Daily Tax Update - November 19, 2015: Treasury Announces Additional Actions to Reduce Tax Benefits of Corporate Inversions

Treasury Announces Additional Actions to Reduce Tax Benefits of Corporate Inversions:  Today, Treasury and the IRS issued Notice 2015-79 providing additional guidance aimed at further reducing the tax benefits of corporate inversions.  The guidance is of three types:  (1) corrections to Notice 2014-52 (previous inversion guidance); (2) measures to inhibit “out from under” transfers of controlled foreign corporations in inversions completed on or after September 22, 2014, the date of Notice 2014-52; and (3) measures aimed at structures in which the new foreign parent is tax resident outside its country of organization and a measure strengthening the “anti-stuffing rules”.
 
Phillip R. West, chairman of Steptoe and head of the firm’s Transactions and Tax Department, commented, “It is likely that recently announced deals prompted new urgency for releasing these rules, but it is equally evident that they have been under consideration for longer than the period since the biggest of those recent deals was announced.”  He further noted that “as expected, Treasury coupled the guidance with another warning that inversions can be most effectively curtailed only with legislation.”  
 
A fact sheet on Notice 2015-79 can be accessed here
 
For more information, please contact Phil West at pwest@steptoe.com or +1 202 429 6462.
 
For DTU coverage of prior inversion guidance, click here.

IRS Issues Guidance on Remodel-Refresh Expenditures:  Revenue Procedure 2015-56 provides certain taxpayers engaged in the trade or business of operating a retail establishment or a restaurant with a safe harbor method of accounting for determining whether expenditures paid or incurred to remodel or refresh a qualified building are deductible under section 162(a), must be capitalized as improvements under section 263(a), or must be capitalized as the costs of property produced by the taxpayer for use in its trade or business under section 263A.

Treasury, IRS Issue Proposed Regulations on Relief From Joint and Several Liability Under Section 6105:  Today, Treasury and the IRS issued proposed regulations (REG-134219-08) relating to relief from joint and several liability under section 6015 and relief from the operation of state community property law under section 66.  The proposed regulations make a number of significant changes to the existing regulations, including providing additional guidance on the judicial doctrine of res judicata and the section 6015(g)(2) exception to res judicata when a requesting spouse did not meaningfully participate in a prior court proceeding, and adding a list of acts to be considered in making the determination as to whether the requesting spouse meaningfully participated in a prior proceeding.  In addition, the regulations propose a definition of underpayment or unpaid tax for purposes of section 6015(f); provide detailed rules regarding credits and refunds in innocent spouse cases; expand the rule that penalties and interest are not separate items from which relief can be obtained to cases involving underpayments; incorporate an administratively developed rule that attribution of an erroneous item follows the attribution of the underlying item that caused the increase to adjusted gross income; update the discussion of the allocation rules under section 6015(c) and (d); and revise the rules regarding prohibition on collection and suspension of the collection statute.  Comments are due by February 18, 2016.