Section 956 Archives - TAX CONTROVERSY 360

International Tax Journal: Code Sec. 956 Proposed Regs

by Lowell D. Yoder | Mar 8, 2019 | IRS Guidance, Uncategorized

Code Sec. 951(a)(1)(B) requires a US shareholder of a controlled foreign corporation (CFC) to include in its gross income “the amount determined under section 956 with respect to such shareholder for such year….” This amount generally is the shareholder’s pro rata share of the average of the amounts of US property held by the CFC as of the close of each quarter. The amount of the inclusion is reduced by the amount of the CFC’s previously taxed income, and limited by its earnings and profits.

Proposed Code Sec. 956 regulations generally would eliminate this Subpart F inclusion rule for corporate US shareholders, although not in all cases. In those cases where a CFC’s earnings are subject to taxation under Code Sec. 951(a)(1)(B), proposed foreign tax credit regulations would deny deemed paid foreign tax credits for foreign income taxes paid on the CFC’s earnings that are subject to taxation.

Read more.

Originally published in International Tax Journal, January-February 2019.

Proposed Regulations under Section 956 Provide Benefits for Corporate Taxpayers

by Bradford E. LaBonte, Lowell D. Yoder and Timothy S. Shuman | Nov 20, 2018 | IRS Guidance, Tax Reform, Uncategorized

On October 31, 2018, the Internal Revenue Service (IRS) and US Department of the Treasury (Treasury) released proposed regulations (REG-114540-18) (the Proposed Regulations) that would prevent, in many cases, income inclusions for corporate US shareholders of controlled foreign corporations (CFCs) under section 956. As a result, among other considerations, the Proposed Regulations could significantly expand the ability of corporate US affiliates to benefit from credit support of CFCs.

Read the full article.

Tax Takes Video: Changes to Interest Deduction

by McDermott Will & Emery and John T. Lutz | Dec 19, 2017 | Tax Reform, Uncategorized

The Senate and House bills include provisions that place limitations on interest deductions for corporations. McDermott Tax partners Alexander Lee and John Lutz discuss several implications for US and US-based multinational corporations, including companies that will be adversely affected by the changes, debt limitations and tax efficiencies of offshore debt, and the changes in lending and collateral packages under the repeal of Section 956.

Tax Reform Conference Committee Reaches Agreement

by McDermott Will & Emery, David G. Noren, Lowell D. Yoder, Sandra P. McGill and Timothy S. Shuman | Dec 18, 2017 | IRS Guidance, Tax Reform, Uncategorized

A House-Senate conference committee has reached agreement on a compromise version of the Tax Cuts and Jobs Act, which includes substantial changes to the corporate and international business taxation rules. The stage now appears to be set for final passage and enactment of the legislation before the end of 2017.

Final §385 Regulations Apply to CFC Loans to Domestic Corporations

by Lowell D. Yoder | Mar 3, 2017 | IRS Guidance, Tax Refunds, Uncategorized

The Treasury and IRS recently issued final regulations under §385 that reclassify certain indebtedness as equity. While the final regulations have limited application to U.S.-based multinationals, they do apply to obligations of domestic corporations to related controlled foreign corporations (‘‘CFCs’’). It is critical to avoid such debt being reclassified as stock under the regulations because of the significant adverse U.S. tax consequences.

Originally published in Bloomberg BNA Tax Management International Journal, February 10, 2017.

IRS Updates List of Items Requiring National Office Review

by McDermott Will & Emery and Jeffrey M. Glassman | Jul 7, 2016 | Court Procedure Matters, IRS Appeals, IRS Audits, IRS Guidance, Transfer Pricing Resource, Uncategorized

On June 30, 2016, the Internal Revenue Service (IRS) issued Chief Counsel Notice 2016-009, which can be found here. In the notice, the IRS updated the list of issues that require IRS National Office review (the List). The List indicates those issues or matters raised by IRS field examiners that must be coordinated with the appropriate IRS Associate office.

There are several new items on the List. Notably, corporate formations with repatriation transactions, certain spin-off transactions and transactions that may implicate Treasury Regulation § 1.701-2 partnership anti-abuse rules are now also included. Debt-equity issues pursuant to Section 385 continue to be on the List.

In addition, now included are issues designated for litigation and issues that for technical tax reasons will not be referred to the IRS Office of Appeals under Revenue Procedure 2016-22, Section 3.03 (also relating to issues designated for litigation). We discussed Revenue Procedure 2016-22 in a recent posting. (more…)

Report on Temporary Regulations Addressing Notional Principal Contracts With Nonperiodic Payments

by McDermott Will & Emery and rshankar | May 31, 2016 | IRS Guidance, Uncategorized

McDermott partner John T. Lutz and associate Chelsea E. Hess were the principal authors of a recent report for the New York State Bar Association Tax Section, “Report on Temporary Regulations Addressing Notional Principal Contracts With Nonperiodic Payments.” The report comments on the temporary and proposed regulations published on May 8, 2015, relating to the treatment of nonperiodic payments made or received pursuant to notional principal contracts (NPCs).

Read the report.