Daily Tax Update - December 9, 2008

IRS COMMISSIONER DISCUSSES INTERNATIONAL TAX ISSUES:  Yesterday, IRS Commissioner Douglas Shulman spoke at the 21st Annual George Washington University International Tax Conference. Shulman said, “Our compliance program will span efforts to ensure individuals, business, and corporate taxpayers understand and meet their withholding obligations to addressing transactions that we see that are trying to circumvent withholding taxes or claiming improper tax treaty withholding taxes.”

  • Shulman said, “In the corporate arena, we’re starting to make progress in our international efforts by focusing on three specific areas which are most on our minds these days and which I believe will best assist our efforts to reign in those corporations who are pushing the envelope and also to help those corporations who play by the rules. First is Transfer Pricing. This is one of the most difficult areas for both tax authorities and taxpayers. I recognize that transfer pricing is not easy to manage – even for those taxpayers that aim to steer clear of any grey area. Although there are many transfer pricing topics, I want to mention three that may be of current interest to the audience. Specifically, cost sharing, contract manufacturing, and global dealing.” Shulman continued, “The second big area is hybrid structures...One of the most problematic of these structures are Foreign Tax Credit generators. In my opinion, FTC generator transactions are examples of situations where certain taxpayers may be trending toward the “bad actor” end of the spectrum.” Shulman added, “Third and lastly are withholding taxes. Today, the IRS will add withholding taxes to the Tier I list of issues. The tier issue process will provide the needed organizational priority and coordination to ensure taxpayer compliance with the US withholding tax provisions. Our compliance efforts will span efforts to ensure individual, business and corporate taxpayers understand and fulfill their withholding tax filing obligations to addressing transactions that attempt to circumvent withholding taxes or claiming improper tax treaty withholding rates.”

NEGOTIATIONS ON $15 BILLION AUTO BAILOUT BILL CONTINUE:  Congressional leaders are working on finalizing the details of a $15 billion loan package for the Big Three automakers. The goal of House and Senate leaders is to try to work through several outstanding issues and have a vote later in the week. However, it was reported that a small group of Republican Senators may try to filibuster the bill if their concerns are not addressed.

  • The money provided to the automakers would come from a $25 billion Energy Department loan program established for the industry's retooling and energy efficiency efforts. The Bush Administration is expected to appoint a “Car Czar” to manage restructuring and oversee the loan program. Under the proposal, the car companies would be required to submit detailed plans for restructuring by March 31, when they would be eligible for additional government assistance. The bill is also expected to contain limits on executive compensation and dividend payments.
  • Chairman of the House Financial Services Committee Rep. Barney Frank said, “It is overwhelmingly likely that a bill will be on the President's desk by the end of the week.”

As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

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