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Nov. 4 — The government is exploring its options on the controversial area of earnings stripping as it works on regulations to implement the anti-inversions Notice 2014-52, a senior Treasury Department official said.
Douglas Poms, senior counsel in the Treasury Office of International Tax Counsel, said the agency continues to consider earnings stripping possibilities “in a manner consistent with the notice,” but no definite course of action has been decided, including whether earnings stripping might be addressed as part of the inversions guidance now underway.
Speaking Nov. 4 at the American Institute of CPAs Fall Tax Division Meeting, Poms said regulations to implement Notice 2014-52 will be finished in coming months, but couldn't give a more definite time frame. He told Bloomberg BNA following the panel that the government is considering options for more inversions guidance—options that may or may not include additional notices.
Intangibles Rules High Priority for 2016
Poms shared the panel with Brenda Zent, Treasury special adviser on international taxation, addressing a broad range of international issues.
On another topic, Zent said issuing final rules on the transfer of intangibles under tax code Section 367(d) is one of the government's highest priorities for 2016. Released in September, the proposed and temporary rules (REG-139483-13) eliminate tax exceptions on transfers of intangibles for goodwill and going concern (178 DTR G-4, 9/15/15).
The rules are intended to take away incentives for inappropriate transfer pricing positions on such transfers.
In answer to questions from practitioners, Zent said in working on the final rules, the government may be willing to consider narrow exceptions to guidance that now completely takes away exceptions for goodwill and going concern value. Treasury understands that this is “a very big change,” Zent said, but views the rules as “shutting down a serious abuse.”
In looking at possible carveouts, she said, “We're serious about the idea that it needs to be an exception that won't re-open the gates.” Zent said the government welcomes comments and already has had taxpayers come in and present what they believe are sympathetic fact patterns.
Section 901(m) Rules Getting Close
Among a range of other guidance that has made significant progress, Poms said rules that disallow foreign tax credits under Section 901(m) are “very far along.” He said the rules will be comprehensive and cover a broad range of areas.
The Treasury counsel said the government is also working on guidance on passive foreign investment companies, among other projects. “We're trying to get as much done as we can,” he said.
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