Tax Dispute Resolution Quarterly

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Envisioning LB&I’s ‘Future State’ By Michael P. Dolan, National Director of IRS Policies and Disputes Resolution In this March 16, 2016, Tax Notes article, Dolan argues that even though the new design for the IRS Large Business and International (LB&I) Division may give the agency more control over its resources, it may leave taxpayers with fewer options for remediating errors, securing certainty, and obtaining penalty relief. Foreign currency options—Section 1256 contracts or not? By Jon Zelnik, Michael Bauer, and Ivan Thomann, Washington National Tax In Wright v. Commissioner, the U.S. Court of Appeals for the Sixth Circuit held that certain over-the-counter foreign currency options are subject to the mark-to-market rules of section 1256. The decision is based solely on the court’s plain reading of the relevant statutory language; the court rejected consideration of relevant legislative history and tax policy. Given that the court’s decision is contrary to several Tax Court decisions and the published position of the IRS, it creates uncertainty in an area previously considered settled. This April KPMG LLP report reviews the case and explains how the decision conflicts with earlier Tax Court decisions and IRS published guidance. Initial analyses of inversions and debt‐equity regulations The Treasury Department and IRS on April 4, 2016 released final and temporary regulations addressing certain “inversions”—the generic term for a domestic corporation’s adoption of a foreign-parented corporate structure—and certain post-inversion restructuring transactions. At the same time, the Treasury and IRS released proposed regulations under section 385 regarding the treatment of certain related-party corporate interests as debt or equity for U.S. federal income tax purposes. These debt-equity regulations are potentially much broader in scope than the inversion rules, affecting myriad varieties of related-party financing. Read two April 2016 reports prepared by KPMG: –– Initial analysis of regulations addressing inversions –– New proposed debt-equity regulations © 2016 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 568452
New law creates new risks for partnership investments By Carol Kulish Harvey, Deborah Fields, and Harve Lewis, Washington National Tax Legislation in November 2015 fundamentally changed the landscape for resolving tax disputes involving partnerships. The Bipartisan Budget Act of 2015 upends the so-called TEFRA rules, which have been in place for more than 30 years. Under the new rules, the IRS will be able to impose liability at the partnership level if it determines, after an audit, that tax was paid on too little income—unless the partnership is eligible to elect, and properly elects, to be subject to a different set of rules. As a result, the IRS’s adjustment of partnership income in a prior year ultimately could burden the partnership’s assets and current owners. A March article in KPMG LLP’s Board Perspective Series addresses the implications of this new law for companies with partnership investments. Companies that own interests in or lend to partnerships may want to start thinking now about how to manage risks posed by the new law. Section 385 regulations: Transforming the world of cross-border corporate income tax? In April, the Treasury Department and IRS proposed regulations under section 385 on the treatment of certain related-party corporate interests as debt or equity for U.S. federal income tax purposes. Although issued as part of Treasury’s effort to discourage corporate inversions, the proposed regulations may have their greatest affect outside of the inverted company context. For example, if finalized, the regulations could potentially effect the treatment of intercompany debt issued among certain corporate groups, resulting in the recharacterization of certain debt instruments as preferred equity for U.S. tax purposes. Watch the replay of KPMG LLP’s webcast on the proposed regulations. Professionals from the firm’s Washington National Tax practice discussed the regs’ potential, significant impact on corporate taxation of intercompany debt. Topics include documentation requirements, distributions of debt instruments and similar transactions, treatment of consolidated groups and questions submitted by numerous viewers. Assessing the validity of regulations after Altera Last year’s Altera Corp. v. Commissioner decision overturned the portion of section 482 regulations requiring related-party participants in a cost-sharing arrangement (CSA) to share stock-based compensation costs. In addition to potential affecting transfer pricing for taxpayers with CSAs, the U.S. Tax Court case may portend changes to how tax regulations are developed and promulgated in the future. During this April webcast, KPMG LLP professionals discussed the potential impact of Altera on taxpayers’ ability to challenge IRS regulations, the history of disputes under the CSA regulations concerning stock-based compensation costs, and the broader implications of Altera for transfer pricing issues. © 2016 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 568452
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Page 3 and 4: Contents Spotlight on compensation
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Page 7 and 8: Golden parachutes By Compensation a
Page 9 and 10: FBAR reporting: Changes are in the
Page 11: Tax enforcement trends Envisioning
Page 15 and 16: A conversation with Greg Matson—E
Page 17 and 18: 2016 webcast series Around the worl
Page 19 and 20: Country by country, step by step: I
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