Daily Tax Update - January 15, 2016: Senate Finance Committee Members Express Concern That EU State Aid Investigations Could Adversely Impact US Companies

Senate Finance Committee Members Express Concern That EU State Aid Investigations Could Adversely Impact US Companies:  In a letter to Treasury Secretary Jack Lew today, Senate Finance Committee Chairman Orrin Hatch (R-UT), Ranking Member Ron Wyden (D-OR), and Committee members Rob Portman (R-OH) and Chuck Schumer (D-NY) warned the EU’s state aid investigations could lead to retroactive taxation on multinational enterprises and have an adverse impact on US-based companies.  The letter expresses concerns that the recent state aid cases may set a precedent that could pave the way for the EU to tax the historical earnings of many more US companies.  The committee members “urge Treasury to intensify its efforts to caution the EU Commission not to reach retroactive results that are inconsistent with internationally accepted standards and that the United States views such results as a direct threat to its interests.”

IRS Releases Guidance on the Treatment by RICs of Certain EU Tax Refunds:  Today the IRS released Notice 2016-10, which addresses the application of sections 853 and 905(c) to the receipt by a regulated investment company (RIC) of a tax refund that was eligible for a foreign tax credit under section 901 or 903 if that tax, when paid by the RIC, was treated as paid by the RIC’s shareholders under section 853(b)(2) because an election was made under section 853(a).  The notice describes regulations that the Treasury Department and IRS intend to issue that will allow a netting procedure which, if applied by the RICs, will greatly reduce the administrative costs and burdens on the US government, RICs, and the RIC’s shareholders.  The notice also provides guidelines for RICs wishing to obtain closing agreements relating to tax consequences arising from the receipt of such refunds.

Miscellaneous Guidance: The IRS released Notice 2016-07, which provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under section 417(e)(3), and the 24-month average segment rates under section 430(h)(2).  The notice also provides guidance as to the interest rate on 30-year Treasury securities under section 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under section 431(c)(6)(E)(ii)(I).