This is a weekend roundup of Bloomberg Tax Insights, which are written by practitioners, 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, and Daily Tax Report: International.
This week we look at the denial of Altera’s certiorari petition; amended partnership return questions; bankruptcy and the IRS; why the Covid-19 recession is different for transfer pricing; the Main Street Loan Program; Mnuchin’s letter on digital taxes; cloud computing compliance; no agency deference in New York; housing incentives making stable investments; group transfer pricing models; transfer pricing defense files; and EU interest limitation rules. We’ll hear from:
- KPMG practitioners on the U.S. Supreme Court’s denial of certiorari to Altera in its challenge of the legitimacy of a transfer pricing regulation
- Rochelle Hodes on amending partnership returns to access economic relief legislation refunds
- Norton Rose Fulbright attorneys on the tricky path to fighting the IRS in bankruptcy court
- Steven Felgran and Steven Wrappe on why the Covid-19 recession requires a different approach to transfer pricing
- Matthew B. Kulkin, Josh Oppenheimer, and Anna Stressenger of Steptoe on the Main Street Lending Program
- Jeff VanderWolk of Squire Patton Boggs on Treasury Secretary Stephen Mnuchin’s letter to European finance ministers
- Sean Torr and Chris Chiriatti of Deloitte on the cloud computing compliance gap
- Michael Semes of BakerHostetler on the New York Tax Tribunal’s decision denying agency deference
- Kathie Soroka of Nixon Peabody on housing incentives providing a stable investment
- Luis Coronado and Stephen Lam of Ernst & Young on modifying group transfer pricing models
- Vernon Noronha and Sid Paruthi of Moss Adams on building a transfer pricing “defense file”
- Oliver R. Hoor and Keith O’Donnell of ATOZ Tax Advisers (Taxand Luxembourg) on the effect of EU interest limitation rules on Luxembourg securitization companies
The U.S. Supreme Court denied certiorari to Altera Corp. in its challenge to the validity of a transfer pricing Treasury regulation requiring related parties to share stock-based compensation. KPMG practitioners analyze what the denial means going forward. Read: Practical Implications of Denial of Review in ‘Altera v. Commissioner’
Coronavirus economic relief legislation included retroactive tax provisions to give businesses immediate access to refunds. However, there are many unanswered procedural questions for partnerships governed by the Bipartisan Budget Act that want to claim those refunds, writes Rochelle Hodes of Crowe. Read: Amended Returns for Partnerships Leaves Unanswered Procedural Questions
In the bankruptcy world the IRS is just another creditor, albeit one with special privileges. Norton Rose Fulbright attorneys highlight the opportunities for challenging IRS tax determinations and pursuing refunds, and the traps for the unwary. Read: Resolving Federal Tax Disputes In Bankruptcy
Many recent articles have attempted to explain how multinational enterprises can persuade tax authorities that their unexpected weak results weren’t driven by non-arm’s-length transfer pricing. Steven Felgran and Steven Wrappe, two transfer pricing experts with decades of experience, say this is the wrong approach. It is better to alter and document transfer prices to align with new arm’s-length realities than to continue legacy transfer pricing approaches that rely on pre-pandemic expectations. Read: It’s Different This Time—Pandemic-Induced Recession Drives Transfer Pricing Changes
The Main Street Lending Program is now open, but borrowers must meet several requirements before they can access funds. Matthew B. Kulkin, Josh Oppenheimer, and Anna Stressenger of Steptoe take us down the twisting road to qualify for a loan. Read: Foreign Employees, Subsidiaries, and Parent Companies! Oh, My! Meeting the Main Street Lending Program Eligibility Criteria
Treasury Secretary Stephen Mnuchin recently wrote a two-page letter to the finance ministers of France, Italy, Spain, and the U.K. stating that negotiations on Pillar 1 of the OECD/Inclusive Framework’s program were at an impasse. The letter received a mixed response. Jeff VanderWolk of Squire Patton Boggs examines the effect of the letter going forward regarding both Pillar 1 and Pillar 2 negotiations. Read: OECD/Inclusive Framework—Pillar 1 Impasse Puts the Spotlight on Pillar 2
Amid the Covid-19 pandemic and the acute need to “go virtual” and work remotely, more organizations are migrating to the cloud and at a faster pace. Unfortunately, companies’ compliance efforts with the Financial Accounting Standards Board’s new cloud computing accounting standard may not be keeping up. Deloitte’s Sean Torr and Chris Chiriatti believe there’s a silver lining to the accounting standard and weigh in on how organizations can capitalize certain costs and regain momentum on compliance. Read: Will Covid-19 Widen Cloud Computing Compliance Gap for Companies?
The New York Tax Tribunal announced in the recent TransCanada decision that it doesn’t defer to agency interpretation and construes a statute in favor of the taxpayer when the statute doesn’t provide an exclusion, exemption, or deduction. Michael Semes of BakerHostetler explains what the decision means for New York taxpayers going forward. Read: New York Tax Tribunal Doesn’t Defer to Agency Interpretation
The Department of Housing and Urban Development’s Rental Assistance Demonstration program combined with low-income housing tax credits can provide stable investment opportunities in uncertain times, writes Kathie Soroka of Nixon Peabody. Read: RAD Road to Recovery—HUD Program, Tax Credit Offer Stable Investments
Luis Coronado and Stephen Lam of Ernst & Young Solutions LLP focus on what companies need to consider in terms of modifications to their group transfer pricing model to manage the impact of Covid-19 and improve their overall cash and operational positions. Read: How Covid-19 is Impacting Transfer Pricing Models
The Covid-19 pandemic has thrown a monkey wrench into the usual transfer pricing computations and how one might define “comparable.” Vernon Noronha and Sid Paruthi of Moss Adams walk through how to begin building a “defense file” in anticipation of audit challenges. Read: Transfer Pricing for Pandemic Times
In the current crisis, securitization may provide businesses with much needed liquidity. Oliver R. Hoor and Keith O’Donnell of ATOZ Tax Advisers (Taxand Luxembourg) analyze to what extent Luxembourg securitization companies may be impacted by EU-wide interest limitation rules, and consider the “standalone” entity exception. Read: Interest Limitation Rules and Luxembourg Securitization Companies
From the Archive
Bloomberg Tax contributors have been following the Altera case through the courts and explaining how the final outcome will affect tax planning far beyond the taxpayer in the case.
After the Ninth Circuit in a 2 to 1 decision ruled that Treasury had met the requirements of the Administrative Procedure Act when it issued final cost-sharing regulations governing stock based compensation, Edward Froelich of Morrison & Foerster LLP examined the majority’s analysis of the APA and concluded that the court’s decision disregarded the requirements of the statute.
In a three-part series prior to the Ninth Circuit decision, Peter Connors, Barbara de Marigny, and Michael Rodgers of Orrick, Herrington & Sutcliffe discussed the background of the Altera transfer pricing controversy with the IRS, and what might happen in the Ninth Circuit. Read: Part One, Part Two, and Part Three
What’s happening outside the world of tax?
The U.S. Supreme Court said participants in U.S. Bank’s defined-benefit plan lacked a concrete injury to sue for repayment of $750 million in plan losses due to alleged mismanagement and for $31 million in attorneys’ fees under ERISA. Susan Katz Hoffman and Marc I. Machiz, principals at Justican Mediation, discuss their differing views of the decision and suggest a legislative fix might work. Read: The Impact of Thole on Pension Plan Litigation—A Conversation
Companies may see an uptick in internal investigations related to Covid-19 workplace issues. Holland & Knight attorneys offer best practices to in-house counsel to avoid risking an unintentional disclosure of sensitive information, and to protect the organization and in-house counsel from risks of accidental discovery. Read: Is This Chat Discoverable? How In-House Counsel Can Protect Privilege
Alternative service providers have been gradually encroaching on law firms’ client base for years, and the Covid-19 recession is only accelerating the trend as clients look to cut costs. Sales consultant David Hirsch says that the legal industry must go on the offensive with a sales plan in order to avoid being the victim of budget cuts. Read: A Case for Investing in Legal Sales Capabilities
Law firms are facing challenges and should take a hard look at how costs, business processes, and technological infrastructure intersect as they search for new efficiencies and smarter workflows. Casepoint’s David Carns says doing so will allow them to protect profit margins in the short term and scale much more quickly when the economy improves. Read: Cost Modeling Can Boost Law Firm Profitability
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The Covid-19 health crisis and associated economic downturn is expected to have a significant impact on commercial real estate lessees, as their ability to attract in-person customers and otherwise generate revenue suffers in the current climate. Lessors and lessees will be incentivized to reexamine their current lease agreements, and are expected in many cases to negotiate changes to allow lessees to continue as a going concern and meet their payment obligations. Lease amendments to address the economic downturn are expected to take a variety of forms, including deferral of rent, reduction of rent, or changing from fixed rent to a net lease arrangement based on share of lessee revenue. Bill Sherman, Mark Melton, and Christopher Marotta of Holland & Knight examine the issues.
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 email@example.com.