IRS Releases Proposed Regulations on Section 965 Transition Tax: Today, the IRS and Treasury issued proposed regulations on section 965, enacted by P.L. 115-97 in December 2017. Section 965 levies a transition tax on post-1986 untaxed foreign earnings of specified foreign corporations owned by United States shareholders by deeming those earnings to be repatriated. For domestic corporations, foreign earnings held in the form of cash and cash equivalents are generally intended to be taxed at a 15.5 percent rate for 2017 calendar years, and the remaining earnings are intended to be taxed at an 8 percent rate for 2017 calendar years. The proposed regulations affect United States shareholders, as defined in section 951(b), with direct or indirect ownership in certain foreign corporations, as defined under section 965(e). The lower effective tax rates applicable to section 965 income inclusions are achieved by way of a participation deduction set out in section 965(c). A reduced foreign tax credit also applies with respect to the inclusion under section 965(g).
Taxpayers may generally elect to pay the transition tax in installments over an eight-year period under section 965(h). The proposed regulations contain detailed information on the calculation and reporting of a United States shareholder’s section 965(a) inclusion amount, as well as information for making the elections available to taxpayers under section 965. For additional information on issues affecting private foundations, click here.
Senate Finance Committee Approves Treasury Nominees; Democrats Oppose Muzinich: Today, the Senate Finance Committee approved Michael Desmond’s nomination to be Chief Counsel for the IRS and an Assistant General Counsel in the US Department of Treasury (Treasury) with a vote of 25 to 2. In a vote along party lines of 14 to 13, the committee approved the nomination of Justin Muzinich, nominee for Deputy Secretary of the Treasury.
Ranking Member Sen. Rob Wyden (D-OR) released a statement indicating his concern that Muzinich had been involved in Treasury discussions to reduce taxes on capital gains by indexing capital gains to inflation, which Sen. Wyden criticized as “a $100 billion giveaway to the wealthy.” Sen. Wyden further stated that if Muzinich’s nomination is reported out of committee, he plans to place a hold on its debate on the floor until Treasury quits “stonewalling” the oversight requests of Democrat committee members.
Guidance on Short-Term, Limited Duration Insurance Released: Treasury, together with the US Department of Labor and the US Department of Health and Human Services, issued final rules amending the definition of short-term, limited-duration insurance for purposes of its exclusion from the definition of “individual health insurance coverage” in 26 C.F.R. part 54, 29 C.F.R. part 2590, and 45 C.F.R. part 144. This action is being taken to lengthen the maximum duration of short-term, limited-duration insurance, which will provide more affordable consumer choices for health coverage.
IRS Releases Final Regulations on Extensions of Time to File Information Returns: The IRS and Treasury have issued final regulations providing rules regarding the automatic and non-automatic extension of time to file certain information returns. Specifically, the final regulations remove the automatic extension of time to file the Form W-2 series (except Form W-2G) and forms reporting nonemployee compensation (currently Form 1099-MISC with information in box 7). These changes were made so that such information returns are available earlier in the filing season for use in the IRS’s identity theft and refund fraud detection processes. The IRS continues to study the appropriateness of the automatic extension for other information returns.
OECD Blockchain Policy Forum Will Be Held Sept. 4-5: The Organisation for Economic Co-operation and Development (OECD) Blockchain Conference will be held on September 4 through 5 in Paris. The Conference will provide a forum for a discussion on the benefits and risks of blockchain and on the policy and regulatory frameworks needed to unleash the potential of blockchain. A draft agenda for the event indicates that, among other things, participants will focus on blockchain tax policy, and fighting tax crime and improving tax administration.