Hearing on International Tax Reform Scheduled for Tomorrow: The Senate Finance Committee will hold a full committee hearing on international tax reform tomorrow at 10 a.m. Witnesses include:

  • Bret WellsProfessor of Law and George Butler Research Professor of Law, Law CenterUniversity of Houston
  • Kimberly Clausing, Ph.D.Thormund A. Miller and Walter Mintz Professor of EconomicsReed College
  • Stephen E. ShaySenior Lecturer on Law, Harvard Law SchoolHarvard University
  • Itai GrinbergProfessor of LawGeorgetown University Law Center

Treasury, IRS to Amend Section 987 Regulations: Notice 2017-57 announces that Treasury and the IRS intend to amend the regulations under section 987, dealing with income and currency gain or loss with respect to a qualified business unit, to defer by one year the applicability date of the final regulations under section 987, as well as certain provisions of the temporary regulations under section 987. For taxpayers whose first taxable year after Dec. 7, 2016 began Jan. 1, 2017, the final and temporary rules will apply beginning Jan. 1, 2019. A taxpayer may choose to apply the final regulations and the related temporary regulations to taxable years beginning after Dec. 7, 2016, provided the taxpayer consistently applies those regulations.

Court Invalidates Temporary Anti-Inversion Rules: On September 29, the US District Court for the Western District of Texas held the temporary anti-inversion rules (T.D. 9761) released in 2016 were unlawfully issued, because they did not follow the Administrative Procedure Act’s notice and comment requirements. The court concluded Treas. Reg. § 1 .7874-8T was substantive or legislative, not interpretive; therefore Treasury and the IRS were not excused from the notice-and-comment procedure required by the Administrative Procedure Act.

Tax Court Finds Treaty Permits US to Tax Unemployment Income as ‘Other Income’: Today the Tax Court issued an opinion in Guo v. Commissioner, holding that the Convention Between the United States of America and Canada With Respect to Taxes on Income and on Capital (US-Canada Income Tax Treaty) permitted the United States to tax the taxpayer’s unemployment compensation. Guo, a Canadian citizen, applied for and received unemployment compensation from the state of Ohio in 2012 and treated the unemployment compensation as exempt from tax under article XV of the US-Canada Income Tax Treaty, which covers “Dependent Personal Services.” The Tax Court agreed with the IRS that article XV does not apply, because unemployment compensation is not “salaries, wages, or similar remuneration derived . . . in respect of an employment.” Instead, the Tax Court held that article XXII of the treaty (covering “Other Income”) governs the tax treatment of the unemployment compensation and permits the United States to tax it.

Tax Court Finds Taxpayer ‘Away From Home’ Under Section 162(a)(2): The Tax Court issued a memorandum opinion in Barrett v. Commissioner. The taxpayer resided in Las Vegas, Nevada at all material times and maintained rental properties in Las Vegas. He performed certain video production business services in Washington, DC for the American Israel Public Affairs Committee (AIPAC) and deducted travel, meals, and entertainment expenses related to such services on his 2011 through 2014 tax returns. The Tax Court found that because the taxpayer performed substantial services for AIPAC in Las Vegas, traveled to Washington, DC only to complete the production process, was required to be in DC only a few weeks at a time, and had other income-producing activities in the Las Vegas area, Las Vegas was the taxpayer’s tax home under section 162(a), and the expenses attributable to the travel to DC were deductible because they were incurred while the taxpayer was “away from home in the pursuit of a trade or business.” However, the taxpayer was not permitted to deduct any deductible expenses not previously allowed, because the taxpayer failed to substantiate the expenses as required under section 274(d).