Opportunity Zone Gift • DAC6 Deadlines • Covid-19 Conversion

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 an unexpected gift in a technical rule correction; the DAC6 deadlines; converting operations to fight the virus; state digital tax; delaying bank provisioning rules; the Dutch burden of proof; death of the “Bob Richards rule"; avoiding a construction permanent establishment; and staying afloat with Covid-19. We’ll hear from:

• Lisa Starczewski of Buchanan Ingersoll & Rooney on a pleasant surprise in the opportunity zone regulations technical correction
• Keith Brockman of Wilbilt Inc. on DAC6 reporting deadlines
• Kate Barton of EY on how businesses are adapting when converting operations to help fight Covid-19
• Ruth Mason of the University of Virginia School of Law and Darien Shanske of the University of California, Davis School of Law on state digital taxes
• Lucas Mahieux of Tilburg University and Haresh Sapra of the University of Chicago on delaying CECL
• Eduard Sporken and Adriaan Bijleveld of KPMG Meijburg & Co. on the burden of proof in Dutch tax cases
• Mark Haynes of Ireland Stapleton on the need for allocation agreements
• Ravi Sawana of Lakshmikumaran & Sridharan on avoiding a permanent establishment with Covid-19 construction delays
• Gary Ashford of Harbottle & Lewis on staying afloat in the U.K.

Photographer: Paul Thomas/Bloomberg

Treasury and the IRS recently issued correcting amendments to the final opportunity zone regulations, and those amendments came with an unexpected gift. Lisa Starczewski of Buchanan Ingersoll & Rooney writes that the correcting amendments appear to make it much easier for an entity to meet qualified opportunity zone business qualifications during the startup period if it has a working capital safe harbor in place. Read: An Unexpected Gift in Opportunity Zone Correcting Amendments—Did This Really Just Happen?

The EU doesn’t appear inclined to extend the DAC6 reporting deadlines for tax motivated transactions despite the Covid-19 pandemic. Keith Brockman outlines the evolution, hallmark principles, best practices, and possible future trends for the measure. Read: DAC6—Past, Present, and Future

Kate Barton of Ernst & Young looks at how businesses large and small are dealing with tax, legal, and workforce issues when converting their normal operations and factories to help fight Covid-19. Read: Covid-19—How are Businesses Adapting Their Operations?

The pandemic is putting states in a fiscal bind. Ruth Mason of the University of Virginia School of Law and Darien Shanske of the University of California, Davis School of Law say digital services taxes could be a sensible way to help states get back on a firm financial footing. Read: The Time Has Come for State Digital Taxes

The coronavirus relief legislation enacted in March included a provision that gave financial institutions the option to delay a new loan loss provisioning standard. Lucas Mahieux of Tilburg University and Haresh Sapra of the University of Chicago argue that the delay in implementing the new standard won’t benefit the economy. Read: Covid-19 Crisis and Banks’ Provisioning Models

A Dutch appeals court recently overruled an earlier negative district court decision on the Dutch Tax Administration’s exit tax assessment. Eduard Sporken and Adriaan Bijleveld of KPMG Meijburg & Co. examine the recent Dutch transfer pricing case. Read: Dutch Court Rules on Profit Split in Business Conversion

The U.S. Supreme Court recently made it clear that who gets a tax refund among a consolidated group or creditors isn’t governed by federal law. Mark Haynes of Ireland Stapleton explains what the Rodriguez decision did and didn’t do. Read: Recent Supreme Court Decision Highlights Need for Tax Allocation Agreements

The Covid-19 pandemic is interrupting many business activities across the globe, including construction. Ravi Sawana of Lakshmikumaran & Sridharan analyzes the Organization for Economic Cooperation and Development’s permanent establishment provisions regarding whether the time during which a construction project is shut down due to the pandemic could inadvertently lead to a permanent establishment designation for a contractor. Read: Covid-19 Period—Excludible or Includible in Construction Permanent Establishment

Governments around the world have introduced emergency tax measures to support business and employees in the virus crisis. Gary Ashford of Harbottle & Lewis looks at further steps U.K. businesses and taxpayers can take to protect themselves, and the changes the future may bring. Read: Covid-19—Trying to Stay Afloat

From the Archive

Bloomberg Tax contributors have been analyzing and deciphering the regulations for the opportunity zone program from the day the first proposed regulations were released.

Investors had a clearer picture of the opportunity zone program after the release of several hundred pages of taxpayer-friendly regulations. The program provides possibilities beyond real estate investment. Blake Christian of HCVT told how it will provide a variety of investment opportunities even with the Covid-19 crisis.

The final opportunity zone regulations made investors and their advisers feel more comfortable with the program. Mike Bernier and Rachel van Deuren of Ernst & Young highlighted the significant changes and improvements as well as the smaller changes and clarifications.

Possibilities for investing in opportunity zones continue to expand. Alan S. Lederman of Gunster noted that the use of pro-rata qualified opportunity fund investor debt, although such debt itself is ineligible for QOF benefits, may increase the 10-year gain exclusion available to the qualifying QOF equity interests.

Beyond Tax

What’s happening outside the world of tax?

Valuation disputes may be just one face of an impending wave of litigation this year due to Covid-19 volatility, but they will be an important area, attorneys from Kobre & Kim write. Rather than take a “wait and see” approach, parties facing valuation disputes should move early, deliberatively, and creatively, and conduct litigation analysis to be in a better position should litigation ensue. Read: Minimizing Litigation Risks From Valuation Disputes During Covid-19

During the pandemic and with more employees working remotely, it’s important to think about preserving, or continuing to preserve, information relevant to a pending dispute or current litigation. Samantha V. Ettari, special counsel at Kramer Levin, examined legal holds and safeguards to protect information. Read: Legal Holds During the Pandemic—Don’t Forget Personal Devices

Top Justice Department enforcement trends have shifted since the arrival of the Covid-19 pandemic to focus on frauds involving testing, cryptocurrency, and False Claims Act violations, Baker McKenzie attorneys write. They also cite growing cooperation among U.S. attorneys offices and state authorities, and say companies need to ensure they have strong compliance programs in place. Read: DOJ Ramps Up Crypto, FCA Enforcement Efforts During Covid-19

Retaining outstanding attorneys is key for law firms during the pandemic as they react to the it and alter strategies to stay competitive. Robert Major, founding partner of Major, Lindsey & Africa, says now—as in past economic downturns—isn’t the time for law firms to curtail hiring. Read: Legal Hiring in a Recession—Lessons From the Past Downturn

State attorneys general are putting companies in the financial services sector on notice that they will bring all their resources and powers to bear to protect consumers during the pandemic. Crowell & Moring attorneys look at credit reporting rules, CARES Act provisions, and mortgage protections and say companies need to keep this heightened focus in mind now and post-pandemic. Read: AGs Turn Focus to Consumer Credit, Mortgages, Stimulus Checks

Exclusive Content for Bloomberg Tax Subscribers

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On April 3, the Organization for Economic Cooperation and Development Secretariat published a useful analysis of several tax treaty interpretive issues raised by government-imposed travel restrictions and quarantine requirements implemented in response to the coronavirus pandemic. Gary Sprague of Baker McKenzie dives into the analysis for the subject matter and, from the perspective of the long-term development of international tax law, whether this type of Secretariat communication should continue as a common practice after the pandemic fades away.

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.