of the legislation and have indicated an intention to hold a hearing to examine the impact of the new law on these companies.  (Presumably, the documentation provided by the companies will be a central basis for whatever questions are directed at the executives who appear at these hearings.)

Without taking a position about the politics of the matter, the dynamics of the request (and any responses to it) may implicate sensitive areas of tax policy and procedure. At this point, Reps. Waxman and Stupak have merely requested that the corporate taxpayers provide information about the impact of the health-care legislation. Suppose, though, that one or more companies decline to produce the requested information.  The perceived costs and benefits of the health-care legislation are likely to be key issues in the upcoming Congressional races this fall.  If the request is declined, and Congressional Democrats fear that their signature achievement is being negatively perceived, would subpoenas to the taxpayers, demanding that they produce the information, come next?

Assuming that scenario, would taxpayers then be obligated to provide the information being sought?  Perhaps more importantly, would Congress be authorized to use that information in a public hearing?

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