Report on recent US international tax developments - 29 March 2024

The recent US congressional hearing on the Biden Administration's proposed FY 2025 Budget shed some light on the government's position on the BEPS 2.0 project. Treasury Secretary Janet Yellen said the Administration continues to support BEPS Pillar One as being in the best interest of US companies. She also confirmed that the Administration believes that any final agreement in regard to both Pillar One and Pillar Two would require congressional action and would not become law through an executive agreement.

In regard to protecting US research and development (R&D) benefits under the BEPS Pillar Two global minimum tax, a Treasury official recently said the government hoped to address US concerns through OECD guidance, but that there could be a so-called "Plan B" legislative fix, if necessary. In response to a question regarding the plans to address R&D Plan B, the Treasury Secretary said at the hearing that "countries participating in the OECD process understand … the R&D credit is a critical issue for us," further suggesting that the US hoped to resolve the issue through administrative guidance.

US officials recently offered some updates with regard to international regulatory projects.

IRS proposed regulations on the 1% stock buyback excise tax are "imminent," according to a senior government official. The official disclosed the coming rules would address a "funding rule" that would apply in the case of a foreign company repurchasing stock, if the repurchase was indirectly funded by a US corporation.

The official further said Treasury and the IRS are "very far along" in developing proposed regulations implementing Notice 2012-15, which would address the application of IRC Sections 367(a) and (b) to stock transfers to foreign corporations that are exchanged for property under IRC Section 304. Progress has also been made in regard to final IRC Section 367(b) regulations that address triangular reorganizations involving foreign corporations. The IRS in October 2023 released proposed regulations (REG-117614-14 (pdf)) addressing cross-border triangular reorganizations that would adopt the modifications to the IRC Section 367(b) regulations proposed in Notice 2014-32, as modified by Notice 2016-73.

Finally, the official disclosed that final regulations under IRC Section 367(d) on the repatriation of intangible property that had previously been transferred offshore are "very far along."

An IRS official was quoted as saying the government in the next year also plans to update guidance on applying for an advance pricing agreement and requesting competent authority relief. According to the official, the new rules will come in the form of revenue procedures and as "companion documents."

Contact Information

For additional information concerning this Alert, please contact:

Ernst & Young LLP (United States), International Tax and Transaction Services, Washington, DC

• Arlene Fitzpatrick
  
  
• Joshua Ruland

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.