U.S. Inbound Corner Archive
U.S. Inbound Corner is a bulletin of the latest tax developments affecting businesses investing into the United States. Written by professionals of the Deloitte member firms, the newsletter provides invaluable insights on a broad range of topics affecting U.S inbound taxpayers.
- Treasury releases inversion guidance – Fulfilling recent promises by Treasury Secretary Jacob “Jack” Lew, the Obama Administration released guidance late September 22 that Lew said “will make companies think twice” before undertaking a corporate inversion transaction.
- Technology Considerations of Country-by-Country Reporting – Among the priorities of the OECD’s global tax reform project, known as base erosion and profit shifting (BEPS) project, “transfer pricing documentation requirements should be less burdensome and more targeted.” Toward this stated goal, the OECD recently published a finalized Chapter V of the OECD Guidelines. With their significant new reporting requirements, the guidelines will instead more likely increase the compliance burden on multinational enterprises (MNEs) in the effort to create an environment of increased transparency. The costs of compliance, however, will vary depending on the technological capabilities the MNEs already have in place.
- New Regulations Open the Door to New Opportunities Under Section 336(e) – Inbound investors should be aware of expanded opportunities to obtain a step up in the US tax basis in assets with a stock acquisition. Historically, there was a limited opportunity to obtain a tax basis in assets equal to fair market value (i.e., a tax basis step-up) in the acquisition of US shares. That opportunity generally was available to US corporate purchasers of stock through an Internal Revenue Code section 338(h)(10) election. Recently finalized Treasury regulations under section 336(e) have created a new opportunity for inbound investors to qualify for a similar election in expanded scenarios (e.g., joint venture). This article discusses the importance of such elections, and some key differences between section 338(h)(10) and section 336(e) elections.
- State & Local Incentives & Credits: Consideration for Inbound US Companies – The United States has been the world’s biggest recipient of foreign direct investment since 2006. Foreign companies continue to open new or expanded facilities in the US and provide additional capital to establish operations. To an inbound US investor, the vast array of incentive programs and the necessary compliance required to monetize the related benefits can be daunting.
- Leveraging “Big Data” to manage the tax challenges arising from business travelers – There are many aspects of the US tax system that are not intuitive. Why is a business traveler from Texas subject to individual income tax on a business trip to New York but not when he/she travels to Illinois? And how does an employer know when to issue a Form W-2 to report the wages earned in different states for its employees travelling for business purposes? Learn how other organizations are taking steps to tackle these challenging and perplexing issues.
- US Estate and gift taxation of resident aliens and nonresident aliens – Non-US citizens, both resident and nonresident aliens, may be subject to US estate and gift taxes. Whether in the United States indefinitely, for a long-term stay, or short-term assignment, the death of a non-US citizen may have adverse US estate tax consequences. Likewise, lifetime transfers by non-US citizens may be subject to US gift tax. This publication will provide an overview of the questions that must be addressed by non-US citizens who live, work, or own property in the United States.
July 2014 (Launch Edition)
Managing the “Managed and Controlled” Provisions of the Stop Corporate Inversions Act of 2014
- Managing the “Managed and Controlled” Provisions of the Stop Corporate Inversions Act of 2014 – On May 20, 2014, House Ways and Means Committee Ranking Member Sander Levin introduced the “Stop Corporate Inversions Act of 2014.” Similar legislation was introduced in the Senate by Senate Permanent Subcommittee on Investigations Chairman Carl Levin. Both bills would make changes to the anti-inversion rules in Internal Revenue Code section 7874 that would significantly broaden their application to acquisitions by non-US based multinationals. Since the rules were drafted to be retroactive, any non-US company contemplating an acquisition of a domestic entity or assets should consider the potential application of the proposed rules before undertaking the acquisition.
- Impact of BEPS Hybrid Mismatch Proposals on Cross-Border Financing Arrangements and UK Response – In March 2014, the OECD Working Party responsible for considering the effect of hybrid mismatch arrangements as part of the Base Erosion and Profit Shifting (BEPS) initiative released two Draft Discussion Papers that include proposals for changes to domestic laws which are intended to neutralize the effects of the hybrid arrangements which could be unilaterally adopted by a country. The UK government has made it clear it supports action against hybrids. Any UK legislation adopting the proposals could significantly affect US-UK financing arrangements.
- FATCA Effective as of July 1, 2014: What Non-US Multinationals Need to Do to Comply – The Foreign Account Tax Compliance Act (FATCA), enacted by the US government in 2010, officially became effective July 1, 2014. Non-US multinational companies must take action to comply with this new withholding regime.
- New Reporting Requirements for Issuers of Securities (Including Debt) under Section 6045B – Domestic and foreign corporations (including foreign multinationals) should be aware of expanded reporting requirements under Internal Revenue Code section 6045B, which could result in significant penalties if a corporation fails to report the impact of an organizational action to a holder’s cost basis in certain securities. Inbound investors may not be aware of these relatively new information reporting requirements and should consider these in connection with their inbound investments; whether as part of the investment itself or exposures for historic liabilities from the failure to report.
- Factor Presence Nexus Considerations for Inbound Companies – Tax law changes effective January 1, 2011, added bright-line statutory nexus thresholds to California’s definition of “doing business” in the state, including a threshold based on a company’s level of sales in the state. Additionally, changes effective January 1, 2013, require single sales factor apportionment and market-based sourcing for sales of property other than tangible personal property. These tax law changes may potentially expose foreign companies with US inbound activities to California franchise tax even if they have no physical presence in the state. Similar considerations would exist in other states with bright-line statutory nexus thresholds, a growing trend in state taxation
- Calendars to Watch – Each edition, be sure to mark your calendars for some of the more important events (recent and upcoming) as well as tax developments making in impact on businesses investing into the United States.