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WEEKEND INSIGHTS: IRS on PPP-Paid Expenses and Trade Under Biden

Nov. 29, 2020, 3:01 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 how the IRS is still contradicting Congressional intent with Paycheck Protection Program loan guidance, what a Biden administration could mean for international trade, and more. We’ll hear from:

  • Bruce Hendrick, David Heidenreich, and Kylie Jennings of Carrington Coleman on IRS guidance for expenses paid with PPP loan proceeds
  • Leonardo Branco of the University of Sao Paolo on the current status of global trade and how a new American administration could change it
  • Sita Slavov of the American Enterprise Institute and George Mason University on Social Security “framing” in retirement planning
  • Javier Esain of Baker McKenzie on the Spanish digital services tax
  • Nguyen Thu Phuong and Nguyen Hung Du of Grant Thornton on foreign direct investment in Vietnam
A closed dining area in the Ocean Beach neighborhood of San Diego, Calif., after a late-night pandemic curfew took effect.
Photographer: Bing Guan/Bloomberg

The latest IRS guidance on expenses paid with Paycheck Protection Program loan funds is still contrary to Congressional intent, write Bruce Hendrick, David Heidenreich, and Kylie Jennings of Carrington Coleman. According to the IRS, businesses can’t deduct the eligible expenses paid with the proceeds of PPP loans. Businesses now face the choice of a greater tax burden or foregoing forgiveness of their PPP loans. Read: New IRS Restrictions on PPP Loans

The U.S. elections could bring changes to trade policy beyond the country’s borders. Leonardo Branco of the University of Sao Paolo looks at the current status of global trade and how a new American administration could change it. The author also examines challenges facing Brazil and obstacles presented by the country’s tax system and bureaucracy. Read: American Elections, Brazilian Taxation, and the Multilateral Trading System

Regardless of whether President-elect Joe Biden’s Social Security proposal will make it through Congress, the messaging regarding benefits needs much improvement, writes Sita Slavov of the American Enterprise Institute and George Mason University’s Schar School of Policy and Government. Workers need to understand that they don’t need to claim benefits when they retire and that benefits rise steadily with delay. Read: Social Security Framing—Benefit-Claiming Can Be Delayed Beyond Retirement

The Spanish digital services tax has been published and enters into force on Jan. 16, 2021. Javier Esain of Baker McKenzie considers its main features and looks at some challenges which may arise in its implementation. Read: Spanish Digital Services Tax in a Nutshell

Nguyen Thu Phuong and Nguyen Hung Du of Grant Thornton Vietnam discuss foreign direct investment in Vietnam looking specifically at the use of a direct investment capital account and the tax risks involved. Read: Foreign Direct Investment in Vietnam

From the Archive

Bloomberg Tax contributors have been figuring out how to navigate the Payroll Protection Program for their clients and sharing their conclusions since the program became law.

Federal Covid-19 relief programs for businesses are extremely complex. Employers should thoroughly consider their circumstances to understand which programs best address their needs, say Ogletree Deakins P.C. attorneys Michael Mahoney and Shivam Bimal, who discussed several of the programs.

The Small Business Administration has released draft questionnaires for review of Paycheck Protection Program loan forgiveness applications of $2 million or more. Lewis Horowitz and Eric Kodesch of Lane Powell analyzed the forms and saw problems with the approach the agency is taking, including a presumption of foresight by borrowers.

Covid-19 debt relief measures are intended to help struggling businesses and individuals, but is debt relief really relief at all? Jasen Hanson and John Hackney of Chamberlain Hrdlicka looked at the general tax principle that the discharge of debt results in income to the debtor—even if the debtor ends up with no additional cash in their pocket and owing the federal government—and what taxpayers need to consider before opting for debt relief.

Beyond Tax

What’s happening outside the world of tax?

There’s been an increase in “tossing the keys” restructurings—private out-of-court deals where the equity sponsor turns over control of the business to the existing lender and walks away. David M. Hillman, co-head of Proskauer’s private credit restructuring group, details five key issues private credit lenders should consider when offered the keys. Read: Taking the Keys: Restructuring Tips for Private Credit Lenders

Communication platforms like Microsoft Teams have quickly become indispensable during the pandemic. FTI Consulting technology specialists Tim Anderson and Chris Zohlen say this rapid adoption has left little room for legal and compliance considerations or governance controls and offer questions counsel should ask to prevent future headaches. Read: Everyone’s a ‘Teams’ Player, But Don’t Drop the Ball on Governance

A remote workforce necessitated by the Covid-19 pandemic has complicated compliance efforts with respect to the Foreign Corrupt Practices Act. Global advisory firm StoneTurn’s Jeffrey Matthews and Winston & Strawn’s Matthew D. Orwig offer key steps for conducting robust remote inquiries to ensure effective third-party due diligence and internal investigations. Read: Five Keys to FCPA Compliance in the Covid-19 Era

Fish & Richardson’s commitment to advancing diversity over the long haul has not focused on boosting numbers overnight. Chief Legal Talent & Inclusion Officer Kristine McKinney and Diversity & Inclusion Manager Whitney Smallwood explain how the firm uses data and metrics to drive diversity and inclusion changes for real, lasting change. Read: Using Data to Advance Diversity and Inclusion for the Long Haul

Exclusive Content for Bloomberg Tax Subscribers

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Sometimes a like-kind exchange straddles two different tax years, raising questions about extending return filing deadlines, installment sale reporting, and allocating partnership liabilities under tax code Section 752. Holly Belanger, Debbie Fields, and Cathy Fitzpatrick of the Washington National Tax practice of KPMG LLP discuss deferral of the recognition of gain realized for U.S. federal income tax purposes by structuring the sale as a deferred like-kind exchange under Section 1031(a)(3).

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

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