By: Jason Booth
For years now an ongoing debate has taken place on Capitol Hill about U.S. international tax policy reform. member at 35 percent) as well as improving our worldwide tax system’s “competitiveness” (compared to nearly all other OECD members’ territorial tax system). However, the purpose of this article is to not discuss the latest in politics on Capitol Hill and how this election year could affect international tax reform (a completely separate topic), but to discuss another part of the government that is focusing just as much in the international tax area – the IRS.
The IRS has, behind the scenes, quietly released over a hundred International Practice Units (“IPUs”) since December 2014. An IPU is guidance that the IRS’s Large Business and International Group issues as a way to educate and provide job aids to its IRS agents. These IPUs provide IRS agents with explanation of international tax concepts as well as information about specific types of transactions. As mentioned, the IRS has issued 113 IPUs as guidance for its agents since December 2014:
- 2016: 29 IPUs (as of March 24, 2016)
- 2015: 40 IPUs (all in the last six months of the year)
- 2014: 44 IPUs (all released on Dec. 15, 2014)
Some important IPUs that have been released and that have come up very often in the U.S. international tax space are, but definitely not limited to:
- Outbound Transfer of Foreign Stock Followed by Check-the-Box Election (Feb. 19, 2016)
- Outbound Transfer of Domestic Stock (Feb. 8, 2016)
- Outbound Transfer of Foreign Stock (Feb. 4, 2016)
- Residual Profit Split Method – Outbound (March 7, 2016); Inbound (Feb. 19, 2016)
- Review of Transfer Pricing Documentation by Outbound Taxpayers (March 4, 2016)
- Outbound Services by U.S. Companies to CFCs (March 4, 2016)
Tax Compliance Aspects:
- Computing Foreign Base Company Income for U.S. Individual Shareholders (March 18, 2016)
- Interest Expense Limitation Computation under §163(j) (March 14, 2016)
- Failure to File the Form 8865 (Reporting Controlled Foreign Partnerships) – Category 1 and 2 Filers – Monetary Penalty (Nov. 23, 2015)
- Failure to File the Form 5471 (Reporting Controlled Foreign Corporations)– Category 4 and 5 Filers – Monetary Penalty (Nov. 12, 2015)
Although these IPUs are not official pronouncements of law and therefore cannot be relied upon as law with respect to taking a tax position, this seemingly endless list of IPUs do provide great tools for taxpayers and their advisors as to how the IRS views certain issues and how they would address such issues in an audit.
We plan to issue further articles regarding specific IPUs. In the meantime, it would be prudent to keep an eye out on the list of released IPUs particularly given the fact that the international tax space is and likely will continue to be in the spotlight.
For a complete list of IPUs, click here.
About Jason Booth (Principal, GHJ)
Jason has over 11 years of experience in public accounting and specializes in international tax consulting assisting both U.S. companies with operations overseas as well as non-U.S. companies with various U.S. inbound issues.
Jason has extensive experience across a variety of industries including private equity, entertainment, real estate and technology. He first started his career in San Francisco before taking back-to-back overseas assignments first in Sydney, Australia and then in Munich, Germany. While overseas, Jason represented a Big Four accounting firm managing its U.S. Tax Desk and focused on U.S. international tax planning and transactional work (M&A and tax due diligence).
On Feb. 24 2016, the House Ways and Means Committee held a public hearing to focus on the global tax environment in 2016 and implication of U.S. international tax reform. The public hearing report, released by the Joint Committee on Taxation, put an emphasis of the U.S.’s “competitiveness” and how can the U.S. promote economic growth which depend heavily on the level of investment and employment in the U.S.