Daily Tax Update - May 20, 2014: Anti-Inversion Legislation Introduced

ANTI-INVERSION LEGISLATION INTRODUCED:  Today, Sen. Carl Levin (D-MI) and Rep. Sander Levin (D-MI) introduced the “Stop Corporate Inversions Act of 2014.”  According to a statement from Sen. Levin, “The Stop Corporate Inversions Act of 2014 is designed to prevent the loss of billions of dollars in revenue through a flood of inversions, a loss that would add either to the deficit or to the tax burden of American taxpayers. The bill would effectively impose a two-year moratorium on inversions, the practice of shifting a corporation’s tax residence overseas through acquisition of an offshore company to avoid paying U.S. income taxes.”

The bill “increases the needed percentage change in stock ownership from 20 percent to 50 percent and provides that the merged company will nevertheless continue to be treated as a domestic U.S. company for tax purposes if management and control of the merged company remains in the U.S. and either 25 percent of its employees or sales or assets are located in the U.S.The bill provides a two year moratorium on inversions that do not meet the stricter tests in the bill so that Congress can consider a long-term solution as part of general corporate tax reform.” 

Levin added, “These transactions are about tax avoidance, plain and simple. The Treasury is bleeding red ink, and we can’t wait for comprehensive tax reform to stop the bleeding. Our legislation would clamp down on this loophole to prevent corporations from shifting their tax burden onto their competitors and average Americans while Congress is considering comprehensive tax reform.”

CREDIT SUISSE PLEADS GUILTY TO HELPING CLIENTS EVADE TAXES: The Department of Justice announced that Credit Suisse has pleaded guilty to criminal charges related to allegations that it helped some of its U.S. clients evade U.S. taxes and has agreed to pay $2.6 billion as part of its plea agreement. According to the Justice Department, Credit Suisse AG pleaded guilty to “conspiracy to aid and assist U.S. taxpayers in filing false income tax returns and other documents with the Internal Revenue Service (IRS).” Justice added, “The plea agreement, along with agreements made with state and federal partners, provides that Credit Suisse will pay a total of $2.6 billion - $1.8 billion to the Department of Justice for the U.S. Treasury, $100 million to the Federal Reserve, and $715 million to the New York State Department of Financial Services.”

The plea agreement can be accessed via:  credit suisse.pdf

MISCELLANEOUS GUIDANCE RELEASED:
Revenue Ruling 2014-16 provides various prescribed rates for federal income tax purposes for June 2014 (the current month). 

Revenue Ruling 2014-17 holds that tangible assets used in converting corn to fuel grade ethanol are properly included in asset class 49.5 of Rev. Proc. 87-56,1987-2 C.B. 674, for depreciation purposes.  The Internal Revenue Service will not apply the revenue ruling to tangible assets that are used in converting biomass to a liquid fuel such as fuel grade ethanol that a taxpayer places in service before June 9, 2014.