Members of Ruchelman P.L.L.C. contribute to publications throughout the world and the Firm’s monthly tax journal, Insights.
The I.R.S. proposal to deny refunds of excess withholding tax in cases were the withheld tax is stolen by the withholding agent was harshly criticized by the Information Reporting Program Advisory Committee. It seems the I.R.S. does not have the authority to pass the loss onto the party that suffered withholding. Elizabeth V. Zanet and Andrew P. Mitchel discuss the issue in detail.
Read MorePoliticians have led us to believe that inverted corporations are not eligible for U.S. government contracts. However, the manufacturing giant Ingersoll-Rand has a different view and the Department of Homeland Security appears to be in agreement.
Read MoreAlthough the origins of the Financial Transactions Tax (“F.T.T.”) date back to the 1970’s, the European Commission first proposed a European Union-wide financial transactions tax in 2011. The proposal came at a time when many Europeans were concerned about the bad behavior of large banks and several E.U. countries were spending billions of dollars to bail out failing banks, while imposing austerity measures to counterbalance the impact on their budgets. Elizabeth V. Zanet and John Chown ponder whether the E.U. will adopt an F.T.T. now that 11 states have agreed to work on its implementation. Open issues exist.
Read MoreThe U.S. Department of Justice’s (“D.O.J.”) “Swiss Bank Program” (officially called the “Program For Non-Prosecution Agreements”), was announced in August 2013 and provided a path for Swiss banks to resolve potential criminal liabilities in the U.S.
Swiss banks eligible to enter the program were required to advise the D.O.J. by December 31, 2013 that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts. Banks that were already under criminal investigation related to their banking activities were expressly excluded from the program.
Recently, the Internal Revenue Service (“I.R.S.”) Office of the Associate Chief Counsel (Corporate) announced that it may hold off on issuing ruling requests to taxpayers seeking assurance on the “active trade or business” requirement (“A.T.B.”) of a tax-free spinoff under Code §355. In light of recent market transactions, the I.R.S. is in the process of considering, how much A.T.B. is enough for a spinoff to qualify for nonrecognition treatment.
The announcement also placed doubt on whether ruling requests already submitted to the I.R.S. would be issued. Speaking at a District of Columbia Bar Association event, a senior technical reviewer at the Office of the Associate Chief Counsel (Corporate) stated that the I.R.S. will hold off on issuing new ruling requests starting on May 19, 2015. He said that requests that were submitted before that date will be reviewed in the normal course, but that position may also change depending on what is decided in the next few months.
In Notice 2015-10 (the “Notice”), issued on April 28, 2015, the I.R.S. stated that it was concerned about cases in which persons subject to withholding under Code §§1441-1443 (“Chapter 3”) or Code §§1471 and 1472 (“Chapter 4”) are making or will make claims for refunds or credits in circumstances where a withholding agent failed to deposit the amounts required to be withheld under §6302.
If a withholding agent fails to deposit an amount withheld under Chapters 3 or 4, or reported as withheld on Form 1042-S, and the I.R.S. issues a refund or credit for the amount, the I.R.S. may not be able to recover that amount because the claimant, and in some cases the relevant withholding agent, may be outside the United States. The new regulations aim to reduce the risk that the I.R.S. may issue improper refunds or credits for fictitious withholding or amounts that have not been deposited and are difficult to collect.
As will be seen below, the new regulations would limit a foreign taxpayer’s refund or credit to the amount deposited by the withholding agent. Though collecting undeposited amounts from withholding agents located outside the United States may be difficult for the I.R.S., one wonders about the fairness of limiting a foreign taxpayer’s refund or credit when the I.R.S. could use its greater resources to collect against the withholding agent.
