This month, we look briefly at several timely issues, including (i) the termination of foreign acceptance agent agreements used to confirm copies of passports outside the U.S. when a non-U.S. individual obtains an I.T.I.N., (ii) a court order in Canada upholding a demand for disclosure of client names and documentation relating to participation in a discredited tax shelter, (iii) E.U. steps that identify potentially blacklisted low-tax or no-tax countries, and (iv) worsening relations between the U.S. and the E.U. stemming from widening differences in tax policies.

A globalized economy has been the driving force behind cross-border tax transparency and increased dissemination of tax information in recent years.  The importance of F.A.T.C.A. reporting has paled as the O.E.C.D. Common Reporting Standard has taken effect in the E.U., State Aid cases are progressing, and country-by-country reports may be publicly available.  Europe and the U.S. are moving in different directions.  Philip R. Hirschfeld and Stanley C. Ruchelman explain.

Notwithstanding the war on State Aid within the E.U., the O.E.C.D. issued a Working Paper recognizing that the encouragement of R&D is an essential part of the development, innovation, and growth of an economy and that carefully tying incentives to the performance of R&D locally is not abusive.  Philip R. Hirschfeld and Galia Antebi explain.

Earlier this year, the U.S. Treasury Department issued comprehensive and detailed proposed regulations under Code §385 that address whether a debt instrument will be treated as true debt for U.S. income tax purposes or re-characterized, in whole or in part, as equity.  Not surprisingly, significant pushback has been encountered from members of Congress, professional bodies, and affected taxpayers.  It seems that the one-size-fits-all approach contains many defects.  Philip R. Hirschfeld and Stanley C. Ruchelman explain.

Crowdfunding is an internet-based form of raising capital for businesses and other endeavors that is popular with millennials.  Millions of dollars are raised each month through crowdfunding, but it is unlikely that much thought has been given to the tax consequences for investors and the companies being funded.  The ways in which crowdfunding transactions are structured vary significantly, and as a result, the tax consequences vary.  In Information Letter 2016-0036, the I.R.S. explains its view of the tax consequences.  The tax consequences may not be benign for the company raising the funds unless certain conditions exist.  Philip R. Hirschfeld and Elizabeth V. Zanet explain the I.R.S. view.

The Tax Section of the American Bar Association recently commented on a set of proposed rules that appear in Notice 2015-54.  When adopted, these rules would limit the ability of U.S. persons to transfer appreciated property to a partnership in a tax-free transaction when the partnership has a non-U.S. person as a partner.  The I.R.S. is concerned that through special allocations of gain, built-in appreciation in contributed assets may escape taxation.  The Tax Section makes a case for additional guidance concerning the methods proposed to eliminate that result.  Philip R. Hirschfeld and Nina Krauthamer discuss the I.R.S. proposal and A.B.A. comments.

Recently-proposed regulations will require information reporting for single member L.L.C.’s that are owned by non-U.S. persons and treated as disregarded entities. Typically, this structure is used for the acquisition of an apartment by camera-shy, high net worth individuals and offshore trading companies wishing to appear as U.S. persons. The regulations are designed to supply the I.R.S. with information about the operations and ownership so that information may be exchanged with tax treaty partner jurisdictions. Philip R. Hirschfeld and Nina Krauthamer examine the proposed reporting rules.

In a follow-up piece on newly proposed anti-inversion regulations, Phillip R. Hirschfeld offers a detailed analysis of new debt equity regulations.  Mind-boggling complexity is proposed for rules in an area of the tax law that lay dormant for almost 40 years.

This month, Galia Antebi and Philip R. Hirschfeld discuss (i) the growing list of countries with which the I.R.S. will exchange F.A.T.C.A. information, (ii) the litigation in Canada attempting to block F.A.T.C.A. exchanges with U.S., (iii) recent developments in acceptably encryption for F.A.T.C.A. exchanges, (iv) additional competent authority agreements, and (iv) an updated list of I.G.A. partner countries.

On April 4, 2016, the Treasury Department issued a third round of new rules under Code §7874 aimed at halting the wave of inversions. Already, at least one inversion transaction, involving pharmaceutical giants Pfizer and Allergan, has been scuttled. Beyond that, the new rules resuscitate regulations issued under Code §385. Philip R. Hirschfeld explains.

This month, Galia Antebi and Philip R. Hirschfeld discuss (i) changes to F.A.T.C.A. regulations designed to ease burdens on F.F.I.’s; (ii) continued I.R.S. interest in public comments; (iii) finalization of domestic entity reporting regulations under Code §6038D; (iv) an exemption from F.A.T.C.A. for a Swiss attorney’s confidential client escrow accounts; (v) competent authority agreements that have been reached with Brazil, Colombia, and Italy; and (vi) an updated list of I.G.A. partner countries.

On February 17, 2016, the Treasury Department released its 2016 Model Treaty. The model serves as the baseline from which the U.S. initiates treaty negotiations. Various provisions are discussed in detail in this month’s Insights.

Those who thought that the limitation on benefits (“L.O.B.”) provision under the U.S.-Netherlands Income Tax Treaty was complex will find that the level of complexity in the 2016 Model Treaty has been raised several levels. Some taxpayers will be losers and others will be winners. Philip R. Hirschfeld and Galia Antebi explain how the revised provision will work.

This month, Insights looks at the latest development in the deferred prosecution agreement with Swiss banks, a property tax increase in Jerusalem for “ghost apartments,” Canadian procedures to exempt foreign employers from withholding tax on salaries paid to certain individuals that are resident outside of Canada but work in Canada from time to time, and the adverse effect outside the U.S. of deferred CbC reporting for U.S.-based multinationals.

This month, Insights looks at the I.G.A. experience in Mexico; updated Form W-8BEN-E and instructions; an announcement on forthcoming regulations that will ease burdens on F.F.I.’s; new I.G.A. competent authority arrangements signed with Norway, Barbados, Romania, Spain, Italy, and Costa Rica; a new I.G.A. with St. Lucia; and the most recent list of I.G.A. partner countries.

At the end of 2015, the I.R.S. issued a notice designed to limit the instances in which contributions of property to foreign partnerships benefit from nonrecognition of gain. In January, the I.R.S. came under pressure to modify its announced position in final regulations that are currently being developed. Philip R. Hirschfeld explains.

This month, recent developments in F.A.T.C.A. include the D.O.J.’s Swiss bank deferred prosecution program; new instructions for Form 8966, F.A.T.C.A. Report; six new YouTube videos regarding the Online Registration System; extension of time to file F.A.T.C.A. Reports; upgrade to F.F.I. lists, the current I.G.A. partner countries, and more.

Everyone likes Christmas presents and the P.A.T.H. Act delivers. It provides favorable tax treatment in the form of (i) F.I.R.P.T.A. exemptions for foreign pensions funds, (ii) increased ownership thresholds before F.I.R.P.T.A. tax is imposed on C.I.V. investment in R.E.I.T.’s, (iii) increased ownership thresholds before F.I.R.P.T.A. tax is imposed on foreign investment in domestically-controlled R.E.I.T.’s, (iv) a reduction in the time that must elapse in order to avoid corporate level tax on built-in gain when an S-election is made by a corporation after the close of the year of its formation, and (v) a permanent exemption from Subpart F income for active financing income of C.F.C.’s.

However, not all taxpayers benefitted from the Act. The P.A.T.H. Act increases F.I.R.P.T.A. withholding tax to 15%, adopts new partnership tax examination rules, and tightens rules regarding I.T.I.N.’s. Elizabeth V. Zanet, Christine Long, Rusudan Shervashidze, and Philip R. Hirschfeld explain these and certain other legislative changes.

Recent developments in the F.A.T.C.A. practice include upgrades to the online registration system, a flurry of competent authority arrangements signed with other countries, F.A.T.C.A. guidance issued by the Turks and Caicos Islands, new authorizing statutes in Russia and Georgia, an implementing memorandum in Germany, an I.G.A. with Angola, updated F.A.Q.’s, and a list of Model 1 and Model 2 I.G.A. partner countries.

Partnerships owning real estate or other assets sometimes take aggressive tax positions that may invite I.R.S. scrutiny. Philip R. Hirschfeld and Nina Krauthamer explain the new partnership audit rules enacted by Congress in November as part of the Bipartisan Budget Act of 2015. With limited exception, partnerships will become liable for tax increases arising from audit adjustments. This treatment raises the importance of tax indemnities when partnership interests are acquired.

Despite efforts to repeal F.A.T.C.A. in the U.S. and opposition from abroad, it appears that F.A.T.C.A. is here to stay. Galia Antebi and Philip R. Hirschfeld address the recent September 30 milestone and the advent of exchanges of financial account information with tax administrations of I.G.A. partner jurisdictions.

In late September, the Obama Administration released the tax revisions that are part of its Fiscal Year 2016 Budget Proposal (the Proposal). These changes are designed to provide deficit reduction measures through additional revenue increases and spending cuts. We explain the new twists to seasoned proposals. If enacted, the changes described in the Proposal could influence global patterns of investment and employment by U.S. multinationals.

This month, Philip R. Hirschfeld and Galia Antebi report on Republican-led efforts to curtail F.A.T.C.A., new F.A.Q.’s released by the U.S. and Mauritius, publication of the St. Kitts and Nevis I.G.A., updated foreign account reporting procedures, and much more.