Ernst & Young Its Washington Dispatch

Congress makes permanent certain international tax extender provisions in major tax legislation – House, Senate committees hold hearings on BEPS, EU state aid and inversions – US issues proposed CbC reporting regulations – US international tax guidance on the horizon – Treasury grants yet another FBAR extension – IRS announces Section 4371(3) excise tax will not apply to foreign-to-foreign reinsurers.

Congressional leaders, Obama Administration negotiating tax extenders package -- Pending Treasury regulations will expand scope of Section 7874, limit benefits of certain post-inversion transactions -- Treasury considering narrowing eliminated exception for outbound transfers of foreign goodwill -- Delayed applicability date announced for aspect of Section 871(m) dividend equivalent payment regulations -- US Senate Foreign Relations Committee approves tax agreements; further Senate action uncertain.

W&M Committee Chairman Paul Ryan elected House Speaker – Senate Foreign Relations Committee holds hearing on 8 pending tax agreements – Accelerated deadline for FBAR filing for calendar year 2016 accounts – IRS delays new rule for loan treatment of nonperiodic payments on NPCs – More countries to exchange bank deposit interest info with US -- IRS to target inbound middle market companies for TP exams – US will accept bilateral Indian APA applications in January 2016 – US CbC reporting regs to be released in 2015 -- OECD issues final BEPS reports

Congress returns to pending deadlines; Speaker Boehner resigns – IRS issues regulations under Subpart F – IRS releases final regulations on integrated hedging transactions – IRS issues long-awaited final regulations addressing “F” reorganizations – IRS proposed regulations would subject outbound transfers of foreign goodwill or going concern value to tax under Section 367(a) or (d) – IRS releases temporary regulations under Section 482 on coordinating TP rules with other Code provisions – IRS issues final and temporary regulations on dividend equivalent amounts – IRS: Cash basis taxpayer may not elect accrual method for claiming FTCs on amended return – IRS extends certain FATCA transitional rules – US Appellate Court affirms special 10-year statute of limitations for refund claims attributable to FTCs runs from return due date – US District Court rules discretionary treaty benefits subject to judicial review.

Congress returns on 8 September to legislative, budgetary deadlines – Tax Court in Altera rules stock-based compensation costs not included in cost pool for QCSAs subject to 1995 cost-sharing regulations -- IRS Notice 2015-54 announces forthcoming regulations on partnership nonrecognition of property contributions -- IRS recharacterizes intercompany referral fee income, reallocates intercompany referral fee expenses -- IRS updates procedures for competent authority assistance -- IRS issues updated guidance on requesting and obtaining an APA -- IRS 2015-2016 Priority Guidance Plan contains new international tax projects – OECD issues report on implementing CbC standard.

Senate Finance Tax Reform Working Group issues international tax reform report – Senior House Ways and Means Committee members release “innovation box” discussion draft – Senate Finance Committee approves “tax extenders” bill – US, Vietnam sign first-ever tax treaty – Treasury to issue international guidance in coming months – OECD holds final public consultation on BEPS Actions 8-10 on transfer pricing – Senate Finance Committee Chairman outlines BEPS concerns.

US international tax reform, repatriation considered to pay for Highway Trust Fund -- Congressional tax leaders express BEPS project concerns -- Bill introduced to close PFIC ‘loophole’ -- IRS issues final Section 7874 regulations; retains bright-line rule of SBAT -- IRS reiterates that principles of Notice 2012-39 retroactively apply to outbound F reorgs with CFC shareholder -- OECD releases discussion draft on hard-to-value intangibles under BEPS Action 8 -- OECD issues implementation package for CbC reporting under BEPS Action 13 – Seven more countries agree to Common Reporting Standard.

US Treasury proposes revisions to US Model Tax Treaty – Senate Finance Committee tax reform working groups deadline extended – US court disallows FTC claim under US-UK treaty for withholding tax on substitute dividend payments – DC Circuit rules retrocession agreements between foreign reinsurance companies not taxable under Section 4371 – PLR distinguishes broadcasting from motion pictures under royalties article in US tax treaty – IRS reiterates position that principles of Notice 2012-39 apply retroactively to outbound F reorg with CFC shareholder – OECD holds public consultations on Action 12 and Action 3 – OECD releases revised discussion draft on preventing artificial avoidance of PE status – OECD official takes aim at multinational tech companies.

Senate Finance Committee hearing on international tax reform reviews US patent box option – Finance Committee Chairman concerned over Obama Administration’s international tax proposals – Senate report released on ‘tax avoidance strategies’ involving derivative contracts, financial products – Fifth Circuit overturns Tax Court in BMS Software – IRS will schedule pre-filing conferences for bilateral APAs with India – IRS finalizing revenue procedures for APA program, competent authority assistance – Treasury plans to release draft updates to US Model Tax Treaty – US officials offer insights on OECD Base Erosion and Profit Shifting project.

Obama Administration’s FY 2016 Budget proposes major overhaul of US international tax system – IRS finalizes regulations under Section 909 foreign tax credit splitting events – IRS Chief Counsel memo addresses application of tax rate disparity test for foreign sales branches – IRS concludes US shareholder must increase E&P in year of Section 951(a)(1) inclusion – IRS releases competent authority agreement with Kazakhstan on treaty benefits for fiscally transparent entities – OECD addresses BEPS Actions 5, 13, and 15 – OECD holds public consultation on BEPS Action 4 on interest deductions and other financial payments.

President Obama, Republican Congressional leaders take out positions on tax reform debate -- US, India agree to framework to settle CA cases; APAs now possible -- IRS CCA 201501013 finds foreign fund engaged in US underwriting activities via US agent -- IRS launches FATCA International Data Exchange Service -- OECD holds public consultations on BEPS Actions 6, 7, and 14

Congress passes tax extenders legislation; gears up for tax reform debate -- Sen. Hatch releases "Comprehensive Tax Reform for 2015 and Beyond" -- IRS finalizes regulations on filing Form 5472 -- IRS offers FATCA relief for IGAs not yet signed -- Treasury grants another FBAR extension -- Treasury / IRS offers more thoughts on corporate inversions -- OECD releases 6 BEPS discussion drafts.

US midterm elections change tax landscape; extenders activity dominates tax agenda in lame duck -- IRS issues regulations on deficient GRAs; withdraws Directive for remedying incomplete GRAs -- IRS releases limited supplemental guidance on codified economic substance doctrine -- IRS rules back-to-back loans structured to avoid Section 956 -- OECD releases discussion draft on low value-adding intra-group services, public discussion draft on follow-up work on treaty abuse under BEPS Action 6.

Congress to return for lame-duck session; inversions and tax extenders legislation possible -- US Court of Claims lacks jurisdiction to hear taxpayer’s refund claim regarding contested foreign taxes;claim not timely under statute of limitations pursuant to ‘relation back doctrine’-- IRS releases additional guidance on economic substance -- US notifies 17 Model I jurisdictions of most favored nation option; Switzerland to negotiate Model 1 IGA.

Congress returned from August recess to debate corporate inversions, Treasury took action -- OECD releases 2014 output of BEPS Action Plan -- IRS CCA concludes accrued but unpaid interest constitutes an obligation of US person for Section 956 purposes -- IRS exempts certain holders of PFIC stock that is mark to market from Section 1298(f) filing

Congress begins August recess; concern over corporate inversions -- IRS clarifies foreign tax credit guidance under Section 901(m)to prevent abuse -- IRS updates procedures for withholding foreign partnerships and withholding foreign trusts -- IRS issues PLR on treatment of certain foreign stock under Section 7874 -- IRS rules consent fee paid on contingent payment debt instrument may result in a taxable exchange -- IRS finalizes regulations applying straddle rules to certain debt instruments -- IRS CCA addresses when late-received documentation can support portfolio interest exemption -- OECD releases report on impact of BEPS in low income countries -- OECD seeks input on collecting and analyzing data on BEPS.

Congress mulls anti-inversion action -- Proposed US-Poland treaty, Spanish tax protocol move to Senate -- Top LB&I officials announce resignation -- IRS issues foreign tax credit guidance under Section 901(m) -- Final Section 861 interest expense allocation and apportionment regs issued; address corporate partners with 10% + interest and users of FMV asset method -- Final Section 1092 mixed straddle regulations limit ability to trigger built-in gains and losses -- IRS issues instructions for Form W-8BEN-E, other forms -- IRS can notify w/holding agent of foreign taxpayer's incorrect claim of withholding tax exemption -- OECD publishes Standard of Automatic Exchange of Financial Information in Tax Matters -- OECD Council adopts 2014 update to Model Tax Treaty

Senate Foreign Relations Committee holds hearing on Spanish and Polish tax protocols -- Repatriation less likely revenue source for Highway Trust Fund -- IRS updates FATCA FFI agreement, US and China reach agreement in substance on Model 1 IGA -- BEPS dominates OECD annual tax conference in Washington -- Congressional leaders voice concern over BEPS

Tax extenders legislation update -- IRS Notice 2014-32 announces amendments to final regulations under Sections 367(a) and 367(b) -- IRS announces FATCA relief treating certain pending IGAs as in effect -- Notice 2014-31 extends PFIC active banking exception for qualifying government bonds -- US persons holding PFIC stock through exempt organizations / accounts exempt from Form 8621 filing -- IRS issues annual APA report -- Pending US tax treaties reported out of committee -- US, Hong Kong sign TIEA -- Official offers US government position on BEPS action items

President Obama releases FY 2015 Budget; includes new international tax revenue-raising proposals -- IRS postpones application of Section 871(m) regulations to specified equity-linked instruments -- IRS Notice 2014-21 provides guidance on taxation of transactions involving virtual currencies -- OECD releases BEPS discussion drafts on treaty abuse, hybrid mismatch arrangements, and digital economy -- Numerous countries commit to early adopt OECD Common Reporting Standard