Daily Tax Update - December 19, 2016: US Wins Appeals in Santander STARS Case

US Wins Appeal in Santander STARS Case:  In Santander Holdings USA, Inc. v. United States, the US Court of Appeals for the First Circuit held that Santander Holdings’ STARS transaction lacked economic substance.  The decision overturns a US District Court for the District of Massachusetts 2015 decision that entitled Santander to $234 million in foreign tax credits for taxes Santander paid to the UK.  The First Circuit held that the STARS transaction did not have a reasonable prospect of creating a profit without considering the foreign tax credits.   

EU Commission Releases Full Apple Decision, Ireland Responds:  Today, the European Commission issued its full decision requiring Ireland to retroactively recoup $14.5 billion in unpaid taxes from Apple Inc.  Following a state aid investigation launched in June 2014, the Commission concluded in August 2016 that two tax rulings issued by Ireland to Apple have substantially and artificially lowered the tax paid by Apple in Ireland since 1991.  The Irish government appealed the decision to the EU General Court on November 9, and today released an explanation of its argument that the Commission misapplied Irish law and mischaracterized the activities and responsibilities of the Irish branches of Apple.  

Miscellaneous Guidance:
Notice 2016-81 provides interim definitions of the terms “chassis” and “body” for purposes of the retail excise tax on heavy trucks, trailers, and tractors imposed by section 4051(a) and for the purposes of applying the safe harbor provision in section 4052(f)(1).  

Notice 2017-1 provides guidance on section 7528(b)(2) relating to an exemption from the requirement to pay a user fee for certain requests to the IRS for determination letters with respect to the qualified status of pension, profit-sharing, stock bonus, annuity, and employee stock ownership plans maintained by small employers. 

Revenue Ruling 2017-01 provides the base period T-bill rate as determined by the Office of Debt Management within the Treasury Department for the period ending September 30, 2016, and provides a table of factors compounded daily for taxpayers with short or alternative taxable years. 

Revenue Ruling 2017-02 provides various prescribed rates for January 2017 for federal income tax purposes including the applicable federal interest rates, the adjusted applicable federal interest rates, the adjusted federal long-term rate, and the adjusted federal long-term tax-exempt rate.