Daily Tax Update - June 22, 2017: Senate Affordable Care Act Repeal Bill Released

Senate Affordable Care Act Repeal Bill Released:  Today, Senate Republicans released their much-awaited health care bill, the Better Care Reconciliation Act of 2017, which would repeal many of the tax provisions of the Affordable Care Act. These repeals include the tanning tax, the 3.8% net investment income tax, and a repeal of the Medicare surtax beginning after 2022. The bill provides that the premium tax credits would be adjusted for income, age, and geography and would be capped at 350% of the federal poverty level. The bill would also reduce the threshold for the medical expenses deduction under section 213 from the current 10% of adjusted gross income to 7.5%.

EU Proposal Would Require Disclosure of Cross-Border Tax Planning:  Yesterday, the European Commission released a proposal for a council directive that would require reporting and disclosure of aggressive cross-border tax planning schemes. The tax planning arrangements covered would include those that i) involve a cross-border payment to a recipient resident in a no-tax country, ii) enable the same income to benefit from tax relief in more than one jurisdiction, or iii) do not respect EU or international transfer pricing guidelines. Tax advisors, accountants, lawyers, banks, and other intermediaries who designed the tax arrangement would be subject to reporting, unless they are bound by professional privacy rules or not based in the EU, in which case the duty to report would fall on the taxpayer receiving the advice. The proposal will be submitted to the European Parliament for consultation and to the European Council for adoption.

OECD Releases Revised Discussion Drafts on Profits Splits and Attribution to Permanent Establishments:  Today, the OECD released revised discussion drafts on the attribution of profits to permanent establishments (PEs) and transfer pricing guidance on the profit split method. The PE discussion draft follows up on a 2015 Final Report, “Preventing the Artificial Avoidance of Permanent Establishment Status,” developed in response to Action 7 of the OECD base erosion profit shifting (BEPS) plan. The draft guidance includes examples of how to analyze PE issues when a multinational enterprise uses a commissionaire structure, an online advertising sales structure, and a procurement structure involving a related intermediary. The PE discussion draft also examines the interaction between Article 7 of the OECD model tax convention, which deals with attribution of profits to PEs, and Article 9, which deals with associated enterprises, particularly with respect to dependent agent PEs. The second discussion draft on profit splits outlines when the method is the most appropriate transfer pricing method and how profits should be split.

Both discussion drafts replace earlier drafts published in July 2016. Comments to the drafts should be submitted by September 15.