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WEEKEND INSIGHTS: Accidental Tax Residency and OECD Comments

Oct. 25, 2020, 2:01 PM

This is a weekend roundup of Bloomberg Tax Insights, written by practitioners and featuring expert analysis on current issues in tax practice and policy. The articles featured here represent just a handful of the many Insights published each week. For a full archive of articles, browse by jurisdiction at Daily Tax Report, Daily Tax Report: State, Daily Tax Report: International, and Financial Accounting.

This week we look at inadvertently becoming a tax resident of a foreign country or a neighboring state, the need for businesses to make themselves heard at the OECD, and how the Cayman Islands got off the EU blacklist. We’ll hear from:

  • Lee Allison, Kat Saunders Gregor, and Andrew Yarrows of Ropes & Gray on tax residency rules in five northeastern states
  • Katelynn Minott of Bright!Tax on what U.S. citizens stuck abroad need to know about state, federal, and foreign tax requirements
  • Jeff VanderWolk of Squire Patton Boggs on why businesses need to provide both written and oral comments on the OECD’s proposed rules
  • Allison Nolan of Athena International Management on the EU removing Cayman Islands from its tax blacklist
  • Thierry Viu of CMS Francis Lefebvre Avocats on negotiating with the French tax authorities
  • Akash Tayal and Jennifer Deutsch of Deloitte on how the cloud will improve the tax function
  • Rahim Walji of CrossBorder Solutions on taking advantage of R&D tax credits
  • Andy Spencer of of Sovos Accordance on postponed import VAT accounting rules in the U.K.’s key trading partners
The Brant Point Lighthouse in Nantucket, Mass. Some people relocated to traditional tourist destinations to escape pandemic restrictions.
Photographer: Maddie Meyer/Getty Images

Many Americans relocated to different states as Covid-19 pandemic restrictions intensified. That relocation may have lasted much longer than they anticipated and may have resulted in the unintended establishment of residency in another state. Lee Allison, Kat Saunders Gregor, and Andrew Yarrows of Ropes & Gray explore several northeastern states’ tax residency requirements and the potential for taxation by multiple states, in part one of a two-part article. Read: When Down the Hall Becomes Across State Lines—Part 1. The authors look at common fact patterns and the impact of certain variables that may affect outcomes in Part 2. Read: When Down the Hall Becomes Across State Lines—Part 2

Millions of Americans have been forced to work remotely this year due to Covid-19, but what do people stranded abroad need to know about filing U.S. taxes from overseas? U.S. expat tax specialist Katelynn Minott of Bright!Tax explains what those displaced Americans should keep in mind when filing their U.S. tax returns. Read: What U.S. Employees Stranded Abroad Need to Know About Filing U.S. Taxes

The OECD’s Inclusive Framework on BEPS will pursue its work plan on the tax challenges of digitalization until at least the middle of 2021. The cost of simply determining how the proposed rules would apply to a multinational group’s business could be substantial, writes Jeff VanderWolk of Squire Patton Boggs. Dec. 14 is the deadline for written comment. The author says it would be prudent for businesses to take advantage of the opportunity for making written comments now and to speak at the scheduled January meeting. Read: OECD Digitalization Project: Now Is the Time for Business to Engage

The Cayman Islands were added to the EU’s “Annex 1” list in February of this year. The list names jurisdictions deemed as non- or partly compliant with international tax standards. Allison Nolan of Athena International Management explains how Cayman has been removed from the list and affirmed by the EU as a cooperative jurisdiction for tax purposes and implements the highest of regulatory standards. Read: Cayman Islands EU’s Blacklist Removal Highlights Cooperation

Thierry Viu of CMS Francis Lefebvre Avocats looks at the negotiation tools available to taxpayers wishing to reach an agreement with the French tax authorities in a tax audit. Read: How to Negotiate a Tax Adjustment in France

The tax function of organizations will be transformed as application portfolios are moved to the cloud. Akash Tayal and Jennifer Deutsch of Deloitte explain how it will make the tax function more efficient, and how to control costs and fund the transition. Read: Transforming the Tax Function With Cloud: A Life Event With Long-Term Benefits

The research and development tax credit can provide a much needed cash boost while creating future value. Rahim Walji of CrossBorder Solutions tells how qualifying for the credit has become less stringent and what smaller businesses can do to claim the credit. Read: In Times of Economic Uncertainty, R&D Tax Credits Provide Much Needed Cash Boost

Andy Spencer of Sovos Accordance discusses postponed VAT accounting rules and considers why they are important for U.K. businesses that send goods to European Union member states. Read: Postponed Import VAT Accounting Rules in the U.K.’s Key Trading Partners

Corporate Tax Chat With Betty Lee Marcelino of Anheuser-Busch

Betty Lee Marcelino, vice president for tax at Anheuser-Busch, spoke with Bloomberg Tax about making it in the world of tax, adapting to the disruption of the pandemic, and broad issues in the field. Before joining Anheuser-Busch, a unit of the world’s largest brewer, AB Inbev, Marcelino served in similar roles at A.P. Moller-Maersk and Dow Jones. She studied business and accounting at the College of New Jersey and New York University’s Stern School, and started her career with Deloitte. Read: Corporate Tax Chat With Betty Lee Marcelino of Anheuser-Busch

From the Archive

Bloomberg Tax contributors were thinking about the implications of working remotely from the beginning of the shutdown.

Many states have issued guidance on payroll tax withholding as employees find themselves teleworking from outside of their usual states of employment. Jason Rosenberg and Adam Caputo of Withum outlined recent guidance and looked at the potential effect on other state taxes.

The OECD issued guidance in April to clarify that employees temporarily working outside of their employer’s home country wouldn’t trigger new income tax obligations. Venable attorneys said the guidance was good news, but that companies should take steps to limit tax exposure as travel restrictions ease and they consider adopting more telework as part of their business model.

Many international travelers have found themselves unable to leave the U.S. due to Covid-19 travel restrictions. Covington & Burling attorneys evaluated recent guidance released by the Treasury Department and the IRS to help those who can only phone home—and their companies.

Beyond Tax

What’s happening outside the world of tax?

Robins Kaplan LLP has taken a hard look at its real estate needs and realities for its attorneys and staff now accustomed to working remotely in the pandemic. Chief Operating Officer Shonette Gaston and Chief Business Intelligence Officer Dr. Shelley Gilliss describe their process for assessing office space needs and offer tips to businesses considering similar questions. Read: How a Big Law Firm Is Tackling Real Estate Realities in a Pandemic

Business disruptions caused by Covid-19 are proving fertile ground for contractual disputes and negotiations over how losses should be allocated. Kasowitz Benson Torres attorneys say courts may be increasingly willing to adjust contract obligations to avoid inequitable results, and they offer tips for contract language. Read: Who Pays When Contract Performance Is Excused Due to Covid-19?

ACLU of Louisiana attorneys discuss the group’s Justice Lab, a program that partners with Big Law to challenge racially discriminatory policies, the recently launched Law Firm Antiracism Alliance, and ways to ensure both have long-term success and root out institutionalized racism. Read: Big Law’s Efforts Toward Racial Equality

Exclusive Content for Bloomberg Tax Subscribers

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Good war planning evolves in stages, from strategic, to tactical, to political. The IRS appears to be in its operational phase, building a cryptocurrency campaign. Jason Morton of Webb & Morton in Arlington, Va., and a Judge Advocate (JAG) with the North Carolina Army National Guard, sees two developments that signal a strong shift in IRS enforcement. These developments dwarf the 10,000 IRS letters sent to crypto users in 2019 warning them of potential compliance deficiencies, which were just shots across the bow; the new developments are wargaming. Crypto-diplomacy and amnesty appear to be lost.

Bloomberg Tax Insights articles are written by experienced practitioners, academics, and policy experts discussing developments and current issues in taxation. To contribute, please contact Erin McManus at emcmanus@bloombergtax.com.

To contact the reporter on this story: Erin McManus in Washington at emcmanus@bloombergtax.com

To contact the editors responsible for this story: Meg Shreve at mshreve@bloombergtax.com; David Jolly at djolly@bloombergindustry.com

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