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Commentary

• * Dec. 12, 2011: The IRS has issued a new fact sheet, FS-2011-13, titled "Information for U.S. Citizens or Dual Citizens Residing Outside the U.S." It is divided into seven sections: 1. U.S. income tax return filing requirement; 2. Penalties imposed for failure to file income tax returns or to pay tax; 3. Possible additional penalties that may apply in particular cases; 4. FBAR filing requirement; 5. How to file an FBAR; 6. Possible penalties for failure to file FBAR; and 7. New reporting requirement for foreign financial assets.
• June 21, 2011: Earlier today, the IRS released Notice 2011-55, which "suspends [the] information reporting requirement under sections 6038D and 1298(f) for taxpayers that may be subject to reporting under those sections for taxable years beginning on or after March 18, 2010, until the IRS releases new Form 8938 (Statement of Foreign Financial Assets) and a revised Form 8621 (Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund). Notice 2011-55 will be published in Internal Revenue Bulletin 2011-29 on July 18, 2011.
• May 14, 2010: Notice 2010-41: "The Treasury Department and the IRS intend to issue regulations providing that, under certain circumstances, an otherwise domestic partnership will be classified as foreign solely for purposes of identifying the U.S. shareholders of a controlled foreign corporation (CFC) that are required to include in gross income the amounts determined under Code Sec. 951(a) with respect to the CFC. This treatment applies to Subpart F income partnership blocker transactions, which were identified as transactions of interest in Notice 2009-7, 2009-1 CB 312, and were added to the list of transactions of interest in Notice 2009-55, I.R.B. 2010-31, 170. Notice 2009-7 will continue to apply, as appropriate."
• April 7, 2010: The IRS has released Announcement 2010-22, requesting "comments from the public regarding guidance projects and issues concerning the interpretation and implementation" of the "FATCA" provisions in the HIRE Act of 2010, P.L. 111-147.
• Oct. 27, 2009: Here's the text of the Foreign Account Tax Compliance Act of 2009, introduced today by Ways and Means Chair Charles Rangel and Senate Finance Chair Max Baucus. Click here to download the JCT's technical explanation of the Act from the Joint Committee on Taxation web site.
• Mar. 3, 2009: As predicted in my recent colloquy with Roger Russell, the Stop Tax Haven Abuse Act has been reintroduced in the Senate. For more, see the TaxProf Blog's collection of hyperlinks.
• Jan. 9, 2009: Happy New Year! U.S. International Tax Outlook begins its third year of publication with today's issue. Included are the text for Notice 2009-7, which details the "Subpart F Income Partnership Blocker"; notes regarding a new Sec. 965 study (plus a cumulation of several 965 sources that appeared last year); and links for TD 9441 and REG-144615-02, which address a Sec. 482 issue, and TD 9438, which gives foreign base company sales income guidance.
• Dec. 19, 2008: Today's U.S. International Tax Outlook provides the body text for Announcement 2008-115, which “describes issues that the IRS and Treasury Department are considering addressing in a notice of proposed rulemaking (REG–130342–08)” regarding the applicability of FIRPTA to “certain rights granted by a governmental unit that are related to the lease, ownership, or use of real property.”
• Dec. 12, 2008: This week's USITO briefly discusses Notice 2008-111, provides abstracts for two new tax policy articles, draws on Rita de la Feria's research for a summary of the Marks and Spencer VAT case, and culls highlights from the Fall SOI Bulletin, two tax treaty developments, the CIIT conference, TD 9433, and the Treasury's Statement of Regulatory Priorities.
• Nov. 21, 2008: Today's U.S. International Tax Outlook provides excerpts from CCH's report on Eric Solomon's Notice 2008-20 comments at the Philadelphia ABA Tax Conference.
• Nov. 14, 2008: This week's USITO briefly addresses Bob Peroni's presentation today of "Better Than Exemption" at University of Toronto.
• Nov. 6, 2008: Today's U.S. International Tax Outlook provides abstracts for two recent tax policy articles and a comment by Reuven Avi-Yonah regarding the ways that President-Elect Obama may try to fulfill his promise to "end tax breaks for corporations that send jobs overseas."
• Oct. 23, 2008: This week's issue of USITO notes, with a sense of deja vu, a VAT complaint that appeared in this week's Journal of Commerce Online; provides the full text for Notice 2008-91, which expands the 30-day exclusion rule of Notice 88-108; and concludes with a link to an article proposing residence-based taxation of individuals in the U.S.
• Oct. 16, 2008: Today's U.S. International Tax Outlook analyzes an article in The Washington Times that discusses VAT rebates on exports and suggests that the best antidote for the WTO's anachronistic distinction between direct and indirect taxes may be a new, capped U.S. foreign tax credit for value added taxes.
• Oct. 9, 2008: This week's issue of USITO provides details on two technical papers released by the U.S. Treasury and discusses three tax policy papers: two on the worldwide-vs.-territorial debate, and one on the application of tax expenditure analysis to deferral, cross-crediting, and the export sales source rule.
• Oct. 2, 2008: Today's issue of U.S. International Tax Outlook provides an overview of four interesting tax policy articles: two on treaties, one on tax competition in offshore financial centers, and one on the Sec. 965 "repatriation holiday."
• Sept. 25, 2008: This week's USITO briefly addresses a recent article on U.S. state tax liability in the absence of a PE, provides extensive excerpts from a recent Canada Revenue technical interpretation regarding the Canadian tax consequences of the conversion of a Delaware LLC to a Delaware LP, and gives details and links for T.D. 9425 (regarding IRC Sec. 6707A penalties) and the IRS International Tax Gap series of articles.
• Sept. 18, 2008: Today's U.S. International Tax Outlook discusses two recent PE decisions by the Tax Court of Canada (Knights of Columbus and AIL) and provides the abstract for an interesting transfer pricing paper I ran across this past week.
• Sept. 11, 2008: This week's issue of U.S. International Tax Outlook discusses selected parts of the recently released Government Accountability Office (GAO) report on effective tax rates for U.S. multinationals and hyperlinks the full text of a tax policy paper that many USITO readers expressed interest in a few months ago: "The Interaction of Tax Systems and Tax Cultures in an International Order for Taxation."
• Sept. 4, 2008: Today marks the first anniversary of my weekly newsletter, U.S. International Tax Outlook. Today's issue gives a heads-up regarding next week's Senate Permanent Subcommittee on Investigations hearing on dividend tax abuse, briefly discusses two new tax policy papers by Michael Graetz and Michael Knoll, and provides the executive summary for the AICPA's comments on the new contract manufacturing regs.
• Aug. 21, 2008: This week's U.S. International Tax Outlook notes the publication yesterday of REG-209006-89, "Transfers by Domestic Corporations That Are Subject to Section 367(a)(5); Distributions by Domestic Corporations That Are Subject to Section 1248(f)"; provides an outline for the NYSBA comments on the contract manufacturing regs; and gives details regarding three international tax articles in the Summer 2008 SOI Bulletin. To subscribe to USITO, click here.
• Aug. 14, 2008: Today's USITO notes the signing of the U.S.-Malta tax treaty on 8 August, provides highlights from Tax Analysts' interview with Dan Berman, gives details regarding a new tax arbitration paper, and touches on two recent IRS releases regarding withholding tax on the U.S.-source income of foreign taxpayers.
• Aug. 7, 2008: This morning's U.S. International Tax Outlook provides perspective on the prior versions of the two international revenue raisers in H.R. 6595, the "Middle Class Tax Fairness Act of 2008," which was introduced by Rep. Timothy Walz, R-Minn., on 24 July.
• July 31, 2008: Today's issue of USITO provides a follow-up regarding last week's HSGAC tax haven hearing, gives details about a recently published tax arbitration paper, and briefly notes the review of my PE book in the current issue of Canadian Tax Journal.
• July 24, 2008: Today's U.S. International Tax Outlook provides details regarding the Senate Finance Committee hearing this morning on the Cayman Islands and the continuation tomorrow of the HSGAC hearing on financial institutions in offshore tax havens.
• July 16, 2008: Today's issue of USITO discusses the permanent establishment portion of the technical explanation for the U.S.-Canada Fifth Protocol, provides details about tomorrow's U.S. Senate hearing on financial institutions in offshore tax havens, gives a heads-up regarding the structured passive investment regulations released today, and notes publication of two interesting tax policy papers by Christopher Hanna and Alex Khachaturian.
• July 9, 2008: Today's U.S. International Tax Outlook is devoted entirely to an in-depth discussion of the 26 June Senate Finance Committee hearing on international tax reform. Here's the opening paragraph: "The witnesses at the 26 June Senate Finance hearing presented three distinct points of view on reforming U.S. international tax policy. One was to "reinvent 1986" by broadening the corporate tax base, this time via elimination of deferral, and lowering the corporate tax rate. Another was to throw worldwide taxation from the train and switch to territoriality. The third was to abolish the corporate tax." To read the rest, send your contact information, including email address, to subscribe@martintittle.com.
• July 3, 2008: Today's issue of USITO provides follow-up information about last week's SFC international tax hearing and gives a heads-up regarding three recently released documents: Ernst and Young's comments on the new contract manufacturing regs, Tom Brennan's interesting repatriation article, and Chief Counsel Advice 200826036 ("Proposed Disallowance of Foreign Tax Credits Attributable to Cross-Border Trust and Financing").
• June 26, 2008: Today's U.S. International Tax Outlook briefly discusses the new "Killer 351" regulations, provides information regarding the JCT report prepared in connection with today's Senate Finance Committee hearing, and gives details on two newspaper articles prompted by Melissa Redmiles's Sec. 965 report. To subscribe, click here.
• June 23, 2008: Another one-page edition of USITO provides additional details on the testimony Jim Hines can be expected to give at Thursday's Senate Finance Committee hearing and gives preliminary information on S.3162, the international tax reform bill that Sen. George Voinovich, R-OH, introduced last Thursday.
• June 20, 2008: A special one-page edition of USITO provides details regarding next week's Senate Finance Committee hearing on international tax reform and the four witnesses who are scheduled to testify.
• June 19, 2008: Today's issue of USITO surveys two new reports that address U.S. taxation of foreign sovereigns, reviews both the analysis of Sec. 965 (the dividends received deduction) in the Spring SOI and Lisa Nadal's critique of that analysis, gives details on Shannon McCormack's new tax shelter paper, and briefly addresses Sen. Ben Nelson's reportable transactions bill, the recently released IRS APA report, Sen. Barack Obama's comments to the Wall Street Journal on corporate taxes, and the treaty revenue raiser in Charlie Rangel's AMT relief bill (H.R. 6275).
• June 16, 2008: Today's USITO hits the high points of Ernst & Young's comments on the -8T GRA regs and the New York City Bar's comments on derivative benefits in treaties, gives a heads-up on Rev. Rul. 2008-31, and calculates a combined state-and-federal effective tax rate for the U.S.
• June 12, 2008: This week's U.S. International Tax Outlook recounts the Kerry-Graham tax colloquy on "This Week with George Stephanopoulos" last Sunday, gives details regarding the hearing now scheduled in July on the new contract manufacturing regs, comments briefly on the court decision in the AWG Leasing SILO case, and explores the two international revenue raisers proposed by Senate Finance Committee Chair Max Baucus in his substitute amendment to H.R. 6049.
• June 5, 2008: This week's USITO provides highlights of Aviva Aron-Dine's new corporate tax reform paper, gives details on the Fortune magazine tax shelter article, lists interesting discussion topics from the recent Law & Society annual meeting, includes information regarding the TCPI presentations in the current issue of TAXES -- The Tax Magazine, and briefly notes Gene Steuerle's recent career move, a WSJ article on the Sala case, and the passing of U.S. international tax expert Walter Diamond.
• May 29, 2008: Today's U.S. International Tax Outlook explores the "plain vanilla preferred stock" 7874 regs; provides the complete text for Rev. Proc. 2008-31, which expands the APA program to include inbound transactions; briefly notes the "Killer B" regs, the NYSBA comments on Notice 2008-20, and the ABA comments on Treas. Reg. Sec. 1.367(b)-4; gives details regarding the second edition of Gene Steuerle's tax policy book; touches on John Swain's comparative, international/state-and-local paper; and surveys the "raise taxes" arguments that former U.S. Treasury Secretary Larry Summers and Martin Wolf presented earlier this month in the Financial Times.
• May 22, 2008: This week's issue of U.S. International Tax Outlook provides an update regarding the upcoming SFC multinational hearing, gives details about two interesting papers -- "Cross-Border Relief Post Marks & Spencer" and "[U.S.] Business Taxes and International Competitiveness" -- and briefly notes several WTO news items.
• May 15, 2008: Today's USITO notes two recent tax policy papers, one on a code of conduct for cooperation in combating international tax evasion and the other on corporate taxation and international charter competition, and briefly discusses three issues: the possibility of a new clampdown on tax havens by the EU, the deferral discussion last Sunday between George Stephanopoulos and "McCain Victory 2008" Chair Carly Fiorina, and the new FIRPTA revenue procedure.
• May 8, 2008: Today's issue of USITO presents the abstract and a hyperlink for Ilan Benshalom's new article “The Quest to Tax Interest Income: Stages in the Development of International Taxation.”
• May 1, 2008: Today's USITO examines the final foreign partner regulations in T.D. 9394, notes two interesting items regarding treaties and tax arbitrage in the latest Canadian Tax Journal, and briefly discusses two sources that address tax havens: the press conference that Sens. Warner and Levin held earlier today, and Anthony Infanti's review of J. C. Sharman's book Havens in a Storm: The Struggle for Global Tax Regulation.
• Apr. 23, 2008: Today's U.S. International Tax Outlook harks back to the inaugural issue last September by extracting the international topics from the First Periodic Update to the UST/IRS 2007-2008 Priority Guidance Plan, correcting two errors, and providing hyperlinks to most of the cited sources. To subscribe, click here.
• Apr. 17, 2008: Today's U.S. International Tax Outlook provides abstracts or excerpts for three recent international tax policy papers and gives details on the 15 April Senate Finance Committee (SFC) hearing, a SFC hearing to be held in July, and Andy Grewal's Boulware podcast.
• Apr. 10, 2008: Today's issue of U.S. International Tax Outlook outlines the foreign tax credit "solution" for the UK's new remittance basis charge for nondomiciliaries.
• Apr. 3, 2008: Today's U.S. International Tax Outlook highlights a recent article that advocates source taxation for emerging economies.
• Mar. 20, 2008: Today's issue of U.S. International Tax Outlook draws attention to three tax policy papers -- a new article on transfer pricing for intangibles and two papers that continue the income vs. consumption tax debate -- and includes a postscript on the disproportionate impact a consumption tax could have on the elderly.
• Mar. 13, 2008: Today's U.S. International Tax Outlook argues that the precedential status of Cudd Pressure, the 1998 Canadian PE case, will not necessarily be affected by the incorporation of OECD guidelines in the diplomatic notes that accompany the Fifth Protocol to the U.S.-Canada tax treaty. It also notes briefly the IRS Abusive Tax Avoidance Scheme Talking Points, the excise tax compliance program for foreign insurers, and two online sources for the IRC.
• Mar. 6, 2008: Today's issue of U.S. International Tax Outlook highlights four tax treaty issues, including the new 2008 protocol to the still-pending U.S.-Bulgaria treaty; provides links and abstracts for four tax policy papers and one interesting comment; and touches on two minor subjects: this week's visit to the Caymans by U.S. GAO investigators, and the advisability of migrating from mechanical, go/no-go tax rules to principles-based rules similar to those enunciated in the WTO agreements. To subscribe, click here.
• Mar. 1, 2008: Paul Caron has blogged The Integrated 2006 United States Model Income Tax Treaty, which Reuven Avi-Yonah and I recently completed, on the TaxProf Blog and has linked a .pdf of the table of contents and introduction.
• Feb. 28, 2008: Today's U.S. International Tax Outlook hits the high points of the new contract manufacturing regs and provides links and brief discussion on several topics, including the Third Circuit's opinion in Swallows, the Liechtenstein bank scandal, REG-209060-86, the latest version of Ed Kleinbard's business enterprise income tax, LII's online IRC, a new listed transaction, and OFII's comments on draft IRS Form 8926.
• Feb. 22, 2008: The Integrated 2006 United States Model Income Tax Treaty, which Reuven Avi-Yonah and I recently completed, is now available on the Amazon and Barnes and Noble web sites.
• Feb. 21, 2008: Today's issue of U.S. International Tax Outlook touches on the Swallows reversal, discusses TAM 200807015, mentions two new patent and tax strategy patent sources, gives details on Larry Lokken's new "losses and FTC" article, and hits the high points on five issues: the upcoming BNAI conference in London, U.S. creditability of the new UK non-dom fee, Monday's DC Bar FTC program, Venuti et al's great flow chart treaty articles, and Announcements 2008-9, -11, and -12.
• Feb. 14, 2008: Today's U.S. International Tax Outlook outlines the process that Massachusetts uses to classify a foreign entity, notes three themes in JCT Chief of Staff Ed Kleinbard's talk at Buchanan Ingersoll a few days ago, and provides details and links for two CRS reports, the IRS 2005 Corporation Source Book, Announcement 2008-8, and the imminent demise of the "super-LOB" provision in the Farm Bill.
• Feb. 7, 2008: Today's issue of U.S. International Tax Outlook discusses four sets of comments on the U.S.-Canada Fifth Protocol, examines a new OECD discussion draft and recently released comments on two past discussion drafts; notes four international items in President Bush's fiscal year 2009 budget; extracts the international responses from MilChev's annual Tax Policy Forecast Survey, and briefly mentions the upcoming ATAX conference, IRS Form 5713, and the Ernst & Young Transfer Pricing Survey.
• Jan. 31, 2008: Today's issue of U.S. International Tax Outlook discusses the recent GAO study documenting weaknesses in FDAP withholding; provides a one-chapter, 26-page excerpt from The Integrated 2006 United States Model Income Tax Treaty, a book that Reuven Avi-Yonah and I recently finished and that Vandeplas Publishing will be releasing at the end of February; and briefly mentions JCT Chief Ed Kleinbard's presentation on the JCT revenue estimating process and a CRS report that contradicts current thinking regarding the burden of corporate tax. The tripleheader of OECD reports that was released this week -- on proposed changes in the model tax treaty and/or commentary regarding services taxation, REITs, and transfer pricing -- will have to wait until next week.
• Jan. 24, 2008: The 24 January issue of U.S. International Tax Outlook explores application of the Comiskey case to U.S. tax strategy patents, announces a new book on the U.S. model tax treaty, provides abstracts and brief comments on several papers being presented at the 20th Annual Australasian Tax Teachers Association Conference, and briefly mentions the "U.S. Presidential Candidates' Tax Matrix," the introduction of H.R.5101, and Notice 2008-20.
• Jan. 17, 2008: Today's issue of U.S. International Tax Outlook provides background on the new OECD report on tax intermediaries, addresses the issue of tax strategy patents, analyzes the Isle of Man's recent S.681 blacklist protest, and touches briefly on two miscellaneous matters: the "WTO at 60" video and the recently released NatWest IV decision. To subscribe, send your contact information, including email address, to subscribe@martintittle.com.
• Jan. 10, 2008: This week's issue of U.S. International Tax Outlook is out. It provides a summary of the NYSBA's comments on the 987 QBU regs; gives details about an interesting article on the final 704(b) regs; outlines the changes in Rev. Proc. 2008-7 regarding international issues ineligible for rulings; summarizes a Sec. 367(a) PLR; touches on the recent corporate tax incidence paper from Treasury; and culls some interesting quotes from Tax Analysts' biennial Quotations About Taxes.
• Jan. 3, 2008: I hope your holiday was restful and safe. Today's issue of U.S. International Tax Outlook takes a brief look at Mike McIntyre's mandatory arbitration objections, notes the elimination of an international provision from the Tax Technical Corrections Act, surveys the Sec. 367(a) problem addressed by Notice 2008-10, touches on the AICPA's Sec. 1.901-2(e)(5) comments, and finally provides abstracts for three very different tax policy papers: one each on flat taxes, the U.S. branch profits tax, and tax information exchanges.
• Dec. 21, 2007: Yesterday's U.S. International Tax Outlook surveys the portions of the recent CIIT conference that I found most interesting, critiques the finding of the last week's mini-conference on corporate tax burden, provides hyperlinks and abstracts for two new Reuven Avi-Yonah articles, and concludes with mention of six miscellaneous matters, including the foreign tax credit regulations that were released on 20 December and the 19 December TEI letter regarding Protocol 5 to the U.S.-Canada treaty. If you haven't received your e-copy, let me know by email and I'll resend it.
  
  On a related note, earlier today, Richard Murphy of UK Tax Research Ltd. posted a short quote from Accountancy Age regarding the Treasury policy report released yesterday. My response to the posting is, at the moment, awaiting Richard's approval, so I'm reproducing it here on a temporary basis:
  
  For those who would like to look further, a summary of the U.S. Treasury report "Approaches to Improve the Competitiveness of the U.S. Business Tax System for the 21st Century," as well as a hyperlink to an Acrobat copy of the report, is available at http://www.ustreas.gov/press/releases/hp749.htm. Lowering of the corporate tax rate is linked to base broadening so that, at least nominally, the same amount of tax would be collected at the lower rate.
  
  Another subject discussed in that part of the report is a shift from worldwide to territorial taxation. This sort of change is proving a hard sell in the U.S. because, at least on a theoretical level, it requires disallowance of domestically incurred expenses that are properly allocable to the foreign-source income -- income that, in a territorial regime, would be tax-exempt. A research paper released in the last few weeks argues that all domestically incurred expenses should continue to be deductible in a territorial system, but I remain unconvinced.
  
  The business activity tax, or "BAT," is structured as a subtraction VAT, so, unless it were permissible for businesses to add it on to the bottom line of consumer invoices, it might not be shifted forward to consumers more than the current corporate tax is. In at least one U.S. state, similar additions to consumer invoices (reflecting certain taxes the seller had to pay) have been proscribed. That said, I think it would certainly be tempting for businesses to leave their retail prices where they are and try to add on an amount for the new BAT.
  
  In a statement released contemporaneously with the report, Assistant Treasury Secretary for Tax Policy Eric Solomon said "[t]he report outlines several broad approaches to business tax reform. The study also outlines specific business tax areas that can be addressed. There are no policy recommendations in this study. We believe it will provide significant substance for discussion, and will further the effort to inform the public policy debate." The full text of his remarks is available at http://www.ustreas.gov/press/releases/hp751.htm.
  
  The lack of policy proposals in the report caused dismay for many in the U.S. tax community. One commentator this morning said "the report makes sure not to give the impression that any specific plan is being advocated or even considered. . . . [F]or those who expected to see concrete policy recommendations, it is like searching under the Christmas tree for a Nintendo Wii and finding socks instead."
• Dec. 15, 2007: If you don't subscribe to my weekly newsletter, U.S. International Tax Outlook,* take a look at my Letter to the Editor in the Dec. 17 Tax Notes (p. 1175). In last week's Tax Notes, Lee Sheppard said that the treaty benefits provision in Charlie Rangel's Tax Reduction and Reform Act of 2007 (H.R.3970, sec. 3204) was essentially the same as the Doggett provision in sec. 12001 of the farm bill, H.R.2419 (see also July 29 commentary, infra). I see them as very different, and I explain why.
  *Subscribers received the analysis included in my Tax Notes letter on Oct. 25, the same day H.R.3970 was introduced.
• Dec. 13, 2007: In the13 December issue of U.S. International Tax Outlook, I discuss two international provisions in the pending AMT Relief Act, give updates regarding creditability of the new Mexican business flat tax and Senate approval of the new Belgian treaty and German protocol, provide links and brief descriptions or excerpts for several recent treaty and tax policy articles, address the topic of an upcoming corporate tax conference, and conclude with brief mention of Rev. Rul. 2008-1 and the new CBO Director's Blog. To subscribe, send your contact information, including email address, to subscribe@martintittle.com.
• Dec. 6, 2007: This week's issue of U.S. International Tax Outlook begins with brief comments on Jim Hines' new foreign income paper. Then it gives details regarding the financial oversight limitations in the UK Overseas Territories, outlines an objection in the Senate to the Levin/Rangel UBIT provision, provides links to commentary about the U.S. presidential candidates' tax positions, and concludes with notes on four miscellaneous matters.
• Nov. 29, 2007: This week's edition of U.S. International Tax Outlook discusses Jersey and the economic conflicts that TIEAs can bring, briefly touches on Luxembourg's S.681 blacklist protest, explores the AJCA reports that Treasury issued a few days ago, gives details on the Sub F changes in store if S.2380 passes, outlines Larry Lokken's suggestions for improving the U.S. ECI rules, and mentions several miscellaneous matters, including Bill C-28 in the Canadian House of Commons, the World Bank/PwC "Paying Taxes 2008" study, and Mercer's 2007 Worldwide Individual Tax Comparator.
• Nov. 20, 2007: This week's edition of my newsletter, U.S. International Tax Outlook, came out early due to the U.S. Thanksgiving holiday. It outlines two international provisions in the 2007 Tax Technical Corrections Act, gives details on several treaty issues, provides information about two international tax policy articles, explores the current U.S. thinking on territoriality, and mentions several miscellaneous matters, including an interesting populist motion introduced in the UK House of Commons. To subscribe, send your contact information, including email address, to subscribe@martintittle.com. To view a sample issue from last month, click here.
• Nov. 15, 2007: Today's issue of my newsletter, U.S. International Tax Outlook, begins by discussing the proposed Canadian withholding tax exemption for interest and a PE problem that may accompany it. It then provides an update on the Mexican flat tax, presents details on the new Netherlands withholding tax regs, and gives brief descriptions and links for the recent CRS tax treaty legislation report, the IRS Sec. 965 directive, and the animated transfer pricing illustration on the Guardian Unlimited's web site.
• Nov. 9, 2007: Richard Murphy of Tax Research UK has blogged an interesting, animated illustration of transfer pricing that is available on Guardian Unlimited's web site. Click here to jump to it.
• Nov. 8, 2007: Today's issue of my newsletter, U.S. International Tax Outlook, explores and links to the new Mexican flat tax, mentions the Avi-Yonah-Clausing formulary apportionment papers, addresses a concern about my PE-by-agent article in this week's Tax Notes International, discusses Guernsey's effort to extract itself from S.681, and notes recent IRS guidance on foreign tax redeterminations. To subscribe, send your contact information, including email address, to subscribe@martintittle.com.
• Nov. 1, 2007: Today's issue of my e-newsletter, U.S. International Tax Outlook, provides several tax treaty updates, gives a heads-up regarding an upcoming article on PE by agent in the U.S., and briefly discusses the Bouma-Mason paper on nondiscrimination provisions in tax treaties. It also notes yet another attack on the worldwide interest expense allocation rules in H.R.3920, mentions and provides a link for Marty Sullivan's tax haven project papers, and includes information regarding the proposed Sec. 901, compulsory payments of foreign taxes regulations.
• Oct. 25, 2007: Today's issue of my e-newsletter hits the international high points in Ways and Means Chairman Rangel's tax reform bill (H.R. 3970), runs down some of the international topics at the Chicago and New York PLI Tax Strategies conferences, gives details on a recent U.S.-UK competent authority agreement, and discusses the Kerry-Emanuel Offshore Deferred Compensation Reform Act. (S.2199, H.R.3923). Other fun topics, like the IRS Servicewide Approach to International Tax Administration, the OECD tax haven initiative, the S.681 protests, and the U.S.-Angola diplomatic notes on international shipping, will have to wait until next week unless I find time for an interim issue.
• Oct. 24, 2007: The "About the Book" blurb on the Vandeplas web site for my book Permanent Establishment in the United States -- A View Through Article V of the U.S.-Canada Tax Treaty still doesn't include any information regarding the structure and organization of the book, so (hopefully temporarily), I'm presenting that information here. The book begins with a three-part introduction: first, a brief, general outline of the concept and scope of PE; next, an overview of  the individual paragraphs in Article V; and finally, a comparison of  the current PE provisions with those in the 1942 U.S.-Canada treaty,  to illustrate the limitations presented by older cases and rulings. Following the introduction are vignettes of ten aspects of U.S. taxation that either underlie the application of treaties or would apply in the absence of a treaty. Next, every paragraph and subparagraph of Article V is analyzed from  three points of view. First, each significant term in the text is defined. (For terms not defined by the treaty, possible definitions from domestic tax law are presented.) Next, the relevant parts of the two model tax treaty authorities -- the OECD Commentaries and the U.S. model technical explanation -- are reviewed and discussed. Finally, relevant cases, rulings, and secondary authorities are presented. An appendix provides six primary sources: the texts of Protocols 1, 3, and 5, each of which makes changes to the treaty's PE provisions; the combined U.S. Treasury technical explanation for the original treaty and the first and second protocols; the technical explanation for the third protocol; and a 1984 Competent Authority Agreement that addresses offshore U.S. drilling rigs.
• Oct. 19, 2007: My new book Permanent Establishment in the United States -- A View Through Article V of the U.S.-Canada Tax Treaty is now available on the Vandeplas Publishing web site and will soon be available through Amazon.com. I anticipate having an Article VII, business profits companion book ready for publication next summer. Between now and then (and hopefully no later than February 2008), Vandeplas will be publishing an expanded version of the article Reuven Avi-Yonah and I wrote last summer for IBFD regarding the new U.S. model tax treaty.
• Oct. 18, 2007: Today's issue of my e-newsletter, U.S. International Tax Outlook, discusses the proposed regs regarding Sec. 1441 withholding on distributions pursuant to self-tenders (REG-140206-06), the proposed regs on "event basis" sourcing of income for some athletes and entertainers (REG-114125-07), and a recent update regarding loss importation transactions (LMSB-04-09-07-61). It also briefly addresses a correction to the "taint-purging" PFIC regs and an OECD report on corporate tax revenues. To subscribe, send your contact information, including email address, to subscribe@martintittle.com.
• Oct. 11, 2007: Today's issue of my e-newsletter briefly addresses and provides hyperlinks for the recent U.S.-Netherlands competent authority agreement, the PFIC "taint-purging" rules, the proposed regulations regarding intercompany debt, and the "on again, on again" case of Parker Drilling Co. v. Finance Ministry of Kazakhstan.
• Oct. 4, 2007: Today's issue of my e-newsletter discusses U.S. expansion of the consistency rule in treaties, with particular reference to the letter that the Institute of International Bankers sent to Eric Solomon on Monday and with an example of a tax treaty that, in two separate technical explanations, advocates both the expanded version of the consistency rule (in the initial enactment TE) and the limited version (in a protocol TE fifteen years later). The newsletter also provides links and abstracts for two interesting papers: "Which Countries Become Tax Havens?" and "A New Development in the 'Subsequent Exchange' Approach Under the Sec. 367(b) Regulations."
• Sept. 27, 2007: Today's issue of my e-newsletter analyzes the new "services" permanent establishment provision introduced into the U.S.-Canada tax treaty by the protocol signed last Friday, documents two problems with the provision, and contains a brief note regarding one of the participants at yesterday's Senate Finance Committee hearing on offshore tax issues.
• Sept. 18, 2007: Today's issue of my e-newsletter, U.S. International Tax Outlook, teases out the few international tax issues that U.S.  Senator and presidential candidate Barack Obama, D-Ill., included in the tax policy speech he gave this afternoon in Washington, D.C.
• Sept. 10, 2007: Today's issue of my e-newsletter addresses the Summer 2007 Statistics of Income Bulletin, international guidance in progress, the IRS coordinated issue paper on cross-border loans, legislation banning tax planning patents, Sandy Levin's UBIT bill, and my audio file of the Sept. 6 W&M hearing.
• Sept. 5, 2007: The second issue of my e-newsletter gives background on five of the twenty witnesses scheduled to testify at tomorrow's W&M "Hearing on Fair and Equitable Tax Policy for America’s Working Families." The five are Len Burman, Douglas Holtz-Eakin, Gene Steuerle, Steve Shay, and Vic Fleischer. To receive a copy of this and future issues, send your contact information, including email address, to subscribe@martintittle.com.
• Sept. 4, 2007: The inaugural issue of my e-newsletter, U.S. International Tax Outlook, addresses the following four topics:
  1) the international issues in the Priority Guidance Plan for 2007-2008 promulgated by the IRS and the Treasury Office of Tax Policy;
  2) Rev. Proc. 2007-58;
  3) the corporate tax benefits questionnaire of Sen. Carl Levin, D-Mich., and
  4) Republican presidential candidate Mike Huckabee's comment to George Stephanopoulos regarding the U.S. tax code.
  To receive a copy of this and future issues, send your contact information, including email address, to subscribe@martintittle.com.
• Aug. 30, 2007: A week from today, on Sept. 6, the Ways and Means (W&M) Committee of the U.S. House of Representatives will hold a hearing on fairness and equity in the U.S. tax code. According to Chairman Rangel's announcement, "The hearing will focus on a number of tax fairness issues, including the tax treatment of investment fund managers and the impact of the alternative minimum tax on working families. It will also examine the reasons why investment funds are being organized offshore." The names of the witnesses who will testify at the hearing have yet to be announced. It should be possible to view the hearing live over the Internet via the link on the W&M home page.
• Aug. 23, 2007: UK tax maven Richard Murphy was the guest last night on BBC Radio 4's Hecklers program, arguing that the UK should scrap the domicile rule that allows some residents with social and family ties to other countries to avoid UK tax on their non-UK income. His rationale was that revocation of this tax break would bolster the trustworthiness and fairness of the UK tax system. The program is available on request on the Internet either through Radio 4's "Listen Again" page or via a special link. If you would like a copy of my notes from the broadcast, email me. Aug. 27: Richard's rationale for eliminating the domicile rule could also be applied to support enactment in the U.S. of the proposed changes in the taxation of carried interest. See my comment on the TaxProf Blog.
• Aug. 10, 2007: Yesterday, President Bush told reporters that the July 26 Treasury Conference on Business Taxation and Global Competitiveness (see July 24 commentary, infra) had piqued his interest in cutting the U.S. corporate tax rate. The question that raises in my mind is whether the President is trying to co-opt, and allocate to corporate tax reform, some of the offsets that Chairman Rangel might otherwise have at his disposal when the W&M Committee considers AMT reform and "tax simplification" after Labor Day.
  Take Subpart F deferral, for instance. The Treasury Conference Paper identified Subpart F deferral as an "unwarranted tax subsid[y]" and said that if it and similar subsidies were repealed, it would be possible to lower the overall corporate tax rate from 35 percent to 27 percent without diminishing corporate tax receipts. Sub F deferral is also one of the provisions identified last February as a likely AMT offset by 61 percent of the Fortune 100 tax and finance executives surveyed. See Aug. 8 commentary, infra. The same overlap between AMT reform targets and corporate tax offsets exists with respect to the Sec. 199 domestic production activities deduction.
  If the President is trying to steal Rangel's thunder by limiting his options in September, it's a shrewd legacy move. Although the Chairman's staff responded by reiterating his goal of restoring fairness in the tax code, they need to retake the offensive if they want to have maximum flexibility this fall. Aug. 17: Yesterday, Deputy Assistant Secretary for Tax Policy Karen Sowell said that Treasury is not actively considering a proposal to lower the corporate tax rate. In Sowell's words, "it's part of the intellectual discussion, but it's not something that's being proposed at this time."
• Aug. 8, 2007: W&M Chairman Rangel's recent promise of a full-bore policy approach to AMT reform after Labor Day reminded me to look again at the Miller and Chevalier's Feb. 2007 survey of revenue raisers that business leaders expect to be tapped to pay for AMT relief. Click here to see the two-page article on the MilChev survey that is available on the CCH web site.
• Aug. 7, 2007: S.1, the Honest Leadership and Open Government Act of 2007, has finally been passed by both the House and the Senate. Subtitle B of Title V, which amends the Standing Rules of the Senate to require disclosure of spending and tax earmarks, contains the Durbin definition of "limited tax benefit" that I discussed in my Jan. 14 commentary, infra. Under this definition, it should be easy to craft legislation that provides a limited tax benefit but lies outside the "limited tax benefit" definition, and therefore is not subject to disclosure. Aug. 10: CQ reported today that S.1 has not been sent to the President for signature because Press Secretary Tony Snow has criticized the earmark provisions as "considerably weakened" from earlier versions of the bill. Congressional leaders are concerned that, if S.1 were subjected to an Article I, Section 7 pocket veto, Congress would have no opportunity to override the veto when it reconvened in September. One solution is simply to delay submission until the summer recess ends.
• Aug. 5, 2007: CRS has released a new report by Jane Gravelle and David Brumbaugh titled "Reform of U.S. International Taxation: Alternatives." I have edited my copy of this report to increase its utility. Blue text in the footnotes indicates hyperlinks that provide instant access to the cited sources. In one footnote, I added a link to Senate Finance Committee testimony by James Hines that was similar to the thrust of his cited article. *Addendum: On or about July 27, 2009, my edited version of Jane and David's report appeared as a downloadable document on the Policy Archive website (www.policyarchive.org). I do not know who uploaded it.
• Aug. 3, 2007: The IRS has released revised versions of the partnership and corporate income tax forms. Click here to jump to the IRS summary of the changes and links to the revised forms. Also released today are T.D. 9350, 9351, and 9352, addressing reportable transactions. Aug. 20: According to remarks made today by Anita Soucy, an attorney-adviser in the Treasury Office of Tax Policy, participation in a transaction addressed by T.D. 9350, 9351, and/or 9352 must be disclosed by the taxpayer to the I.R.S. within 90 days of the inception of participation or classification of the transaction as one addressed by one or more the the three Treasury Decisions.
  [Aug. 3 commentary cont'd.] On the legislative front, parallel "patriot" bills were introduced in the House and Senate (H.R.3319 and S.1945) to grant tax breaks to businesses that employ workers and spend research dollars in the U.S. These benefits would be financed in part by amending IRC Sec. 7701(a)(4) so that foreign corporations are subjected to U.S. income tax if they are "created or organized as [] foreign corporation[s] (instead of as []domestic corporation[s]) principally for the purpose of avoiding being treated as []domestic corporation[s]."
• July 29, 2007: When Reuven Avi-Yonah and Kimberly Clausing unveiled their formulary apportionment corporate tax proposal at the Hamilton Project meeting in June, I thought their goal of removing the incentive to shift income to low-tax countries was laudable but unlikely to ever see legislative daylight. The passage of the amended Farm Bill this week by the House changed all that.
  Of course, the Farm Bill (H.R. 2419) does not embrace formulary apportionment. It does, however, include a revenue raiser (originally submitted as a separate bill, H.R. 3160, by Rep. Lloyd Doggett, D-Tex.) that undermines the international income shifting of non-U.S. parent companies in a fairly aggressive way. If the U.S. subsidiary of a foreign company makes payments to a foreign subsidiary of the foreign company, and if those payments are subject to IRC Chapter 3 withholding, then the withholding rate will be either the rate in effect for payments to the country of the subsidiary or the home country of the parent, whichever is higher. This amounts to a kind of mandatory "check the box" provision, in which the separate corporate existence of the foreign subsidiary disappears for withholding tax purposes whenever the rate of withholding for the parent's home country would yield higher withholding tax revenue.
  The day after the Doggett amendment was announced, the administration (through the OMB) came out against it, saying 1) that it would "discourage foreign investment in the United States, override tax treaties the U.S. has with many nations, and raise questions under other international agreements" and 2) that if it (and other objectionable provisions) were included in the final legislation, "the President's senior advisors would recommend that he veto the bill." Business spokespeople also chimed in, noting that the amendment would be particularly hard on parent companies in countries like Brazil and the Republic of China/Taiwan that have no tax treaty with the U.S.
  I agree that the amendment is overbroad and, if enacted, will probably penalize business arrangements that are not abusive. The better approach to this kind of "tax cheating" (if in fact it is cheating) would be to revise the limitation on benefits (LOB) articles in the relevant tax treaties. Of course, that would take much longer than enactment of the amendment, and Congress would not get to use the funds generated by treaty revisions as a revenue raiser.
  The Senate is scheduled to begin deliberations on the Farm Bill after Labor Day. Addenda: Aug. 1: Chuck Grassley, R-Iowa and ranking member of the Senate Finance Committee (SFC), came out against the Doggett amendment today in an interview with BNA. Aug. 2: Yesterday, SFC Chair Max Baucus, D-Mont., confirmed that the Doggett amendment will not be in the Senate version of the Farm Bill. Whether House members will be able to slip some version of it back in during conference negotiations remains to be seen. Aug. 7 and 15: Sen. Grassley reiterated his opposition to the Doggett amendment on these two days in telephone press conferences. Oct. 2: Click here to access a more treaty-focused version of Reuven and Kimberly's formulary apportionment proposal.
• July 24, 2007: The ramp-up for Thursday's Treasury Conference on Business Taxation and Global Competitiveness (click here to view the agenda and list of speakers) began today with the release of a background paper by Robert Carroll, Deputy Assistant Treasury Secretary for Tax Analysis. According to the accompanying press release, "the paper details:
  1) the extent to which special provisions narrow the business tax base;
  2) the importance of the non-corporate sector generally subject to the individual tax rather than the corporate tax;
  3) the various ways the tax system distorts economic decisions; and
  4) how the level of U.S. tax compares with our major trading partners (G7, OECD, and emerging market countries)."
  Bottom line: the businesses that cannot lower their U.S. taxes via Sec. 199 or other specialized tax breaks have gotten Treasury's attention. July 26: To view webcasts of the conference, click here.
• July 15, 2007: In connection with a hearing scheduled by the Senate Committee on Foreign Relations for July 17, the Joint Committee on Taxation has issued an Explanation of the Proposed Income Tax Treaty Between The United States and Belgium (JCX-45-07), an Explanation of the Proposed Protocol to the Income Tax Treaty Between The United States and Denmark (JCX-46-07), an Explanation of the Proposed Protocol to the Income Tax Treaty Between The United States and Germany (JCX-47-07), and an Explanation of the Proposed Protocol to the Income Tax Treaty Between The United States and Finland (JCX-48-07).
• July 5, 2007: The new D.C. Circuit decision in Murphy v. IRS is out, and Chief Judge Ginsburg's message to Marrita Murphy is "oops." Click here to jump to the D.C. Circuit's July 3 opinion. For links and history regarding this interesting case, see my commentaries for Aug. 22 and Dec. 22, infra.
• June 28, 2007: A new draft version of Form 1118 is finally out. Comments are due by Sept. 10.
• June 7, 2007: The days of the "public" Killer B reorganizations (see March 9 commentary, infra) are numbered. See Notice 2007-48, I.R.B. 2007-25 (May 31, 2007).
• May 24, 2007: According to an OECD news release, the UK today became the 15th country to sign the joint OECD-Council of Europe Convention on Mutual Administrative Assistance in Tax Matters. Prior signatories include Azerbaijan, Belgium, Denmark, Finland, France, Iceland, Italy, the Netherlands, Norway, Poland, Sweden and the United States. According to the release, Canada and Ukraine have signed the Convention but are still in the process of ratification.
• May 23, 2007: This fall, the Joint International Tax Shelter Information Centre (JITSIC) will open a new office in London and expand its membership to include Japan's National Tax Agency.
• May 19, 2007: CRS Specialist in Public Finance David Brumbaugh has updated his report "Firms That Incorporate Abroad for Tax Purposes, 2007: Corporate 'Inversions' and 'Expatriation'" (CRS Order Code RL31444). Click here to view an Acrobat file that compares the current verison (dated April 25, 2007) with the prior version (dated Dec. 28, 2006).
• May 9, 2007: Ho Chih-Chin, former IRS economist and now Finance Minister of Taiwan, has announced plans to switch from Taiwan's current territorial system of taxation to a worldwide system. The change, which Ho expects to take two years, would allow for a decrease in Taiwan's top marginal rates. Taiwan has included offshore income in the base for its alternative minimum tax since January 2006.
• May 8, 2007: The JCT has released its comparison of the 2006 and 1996 U.S. model tax treaties.
• May 7, 2007: The OECD has released a public discussion draft titled "Application and Interpretation of Article 24 (Non-Discrimination)." Comments are due July 31.
• May 4, 2007: REG-123365-03, the proposed regs on the active trade or business requirement of Sec. 355(b), will be published in the Federal Register on May 8. Comments are due by Aug. 6. May 12: Stephen Fattman, IRS special counsel to the associate chief counsel (corporate), stated at the ABA Tax Section meeting in Washington that the IRS takes a qualitative, rather than a quantitative approach in applying the Sec. 355(b) active trade or business requirement.
• Apr. 13, 2007: The NYSBA's "Report on the Model Income Tax Convention Released by the [U.S.] Treasury on November 15, 2006" is out, and in general, it's interesting and asks good questions. The main oversights are in Articles 17, 18, and 22 and are too detailed to present here.
• Apr. 12, 2007: IRS, "Revisions to Regulations Relating to Repeal of Tax on Interest of Nonresident Alien Individuals and Foreign Corporations Received from Certain Portfolio Debt Investments," TD 9323, 72 Fed. Reg. 18386 (Apr. 12, 2007).
• Apr. 11, 2007: The OECD has released a discussion draft on a revised Commentary regarding Art. 7, the business profits provision in its 2005 model tax treaty. If you are already familiar with the Art. 7 commentary and just want to review the changes, the discussion draft's annex contains an integrated, redline version of the discussion draft and the current commentary. Comments on the discussion draft should be sent to Jeffrey Owens, ideally before June 15, 2007.
• Apr. 6, 2007: The "principles vs. rules" debate about which I wrote in TNI last May is continuing. The Institute of Chartered Accountants of Scotland (ICAS), which held a "Too Late for Principles?" conference last October, hosted another meeting in New York on Wednesday.
  One of the questions discussed (again) was how to implement and enforce principles-based standards. Something I listened for in vain was a recognition that any principles- or standards-based system absolutely requires a set of meta-standards that govern the acceptable and unacceptable interpretations of the principles or standards. For maximum, immediate clarity and utility, these meta-standards need to be accompanied by a body of decisions that demonstrate their application. The only interpretive meta-standards I know that meet these requirements are found in Article 31(1) of the Vienna Convention on the Law of Treaties.
  Article 31(1) says "[a] treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose." The four standards set forth in this sentence -- plain meaning, with recourse to context and/or object and purpose if necessary, all under the umbrella of good faith -- could give structure to the interpretation of principles-based standards, and they would also make it very difficult for anyone to defeat or argue around those standards. Although Article 31 is itself stated in general principles, its meaning has been interpreted and applied over the past twenty-seven years by international judicial authorities, including (since 1995) the panels and Appellate Body of the World Trade Organization. Those interpretations and decisions could be applied by analogy to use of the Article 31 standards outside a treaty context.
• Mar. 31, 2007: Yesterday, the U.S. Treasury announced the signing of a Tax Information Exchange Agreement (TIEA) with Brazil on March 20. Whether this will finally lead to a treaty is arguable, given the U.S. insistence on a parallel agreement allowing resolution of disputes regarding U.S. investments in Brazil by international courts of arbitration.
• Mar. 30, 2007: REG-156779-06, targeting what the IRS has determined are abusive foreign tax credit transactions, will appear in today's Federal Register. Copies of it are available in today's BNA Daily Tax Report and Tax Analysts' Worldwide Tax Daily. According to IRS news release no. IR-2007-73, the Joint International Tax Shelter Information Centre (JITSIC) was responsible for alerting the IRS to the impact of these transactions on the U.S. fisc.
• Mar. 22, 2007: U.S. budget writers are repo