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I. Introduction On May 7, 2024, the Treasury and Internal Revenue Service (IRS) released proposed regulations that would provide guidance regarding information reporting on transactions with foreign trusts, receipt of [...]

I. Introduction The Internal Revenue Code taxes U.S. persons on all of their worldwide income, from whatever source derived. (1) This creates a double taxation problem with respect to a [...]

The Tax Court ruled against a taxpayer's petition for the foreign earned income exclusion and foreign housing exclusion, holding that she had waived the right to each in a closing [...]

As discussed by Mike Schadewald in his article in this issue, "States that Permit Combined Reporting on a Worldwide Basis," when a unitary group is required to compute its tax [...]

The states that impose corporate income taxes employ a variety of tax reporting options for groups of commonly controlled corporations, including the filing of separate company tax returns, consolidated tax [...]

I. Introduction Over the past few decades, sports and entertainment have increasingly globalized, resulting in numerous foreign athletes and entertainers entering and performing in the United States. Many of these [...]

I. Introduction International tax disputes often create important guidance, some obvious, some not. Aroeste is a great example. (1) Those looking no further than the surface likely consider this case [...]

As 2023 was ending, the U.S. Department of Treasury and the Internal Revenue Service (IRS) released helpful guidance regarding foreign tax credits (FTCs). Notice 2023-80 extends relief provided in a [...]

U.S. and foreign taxpayers alike can choose to conduct cross-border business through a variety of business entities. A business entity may be organized either in the United States or in [...]

Reversing the Tax Court, the D.C. Circuit held that the IRS has the statutory authority to assess penalties under Sees. 6038(b)(1) and (2). Background In 2004, Alon Farhy, a U.S. [...]

By a vote of 95-2, the Senate on June 22, 2023, approved a resolution of advice and consent to the ratification of a tax treaty between the United States and [...]

Estates, Trusts & Gifts IRS signals it will challenge IDGT basis step-up at death The IRS recently published Rev. Rul. 2023-2, which publicly announced that the Service will be challenging [...]

In This Department CREDITS AGAINST TAX Credit for increasing research activities in a short tax year; p. 7. New advanced energy project tax credits under the Inflation Reduction Act; p. [...]

The U.S. federal income tax system generally subjects U.S. taxpayers to taxation of earnings from all sources, foreign and domestic. To prevent double taxation, a credit against U.S. federal income [...]

In This Department CORPORATIONS & SHAREHOLDERS 'Blocker' corporations: Considerations for investment fund managers; p. 7. Inflation Reduction Act implications for Sec. 355 distributions; p. 9. EXPENSES & DEDUCTIONS Defining software [...]

In business acquisitions, one of the key issues for negotiation between a purchaser and a seller is whether to structure the deal as a stock or an asset acquisition. For [...]

The economic challenges brought about by the COVID-19 pandemic prompted many businesses to rationalize their international structures with an emphasis on selling or otherwise disposing of underperforming foreign entities. Disposing [...]

Recently, a Magistrate Judge, in an evidentiary dispute in a federal district court (1) involving the imposition of penalties arising from the non-filing by the individual of FinCEN Forms 114, [...]

Treasury determined that taxpayers are required to allocate and apportion U.S. shareholder deductions (including those for interest expense) to global intangible low-taxed income ("GILTI") in 2019 when it issued final [...]

Gross Income Distribution from 401 (k) plan taxable to taxpayer with diabetes A taxpayer who had diabetes but was able to control it with insulin and other medication could not [...]

February 1, 2024 A multinational telecommunications company could not avoid recognizing gain on $2.8 billion of a $3.8 billion total gain from its sale of a Japanese controlled foreign corporation [...]

February 1, 2024 The foreign tax credit (FTC) rules stand out as one of the most dynamic and fluctuating areas in the evolution of international taxation in the last few [...]

Editors note: This article was written in mid-December 2022. It is expected that by the time of publication, the US Department of Treasury and the Internal Revenue Service may release [...]

I. Introduction The reports of deferral's death have been greatly exaggerated. It cannot be denied that the Tax Cuts and Jobs Act (the "TCJA") (1) made dramatic changes to the [...]

As readers are well aware, almost a year ago, on December 28, 2021, the Treasury Department issued final foreign tax credit regulations (hereafter the "final regulations") (1) finalizing the proposed [...]

For almost four decades, the foreign tax credit regulations have established a three-part net gain requirement for determining when a particular foreign levy is an income tax. Now, things have [...]

This article is the second part of Chapter 9, Controlled Foreign Corporations, from the authors' most recent edition of UNITED STATES INTERNATIONAL TAXATION: OUTBOUND AND INBOUND ACTIVITIES. [paragraph] 9.26 Global [...]

I. Introduction Prior to 1962, U.S. tax regime generally allowed multinational corporations to defer tax on the income earned by their foreign subsidiaries until the income was repatriated to the [...], There are several categories of income under the umbrella of Subpart F that is subject to U.S taxes in the year in which it is earned by a controlled foreign corporation ("CFC"). One of the categories is Foreign Base Company Sales Income ("FBCSI"). Code Sec. 954(d)(1) sets forth the general rule defining FBCSI and identifies four types of personal property transactions that a CFC derives FBCSI involving related persons outside the CFC's country of organization. Code Sec. 954(d)(2) provides a special branch rule that applies in situations where the carrying on of activities by a CFC through a branch outside the country of incorporation of the CFC has substantially the same tax effect as if such branch were a wholly owned subsidiary corporation deriving such income} The branch rule prevents a U.S. shareholder from avoiding Code Sec. 954(d)(1) by having its CFC conduct activity through a branch rather than a related person. Reg. [section]1.954-3 further defines FBCSI and provides exceptions where a CFC can exclude its sales income from FBCSI. The focus of this article is to discuss the purpose of Code Sec. 954(d)(1) and (d)(2) and Reg. [section]1.954-3 and examine how the courts applied these statutes and regulations in making judgment in Whirlpool Financial Corporation v. Commissioner (2) and analyze why this case is so controversial.

I. Introduction As many readers already know, on December 28, 2021, the Treasury Department and the Internal Revenue Service (the "IRS") issued final regulations relating to the allocation and apportionment [...]

The US Court of Appeals for the Sixth Circuit issued a majority opinion in Whirlpool Financial Corporation & Consolidated Subsidiaries v. Commissioner (1) that disregards the regulatory manufacturing exception to [...]

Table of Contents Introduction I. International Taxation in the Twenty-First-Century Economy A. Structure and Principles of International Taxation--Source and Residence B. The Failings of International Tax Law in the Modern [...], Digitalization has reshaped the relationship between companies and their customers and users. Customers and users increasingly serve a dual role. They are not only consumers but also producers, creating data and content. They are a value-creating workforce, functioning as "digital laborers." Digital laborers' value creation highlights that there are two parts to the question of whether multinational companies are paying their "fair share" of taxes--one of amount and one of location. First, are companies' total tax bills paid across all countries in line with their global income? Second, is taxing authority over multinational companies' income being divided amongst countries in a coherent and fair way? Digital laborers' value creation implicates the second. Under the current international tax system, the presence of digital laborers in a country does not grant that country taxing rights over income stemming directly from those digital laborers' data and content creation. As a result, what are essentially the same activities-individuals creating products and performing services for a company-are taxed differently when they are performed by digital laborers rather than by a traditional workforce. This inconsistency and the accompanying outcome that countries cannot tax corporate income arising from extensive business activities within their borders have contributed to cries that the current system is unfair. Recent reforms addressing this outcome share a common weakness. They do not recognize the function of digital laborers as producers in the modern economy. As a result, they overturn the theory of source-based taxation as a taxing right granted only to the country of production and introduce major structural changes to the international tax system that apply only to a subset of global companies. These changes are all to correct an unfairness that can be remedied under the system's current theoretical framework and structure. This Article rejects the notion that these major theoretical and structural changes are necessary or even appropriate methods to allow digital laborers' home countries to tax income directly related to their data and content creation. Instead, the international tax system should recognize digital laborers' role as a new type of workforce for companies and, accordingly, allow their home countries to tax income related to their work under the existing application of the source principle and with more incremental structural reforms. In addition to minimizing disruption in international tax law, this approach reinforces coherence and fairness by taxing equivalent economic activities equivalently.

In 2004, Congress enacted Code Sec. 7874 as part of the American Jobs Creation Act. Code Sec. 7874 was a response to a wave of corporate inversion transactions in the [...]

The definition of "pro rata share" in Section 951(a)(2) is fundamental to the subpart F regime. That regime, of course, dates to the John F. Kennedy administration.1 Most words in [...]

Code Sec. 267A generally disallows deductions for hybrid interest and royalty payments that are not included in the income of the recipient, which generally increases U.S. taxable income by the [...]

I. Introduction Kicking somebody when they are down is one thing, but kicking them repeatedly is another. Several recent cases demonstrate that the U.S. Internal Revenue Service ("IRS") is doing [...]

In our December 2018 (1) column, we provided an overview of the FBAR reporting requirements and related penalties and highlighted a number of cases on FBAR "willful failure" penalties that [...]

Table of Contents [paragraph]4.01 Introduction [paragraph]4.02 Background of DISCs [paragraph]4.03 DISC Qualification Requirements--Generally [paragraph]4.04 Gross Receipts Requirement for DISCs [paragraph]4.05 Assets Requirement for DISCs [paragraph]4.06 Deficiency Distribution to Meet DISC [...]

Since the enactment of the law known as the Tax Cuts and Jobs Act (TCJA) at the end of 2017, (1) the TCJA's tax reform provisions have been subject to [...]

Although there are still many good reasons for U.S. multinational companies to maintain their current structures in low-tax jurisdictions outside the United States, (1) many companies are contemplating bringing lower-tier [...]

Congress created the Global Intangible Low-Taxed Income ("GILTI") regime in the 2017 Tax Cuts and Jobs Act as a new anti-deferral regime. The legislative intent of Congress was two-fold: (1) [...]

I. Introduction Many people have grown weary of cases focused on penalties for failing to declare foreign accounts on FinCEN Form 114 ("FBAR"), which is understandable given all the attention [...]

Table of Contents I. Introduction: Changes to the Foreign Tax Credit System, 341 and Interaction with the Changes Made to Other International Tax Rules II. New Foreign Tax Credit Rules [...], The recent Tax Cuts and Jobs Act (TCJA) enacted massive changes to the U.S. tax system's international tax rules, including changes to the U.S. foreign tax credit. (Foreign tax credits reduce U.S. tax by the amount of the U.S. taxpayer's foreign taxes, subject to many requirements.) Among other changes, the TCJA added a new type of foreign tax credit for U.S. shareholders who suffer GILTI (global intangible low-taxed income) inclusions. In addition, the TCJA reduced the foreign tax credits available in some circumstances, to coordinate with new international tax provisions. Such new provisions include a one-time deemed repatriation of certain foreign subsidiaries' earnings, a 100 percent deduction for dividends received from certain foreign subsidiaries, and the BEAT (base erosion and anti-abuse tax). This Article discusses the impact of the GILTI-related foreign tax credit rules and the coordination of other new international provisions with the existing foreign tax credit system. The Article argues that the GILTI-related foreign tax credit is more generous than accuracy (exact reduction of double taxation) would demand. The TCJA's coordination of other new rules with the foreign tax credit system also tends to be more taxpayer favorable than mere fairness would require, with some notable exceptions. The interaction of the foreign tax credit with the new international tax provisions also creates some surprising effects and incentives.

I. Introduction The Tax Cuts and Jobs Act ("TCJA") (1) enacted the "foreign-derived intangible income" ("FDII") regime and the "global intangible low-taxed income" ("GILTI") regime. Both regimes were intended to [...]

The law known as the Tax Cuts and Jobs Act of 2017 (TCJA) (1) made many significant changes to the international tax regime. One important change is Sec. 250, which [...]

On May 6, TEI submitted comments to the Internal Revenue Service and U.S. Department of the Treasury regarding proposed regulations on the new section 250 deductions for foreign-derived intangible income [...]

Introduction As international tax practitioners get their bearings post-TCJA, disregarded transactions are emerging as a problem of fresh significance for U.S. multinational companies. (1) In the pre-reform world, payments between [...]

As part of the comprehensive tax reform implemented through the Tax Cuts and Jobs Act of 2017 (the "TCJA"), (1) Congress enacted Code Sec. 245A in order to establish an [...]