Daily Tax Update - December 2, 2016: IRS to Modify 'Triangular Reorganizations' Rules

IRS to Modify ‘Triangular Reorganizations’ Rules:  In Notice 2016-73, released today, the IRS announced its intent to issue regulations modifying the “triangular reorganizations” rules under section 367 for foreign corporations where a subsidiary acquires its parent’s stock and uses that stock to acquire a target corporation.  The regulations will also modify the “all earnings and profits” amount that must be included in income as a result of certain inbound asset acquisitions that repatriate “excess asset basis.”

IRS Issues Guidance on Application of Dividend Equivalent Regulations:  Today, the IRS issued Notice 2016-76, which provides for the phased-in application of the section 871(m) dividend equivalent regulations, which were issued in September of 2015.  The section 871(m) regulations will apply: (1) only to delta-one transactions in calendar year 2017 and (2) to non-delta-one transactions beginning in calendar year 2018.  Delta-one transactions involve specified notional principal contracts and equity-linked instruments.  “Delta-one” means that changes in the value of a derivative exactly mirror the changes in the value of the underlying security. 

IRS Provides Transition Relief for Small Employers Where SHOP Exchange is Unavailable:  IRS Notice 2016-75, issued today, provides guidance on section 45R for certain small employers that cannot offer a qualified health plan (QHP) through a Small Business Health Options Program (SHOP) Exchange.  Specifically, the transition relief allows employers, whose principal business address is in a county in which a QHP through a SHOP Exchange will not be available for the 2016 calendar year, to claim the credit by satisfying the pre-2014 rules.

Rep. Richard Neal to Succeed Levin as Ranking Ways and Means Democrat:  Rep. Richard E. Neal (D-MA) was named ranking member of the House Ways and Means Committee, replacing Rep. Sander Levin (D-MI), who said earlier this week he was stepping down.  Rep. Neal has served in Congress since 1989.