Foreign Tax Credits • Private Equity Financing • Merger Losses

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 foreign tax redeterminations; financing private equity acquisitions; deducting merger expenses; taxes as weapons in trade wars; incentivizing home ownership in high-tax states; and the U.K.'s final regulations and Luxembourg’s draft law on disclosing cross-border tax arrangements. We’ll hear from:

• John Harrington of Dentons on the weaknesses in the proposed foreign tax redetermination regulations
• Jeremy Swan of CohnReznick on the effect of the interest deduction limitation on private equity transactions
• Robert Willens on trying to cut your losses when unloading a bad acquisition
• Steven Wrappe of Grant Thornton on taxes as weapons in the trade war
• Michael Romer of Romer Debbas on home ownership policy choices
• Catherine Robins of Pinsent Masons on the U.K.'s DAC 6 regulations
• Oliver R. Hoor and Fanny Bueb of ATOZ Tax Advisers on Luxembourg’s draft law to implement DAC 6

A home for sale in Saddle River, N.J. in March 2019.

Photographer: Erica Yoon/Bloomberg

The IRS and Treasury recently published proposed and final regulations for various aspects of the foreign tax credit. John Harrington of Dentons describes the new foreign tax redetermination rules in Part I of a two-part article. Read: New Foreign Tax Credit Regulations: In Need of a Redetermination—Part 1. Harrington walks through some examples of how the new rules might play out in Part 2 of the article. Read: New Foreign Tax Credit Regulations: In Need of a Redetermination—Part 2

The interest expense limitation enacted in the 2017 tax law is complicating how private equity firms structure their investments. Jeremy Swan of CohnReznick looks at the options available to PE firms and their portfolio companies and what actions can be taken before the final regulations are released. Read: Interest Expense Limitation to Trigger Changes in Financing Private Equity Deals

In a Technical Advice Memorandum that Robert Willens describes as the first of its kind, the IRS said a taxpayer couldn’t claim a loss deduction for acquisition-related professional and administrative fees incurred by a target business upon the sale of that business. Read: ‘Facilitative’ Merger Costs Don’t Create Separate Intangible Asset

Steven C. Wrappe of Grant Thornton LLP discusses the three taxing approaches that have emerged to address the tax challenges of the digital economy—excise taxes, modified transfer pricing rules, and tariffs. Each of these is a potent weapon in a global trade struggle and each imposes a very different tax impact on multinational enterprises. Read: Weapons of Mass Taxation—Excise Taxes, Transfer Pricing and Tariffs

Relatively high-tax states such as New York and California face a dilemma in how to incentivize home ownership following the enactment of the state and local tax deduction limitation in the 2017 tax law. Michael Romer of Romer Debbas LLP examines the issue of whether the federal government should be subsidizing state and local government and the effect on homeowners in a New York City suburb. Read: Blue State Quandary—Incentivizing Home Ownership

The U.K. government has published the final regulations to implement DAC 6. Catherine Robins of Pinsent Masons takes a look at the provisions in the regulations and their implications for business. Read: Final Regulations for Disclosure of Cross-Border Tax Arrangements

In the second of a series of three articles, Oliver R. Hoor and Fanny Bueb of ATOZ Tax Advisers (Taxand Luxembourg) provide an overview of the scope of the mandatory disclosure regime and analyze the fine line between penalties for non-compliance and penalties for violation of professional secrecy in case of over-reporting. Read: The New Mandatory Disclosure Regime—Navigating Between Penalties

From the Archive

Bloomberg Tax contributors have been analyzing the effect of the 2017 tax law’s interest deduction limitation almost since its enactment.

Kirsten Malm and Zak Perryman of Ernst & Young LLP looked at the impact of the U.S. Tax Cuts & Jobs Act 2017 on global merger and acquisition trends, including why this is an era of both heightened risk and opportunity for tech companies, and why the role of tax within transactions has been hugely elevated.

Joseph Sebik of Siemens Corp. provided a lease-versus-own analysis of equipment financing.

New lease accounting rules and the 2017 tax law changed the leasing landscape. Bill Bosco of the consulting firm Leasing 101 explained why leasing makes financial sense for many businesses and walked through an example of buying versus leasing a company car.

Beyond Tax

What’s happening outside the world of tax?

General counsels are a mysterious, idiosyncratic bunch, but Chambers Associate’s research has found only 40% were previously partners in private practice, a third are female, and Harvard is the most popular school for their education. Chambers Associate deputy editor Thomas Lewis looks at their similarities in their careers and education. Read: Most General Counsels Gain Experience In-House, Harvard Tops Backgrounds

All the technology and calendar systems available today still can’t prevent a litigator from making motion-ending errors. Perkins Coie attorneys offer pointers for how to make sure your motion avoids unforced errors and abides by judges’ differing rules. Read: Don’t Lose a Motion With These Too-Common Mistakes

A growing wave of legal process outsourcing companies and alternative service providers is disrupting the legal industry by offering unique delivery models, specialized services, digital capabilities, and cost-effective pricing structures. Major, Lindsey & Africa’s Elizabeth Smith and Roger Garceau offer advice for law firms on how to effectively navigate today’s legal services revolution. Read: Law Firms Must Innovate to Keep Up With Alternative Service Providers

While federal congressional investigation law is relatively developed and has been in the news because of inquiries into the Trump administration, similar investigations at the state level can have unfamiliar rules and processes. Covington & Burling’s Brendan Parets looks at what attorneys should be aware of across the country. Read: State Investigations—50 Takes on Subpoena, Privilege, Document Rules

The Fifth Circuit’s ruling that the Affordable Care Act’s individual mandate is unconstitutional is important because it impacts other parts of the act and whether provisions, such as the “employer mandate,” can stand on their own, writes Ballard Spahr’s Edward I. Leeds. Read: Fate of Obamacare in Limbo Following Invalidation of Individual Mandate

The Growth Lab, housed in global law firm DLA Piper’s San Francisco office and run by StartOut, is the largest national nonprofit organization for LGBTQ+ entrepreneurs. Andres Wydler, executive director of StartOut, and DLA Piper partner Thomas Gaynor say a platform like the Growth Lab is important because economic empowerment is the next stage in LGBTQ+ civil rights. Read: StartOut Growth Lab, DLA Piper Partner to Support LGBTQ+ Entrepreneurs

Exclusive Content for Bloomberg Tax Subscribers

(*Note: Your Bloomberg Tax login will be required to read the following content.)

Joshua Ruland, Mark Opper, and Carlos Vaca Valverde of Ernst & Young LLP explore the tax consequences of a fact pattern where a domestic corporation is a partner in a domestic partnership that owns stock in a controlled foreign corporation (CFC); the CFC earns tested income that the domestic corporation includes as global intangible low-taxed income (GILTI), under tax code Section 951A; the CFC may or may not make a distribution of its earnings to the domestic partnership; and the domestic partnership later sells the CFC stock.

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.