top of page
Search

Pre-Inauguration Flurry of Final and Proposed Regulations

wbricker

By: William L. Bricker, Linda Galler, and Juliya L. Ismailov


The Biden administration is scrambling to finish unfinished tax business – namely, to finalize previously proposed regulations and to propose several new regulations interpreting provisions of the Internal Revenue Code. 

 

While President Trump will likely issue a regulatory freeze on proposed regulations (as has become a regular practice by incoming presidents), the proposals will, in the meantime, obtain some publicity.  By contrast, the process for withdrawing or modifying regulations that have been finalized will be more challenging, though that is certainly possible. 

 

Below is the list of final and proposed tax regulations issued during the last week:

 

Final Regulations:

 

  • Expatriate Gift and Bequest Tax

    • interpreting Section 2801 on covered gifts or bequests from individuals who gave up US citizenship or permanent residency after June 2008

    • defining the terms “covered expatriate,” “foreign trust,” and “domestic trust”

 

  • Anti-Abuse Disclosure Requirements for Partnership Basis-Shifting and Microcaptive “Transactions of Interest”

    • basis-shifting intra-partnership transactions causing a basis increase over $25 million for 2025 (and $10 million in future years)

    • actions by a captive insurance company (microcaptive) insuring against risks of a specific business and paying taxes on its investment income

    • advisers and participants must disclose these two categories of transactions, which are now “transactions of interest”

 

  • Multinational Company Deductions

    • limiting deductions by multinational companies when payments are made to a US corporation generating a loss in the US corporation’s global minimum tax calculations

    • interest and royalties to a US company from a disregarded entity are included in US company’s income

    • intended to prevent “double dipping” by deducting a loss in both a foreign country and on US tax return

 

  • Characterization of Digital Content Transactions and Cloud Computing Transactions

    • aiding in characterizing cloud transactions and digital content access as provision of services or a lease of property

    • adopting a “predominant character approach” in a mixed transaction, such as purchase of digital content played on a cloud platform (instead of bifurcating the transaction into different income types)

    • determining the source of income from cloud transactions


  • Access to IRS Independent Office of Appeals

    • addressing procedural and timing rules that must be met before IRS Appeals consideration of tax cases

    • providing exceptions to consideration by IRS Appeals of certain types of cases


Proposed Regulations:

 

  • Commercial Clean Vehicle Credit

    • credit available for businesses who place a qualified commercial clean vehicle in service after Dec. 31, 2022, including previously owned vehicles

    • credit available for manufacturers of qualified commercial clean vehicles

    • credit is the lesser of the incremental cost (i.e., purchase price of vehicle over purchase price of a comparable vehicle), and 15% of the taxpayer’s basis in the vehicle (30% for a vehicle not powered by gasoline or diesel engine)

 

  • Qualified Derivative Payments under Base Erosion Antiabuse Tax (BEAT)

    • modifying 2019 final regulations

    • disqualifying mark-to-market gain or loss on certain outbound derivative payments (QDPs) to foreign affiliates in related party securities lending transactions

 

  • Limits on Deduction of Over $1M of Salary by Publicly Held Corporations

    • clarifying determination of five highest-paid employees targeted by the deduction limitation

    • defining “employee” to include a common law employee, an officer of the corporation, and an employee of a subsidiary or affiliated holding company

 

  • Corporate Reorganizations

    • providing regulatory guidance on structuring and implementing tax-free corporate reorganizations or spinoffs.

    • requiring multi-year reporting for corporate separations and related transactions on new Form 7216

 

  • Regulations Implementing Changes Made by SECURE 2.0 Act

    • requiring that certain cash or deferred arrangements and salary reduction agreements with employees be eligible for automatic enrollment

    • retirement plan catch-up contributions made by higher-income participants are designated as after-tax Roth contributions

 

0 comments

Recent Posts

See All

Comments


bottom of page