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Battling Killer B's and Working With Taiwan as Priority Guidance Plan Arrives

Posted on Nov. 20, 2023
Mike Knobler
Mike Knobler
Julia Ushakova-Stein
Larissa Neumann
Larissa Neumann

Larissa Neumann, Julia Ushakova-Stein, and Mike Knobler are partners with Fenwick & West LLP.

In this installment of the U.S. Tax Review, the authors explain the latest regs against Killer B transactions, Taiwan-U.S. double taxation relief, the 2023-2024 priority guidance plan, and further IRS guidance and caselaw developments.

Killer B Regulations

Proposed Treasury regulations released in October (REG-117614-14) provide the latest chapter in the government’s long battle against so-called Killer B transactions, cross-border triangular reorganizations intended to repatriate earnings of a foreign subsidiary without incurring U.S. income tax.

Final regulations published in 2011 were followed by Notice 2014-32, 2014-20 IRB 1006, and Notice 2016-73, 2016-52 IRB 908, as the IRS sought to prevent creative tax planners from exploiting gaps in the rules under section 367(b).1 Although the Tax Cuts and Jobs Act greatly reduced the number of situations in which such planning remains relevant, the preamble to the proposed regulations says the transactions at issue continue to “raise significant policy concerns.” The proposed regulations adopt the guidance in the two notices with some modifications intended to lower taxpayers’ compliance burden.

The transactions at issue involve one or more foreign corporations; in an example described in Notice 2016-73, a U.S. parent owns both a U.S. subsidiary (USS) and a foreign subsidiary (FP), each of which own second-tier foreign subsidiaries. FP has no earnings and profits, but its subsidiary has E&P. FP’s subsidiary acquires stock from FP for property, then uses that stock to acquire the stock of the foreign subsidiary of USS in a reorganization. The taxpayer files a gain recognition agreement with respect to USS’s transfer of its subsidiary’s stock on all but a de minimis amount of that stock and, with respect to that de minimis amount, recognizes a small amount of gain under section 367(a)(1). The taxpayer takes the position that a deemed distribution from FP’s subsidiary to FP would not result in section 367(b) income because any dividend income to FP would not be subject to U.S. tax (because FP had no E&P) and would not give rise to an income inclusion under section 951(a)(1)(A) by reason of section 954(c)(6). Accordingly, the taxpayer takes the position that the section 367(b) income (which, under this position, is zero) does not exceed the section 367(a) gain, and, therefore, the final regulations do not apply to the FP acquisition by reason of the section 367(a) priority rule. The taxpayer takes the position that a subsequent FP inbound transaction results in no income inclusion for the U.S. parent because FP’s E&P is not increased and thus FP’s all E&P amount is zero. The result is a repatriation of property without an income inclusion.

Notice 2016-73 changed this result by requiring an adjustment in the all E&P amount. Under this rule, if there is “excess asset basis” within a foreign acquired corporation, then, in the case of an exchanging shareholder to which reg. section 1.367(b)-3(b)(3) applies, the all E&P amount with respect to the stock in the foreign acquired corporation that it exchanges is increased by the “specified earnings” with respect to the stock. Specified earnings is the lesser of:

  • the sum of the E&P of each foreign subsidiary of a foreign acquired corporation; and

  • the excess asset basis of the foreign acquired corporation.

The excess asset basis is the amount by which the inside asset basis of a foreign acquired corporation exceeds the sum of:

  • the E&P of the foreign acquired corporation attributable to its outstanding stock;

  • the aggregate basis in the outstanding stock of the foreign acquired corporation determined immediately before the inbound nonrecognition transaction; and

  • the aggregate amount of liabilities of the foreign acquired corporation that are assumed by the domestic acquiring corporation in the inbound nonrecognition transaction.

The proposed regulations ease the compliance burden by not applying the excess asset basis rules unless a subsidiary previously acquired stock or securities of its parent in exchange for property in connection with a triangular reorganization and adjustments were not made that have the effect of a distribution of property from the subsidiary to the parent under section 301.

Funds Exempted From Wash Sale Rules

Redemptions of money market fund shares will not be treated as part of a wash sale under section 1091, the IRS announced in Rev. Proc. 2023-35, 2023-42 IRB 1. The rule applies to money market funds redeemed after October 2. It extends Rev. Proc. 2014-45, 2014-34 IRB 388, which provided that the wash sale rules do not apply to money market funds with floating asset values. Now, money market funds with fixed asset values also are not subject to the wash sale rules. The change was needed, the IRS explained, because new SEC rules allow money market funds to impose liquidity fees, which would result in losses for most redeeming shareholders in funds with fixed net asset values. Because money market fund shareholders often buy and sell shares in the same fund within a short timeframe, the IRS said, Rev. Proc. 2023-35 was necessary to prevent undue tax compliance burdens.

Section 1091(a) generally disallows a loss realized by a taxpayer on a sale or other disposition of shares of stock or securities if, within a period beginning 30 days before and ending 30 days after the date of the sale or disposition, the taxpayer acquires (by purchase or by an exchange on which the entire amount of gain or loss is recognized by law), or enters into a contract or option to so acquire, substantially identical stock or securities.

Taiwan-U.S. Relief From Double Taxation

Bipartisan legislation (United States-Taiwan Expedited Double Tax Relief Act, S. 3084), pending in both the Senate and the House of Representatives, would grant taxpayers treaty-like relief from double taxation of cross-border investment between the United States and Taiwan. No tax treaty is possible because the United States does not have diplomatic relations with Taiwan.

Under the proposal, the United States and Taiwan would adopt language analogous to the U.S. model treaty. Tax on U.S.-source interest (other than original issue discount interest), royalties, amounts described in section 871(a)(1)(C), and gains described in section 871(a)(1)(D) that are paid to or received by a qualified resident of Taiwan would be reduced to 10 percent. Tax on U.S.-source dividends that are paid to or received by a qualified resident of Taiwan would be reduced to 15 percent. The branch profits tax applicable to effectively connected income (including the branch profits tax on interest) would be reduced to 10 percent, thus matching the reduced rate for dividends and interest that would otherwise apply. Gross income taxable as a result of a permanent establishment would include only gross income that is effectively connected with the PE.

Entities taxed as corporations in Taiwan would be treated as qualified residents of Taiwan if they meet an ownership and income test, a publicly traded in Taiwan test, or a qualified subsidiary test. In addition, qualified items of income would be treated as income of a qualified resident of Taiwan. A qualified item of income includes any item of income which emanates from, or is incidental to, the conduct of an active trade or business in Taiwan, and if a person derives an item of income from a trade or business activity conducted in the United States, or derives an item of income arising in the United States from a connected person, the trade or business activity in Taiwan to which the item relates is required to be substantial in relation to the same or complementary trade or business activity in the United States.

The United States-Taiwan Expedited Double Tax Relief Act cleared the Senate Finance Committee by a 27-0 vote. The legislation was co-written by committee Chair Ron Wyden, D-Ore., and ranking member Mike Crapo, R-Idaho, and House Ways and Means Committee Chair Jason Smith, R-Mo., and ranking member Richard E. Neal, D-Mass. The Finance Committee previously approved a competing bill, the Taiwan Tax Agreement Act of 2023 (S. 1457).2

FTC Statute of Limitations Case

On August 21 the Court of Federal Claims held for the government in a section 6511(d)(3) statute of limitations dispute in Polk.

A portion of the taxpayers’ refund claim was based on a foreign tax credit, and the remainder was based on other issues. The government moved to dismiss as statute-barred the portion of the claim based on other issues.

The taxpayers argued that section 6511(d)(3) provides that “if the claim for credit or refund relates to an overpayment attributable to” foreign taxes, then the 10-year statute of limitations applies. They said that the government was reading the phrase “relates to” out of the statute by arguing that a claim is covered by section 6511(d)(3) only if it arises solely from an overpayment attributable to foreign taxes.

Although the taxpayers’ administrative claim was filed within the section 6511(d)(3) extended 10-year period, the court agreed with the government that only the taxpayers’ claim based on FTCs was timely. The court held that the taxpayers’ claim for the remaining refund was governed by the shorter limitations period under section 6511(a) because section 6511(d)(3) provides an exception to the default limitations period only with respect to FTC-based refund claims.

The court stated that because it must consider the words in their context and with a view to their place in the overall statutory scheme, “attributable to” in section 6511(d)(3)(A) carries the plain meaning of “due to, caused by, or generated by.” Therefore, for a tax refund claim to come within the application of the 10-year limitations period of section 6511(d)(3), the tax refund claim must be due to, caused by, or generated by, or, in other words, attributable to, taxes paid or accrued to any foreign country, that is to say, FTCs. As a result, only the portions of a refund claim that are based on FTCs should receive the benefit of the extended 10-year limitation in section 6511(d)(3), even if the refund claim covers non-FTC-based amounts.

F Reorganization Ruling

A publicly traded foreign corporation’s redomiciling transaction qualifies as an F reorganization despite days of stock trading occurring before the final step in the transaction, the IRS ruled.

The ruling in LTR 202339009 shows that despite the seemingly mechanical requirements of reg. section 1.368-2(m), including the requirement that “the same person or persons must own all of the stock of the transferor corporation, determined immediately before the potential F reorganization, and of the resulting corporation, determined immediately after the potential F reorganization, in identical proportions,” the IRS can show flexibility when public trading renders exact identity of ownership impossible. This goes beyond the familiar F in a bubble rule under which events occurring before or after the steps of an F reorganization normally won’t prevent those steps from constituting an F reorganization. Here, trading that occurred between the first and last steps of the purported F reorganization did not prevent those steps from constituting an F reorganization.

In LTR 202339009, the Country A transferring corporation established a new Country B corporation, then sold the shares of its Country C subsidiary to the new corporation in exchange for non-interest-bearing demand notes with a face value equal to the fair market value of the subsidiary’s shares. The taxpayer represented that the transfer was structured as a sale solely for local law reasons.

Shareholders then exchanged their stock in the transferring corporation for stock in the new corporation. Days later, the transferring corporation converted into an eligible entity and elected to be classified as an entity disregarded as separate from the new corporation for U.S. federal income tax purposes. The taxpayer represented that no planned purchase or sale of stock of the new corporation during the period before the check-the-box election would be included as part of the plan of reorganization.

Late Election Relief Letter Ruling

The IRS granted late election relief under reg. sections 301.9100-1 and -3 to a diversified, open-end management investment company (the Fund) seeking to make seven tax elections.

In LTR 202340007, the Fund filed late elections:

  • under section 851(b)(1) to be treated as a regulated investment company;

  • under section 852(b)(8)(A) to defer a portion of its “qualified late-year loss”;

  • under section 855(a) to treat certain distributions paid after Year 1 as paid during Year 1;

  • under prop. reg. section 1.988-7(a) to use a mark-to-market method of accounting for section 988 gain or loss with respect to section 988 transactions except as described in prop. reg. section 1.988-7(b);

  • under reg. section 1.1272-3(a) to treat all interest on debt instruments as original issue discount;

  • under section 1278(b) to include market discount in income currently; and

  • under section 1283(c)(2) to accrue acquisition discount, instead of original issue discount, on nongovernmental short-term obligations for purposes of complying with section 1281.

The ruling confirms that taxpayers may make the mark-to-market election under prop. reg. section 1.988-7(a) and that the normal rules for relief from filing deadlines for regulatory elections apply to that election.

Substitute Interest Ruling

Substitute interest payments made to domestic funds in connection with securities lending and sale-repurchase transactions will be treated as qualified interest income so that foreign shareholders of the funds receive the same exemption from tax that they would have received if the payments were made directly to them, the IRS ruled.

In LTR 202340003, exchange-traded funds entered into securities lending transactions in which they lent a U.S. debt instrument to a counterparty in exchange for an obligation to return an identical debt instrument and payments for the use of the debt instrument. Funds also entered into sale-repurchase transactions in which the funds sold U.S. debt instruments to a counterparty and agreed to purchase identical debt instruments on a fixed date for a fixed price. During the term of both the securities lending transactions and the sale-repurchase transactions, the funds received substitute payments of amounts equivalent to any interest payments made on the debt instrument.

Reg. sections 1.871-7(b)(2) and 1.881-2(b)(2) provide that a substitute interest payment received by a foreign person pursuant to a securities lending transaction or a sale-repurchase transaction has the same character as interest income paid or accrued under the terms of the transferred security for purposes of reg. sections 1.871-7 and 1.881-2. Thus, the payment can qualify for the portfolio interest exemption.

The IRS reasoned that even though the payments under the ruling’s fact pattern were made to domestic funds rather than directly to a foreign person, treating the payments as qualified interest income is consistent with the policy underlying sections 871(k) and 881(e).

Revised FTC IRS Practice Unit

On September 29 the IRS released an updated IRS practice unit titled “Categorization of Income and Taxes Into Proper Basket,” dated August 1. This practice unit updates the last version from May 15. The update provides that, with a section 962 election, the reduced corporate rate of 21 percent applies before the section 250 deduction. This is an important option for individual U.S. shareholders to be able to take advantage of the global intangible low-taxed income deduction and obtain FTCs.

The FTC limitation must be calculated separately for different categories of foreign-source income under section 904(d). The practice unit discusses seven categories of income:

  • section 951A (GILTI);

  • foreign branch;

  • passive;

  • general;

  • section 901(j);

  • certain income resourced by treaty; and

  • lump sum distributions.

In describing GILTI, the practice unit states that, generally, individual U.S. shareholders are not eligible for the GILTI deduction under section 250 or FTCs for taxes deemed paid for GILTI under section 960. However, an individual U.S. shareholder can make a section 962 election, which allows an individual to pay the GILTI tax as if the individual were a U.S. corporation (at the reduced corporate tax rate of 21 percent, before the section 250 deduction).

If an individual U.S. shareholder does not make a section 962 election, the individual would report section 951A income but would not be able to claim FTCs for taxes with respect to GILTI or claim a section 250 deduction.

Priority Guidance Plan

On September 29 the IRS and Treasury released the 2023-2024 Priority Guidance Plan. The plan contains 237 guidance projects that are priorities during the 12-month period from July 1, 2023, through June 30, 2024.

There are two new projects that were not in the 2022-2023 Priority Guidance Plan (fourth-quarter update) (prior plan):

  • regulations under reg. section 1.1502-75 regarding group continuation; and

  • regulations under reg. section 1.1502-91 regarding the redetermination of consolidated net unrealized built-in gain or loss.

Guidance for financial institutions and products includes:

  • Guidance under section 166 on the conclusive presumption of worthlessness for bad debts. Notice 2013-35, 2013-24 IRB 1240, which requested comments on the existing rules, was published on June 10, 2013. This was in the prior plan.

  • Guidance addressing issues relating to mark-to-market accounting under section 475 (in the prior plan).

  • Regulations under section 1001 on the modification of debt instruments, including issues relating to disregarded entities (in the prior plan).

  • New to the priority plan are:

    • regulations under section 6011 that identify certain basket transactions and notional principal contract transactions as listed transactions; and

    • guidance relating to certain financings of regulated public utility costs involving certain state financing entities.

Guidance on general tax issues includes:

  • guidance under sections 55, 56A, and 59 regarding the corporate alternative minimum tax;

  • guidance under section 163(j) regarding the limitation on business interest deductions, including the application of section 163(j) to interest capitalized under section 266;

  • regulations under section 267 regarding related-party transactions and partnerships;

  • guidance under section 1202 regarding the exclusion of gain from the sale or exchange of qualified small business stock (new to this plan);

  • guidance regarding the application of the 60-month limitation under reg. section 301.7701-3(c)(1)(iv) on the redomiciliation of an entity; and

  • guidance on the tax treatment of transactions involving digital assets.

Guidance on international tax issues includes:

  • Regulations under sections 959 and 961 concerning previously taxed E&P under subpart F.

  • Regulations under section 245A regarding deduction in respect of the foreign-source portion of certain dividends received by domestic corporations from specified 10-percent-owned foreign corporations.

  • Modification of regulations under section 367 regarding certain triangular reorganizations involving one or more foreign corporations. Notice 2016-73, 2016-52 IRB 908, was published on December 27, 2016. Notice 2014-32, 2014-20 IRB 1006, was published on May 12, 2014.

  • Regulations under section 367 regarding application to certain transfers of stock to foreign corporations in exchange for property under section 304. Notice 2012-15, 2012-9 IRB 424, was published on February 27, 2012.

  • Regulations under section 367 regarding application to transactions involving certain transfers of intangible property by a domestic corporation to a foreign corporation in an exchange described in section 361(a) or (b). Notice 2012-39, 2012-31 IRB 95, was published on July 30, 2012.

  • Regulations under section 954 on the timing of the elections in reg. section 1.954-2(g)(3) and (4) regarding foreign currency gain or loss treatment as foreign personal holding company income on behalf of a controlled foreign corporation. This was added after the prior plan.

  • Regulations related to the FTC, including in light of the global anti-base-erosion (GLOBE) rules. Notice 2023-55, 2023-32 IRB 427, was published on August 8 and is updated from the prior plan.

Guidance on transfer pricing includes:

  • Regulations under sections 367 and 482, including regulations addressing the changes to sections 367(d) and 482 on aggregation, realistic alternatives, and the definition of intangible property; and regulations under section 482 clarifying certain aspects of the arm’s-length standard, including periodic adjustments. Proposed (REG-139483-13) and temporary (T.D. 9738) regulations were published on September 16, 2015.

  • Regulations under section 482 clarifying the effects of group membership (for example, passive association) in determining arm’s-length pricing, including for financial transactions.

  • Guidance updating Rev. Proc. 2015-41, 2015-35 IRB 263, providing the procedures for requesting and obtaining advance pricing agreements and guidance on the administration of executed APAs.

  • Regulations under section 482 addressing the treatment of intangible development costs that are incurred as part of a cost-sharing arrangement and are required to be charged to capital account. This is a new addition to the plan.

Other new additions include regulations under section 6045 addressing the reporting by U.S. brokers of digital asset transactions in connection with the OECD’s crypto asset reporting framework and regulations under section 1503(d), including regulations addressing intercompany transactions and items arising from stock ownership.

Corporate AMT Comments

International Issues

The IRS should issue guidance preventing dual inclusion of CFC earnings under the corporate AMT, two commentators said.

In comments to IRS Notice 2023-64, 2023-40 IRB 974, both the New York State Bar Association Tax Section and the National Foreign Trade Council (NFTC) expressed concern that the same CFC income could be included via both the dividend inclusion rule of section 56A(c)(2)(C) and the CFC adjustment rule of section 56A(c)(3). Under the dividend inclusion rule, the adjusted financial statement income (AFSI) of an applicable corporation takes into account dividends received from corporations that are not part of the applicable corporation’s consolidated group. Under the CFC adjustment rule, the AFSI takes into account the appliable corporation’s pro rata share of items taken into account in computing the net income or loss of a CFC.

The NFTC recommends that dividends and other distributions from CFCs be excluded from AFSI. For similar reasons, it recommends that gains from the sale of stock be excluded to the extent that such gains reflect amounts that already have been included via the CFC adjustment rule.

The NYSBA Tax Section recommends either that dividends from CFCs be excluded from AFSI or that dividends from CFCs be excluded to the extent they are attributable to income that is or has been previously taken into account by the shareholder through the CFC adjustment rule.

The Tax Section also recommends that:

  • a section 78 gross-up amount is not treated as a dividend for purposes of the dividend inclusion rule;

  • for purposes of the corporate AMT FTC, foreign income taxes should be considered “taken into account” on an applicable financial statement only if they increase the current tax expense;

  • corporate AMT FTCs should be available if the tax is paid or accrued for federal income tax purposes in a year before the year in which the tax is taken into account on the applicable financial statement of the applicable corporation or CFC (and not just where the tax is paid or accrued in the same year or in a year after the tax is taken into account on the applicable financial statement); and

  • Treasury should consider administrative relief for the corporate AMT FTC when timing differences between book and tax accounting give rise to a deferred tax liability.

The NFTC also recommends that:

  • adjustments under the CFC adjustment rule occur on the last day of the CFC’s local accounting period;

  • the corporate AMT include provisional credits for contested foreign taxes; and

  • dividends from noncontrolled 10-percent-or-greater-owned foreign corporations be excluded from the corporate AMT.

Impairment Losses

The IRS should issue guidance governing the treatment for corporate AMT purposes of impairment losses on held-for-sale investments recorded for financial accounting purposes in years before the year that a sale of the investments closes, one taxpayer suggests.

Voya Financial Inc. explained that under U.S. generally accepted accounting principles, it was required to take a $1.5 billion loss in 2019 and 2020 and to record an $800 million gain in 2021 related to the same underlying transaction, the disposition of life insurance subsidiaries. The timing of the $800 million gain from the economic value of reinsurance agreements was determined by the closing of the sale, which occurred years after Voya was required to record the held-for-sale impairment losses. The result, Voya said, was a “significant distortion” in Voya’s AFSI for purposes of the test used to determine whether it is an “applicable corporation” subject to corporate AMT.

Voya proposes that:

  • losses attributable to investment in stock of consolidated subsidiaries be taken into account in the tax year in which the members leave the consolidated group;

  • the financial statement income attributable to a single “covered transaction” should be treated as occurring entirely in the tax year in which the transaction closes; or

  • financial statement income related to a covered transaction involving the sale of stock and reinsurance transactions be taken into account in the tax year in which the transaction closes.

Coinbase Comments on Reporting Rules

Proposed regulations governing gross proceeds and basis reporting for digital asset transactions “would impose an unprecedented, unchecked, and unlimited tracking on the daily lives of Americans,” Coinbase Global Inc. said in the first of two planned comment letters on the proposed regulations.

The proposed regulations “would establish an incomprehensible and unduly burdensome set of new reporting requirements that will degrade and displace the same taxpayer services the IRS is seeking to improve,” Coinbase added.

Coinbase asserted six core problems with the proposed regulations:

  • lack of parity with the rules governing providers of financial services (via an overbroad definition of broker);

  • duplicative and burdensome reporting;

  • invasion of privacy (via the reporting of payment and stablecoin transactions);

  • violation of technological neutrality;

  • unrealistic compliance timeline; and

  • missed opportunity to leverage blockchain technology in tax reporting.

Subject-to-Tax Rule

A multilateral convention to implement the “subject to tax rule” is open for signatures.3 Under the subject-to-tax rule, which is part of pillar 2 of the OECD-backed global tax reform plan, developing jurisdictions will be able to tax intragroup interest, royalties, payments for services, and some other payments at a rate up to the difference between 9 percent and the nominal corporate income tax rate of the residence jurisdiction. The subject-to-tax rule applies before the other pillar 2 rules and is creditable in computing the effective tax rate for pillar 2’s income inclusion rule and undertaxed profits rule. Jurisdictions that apply nominal corporate income tax rates below 9 percent to “covered income” will be required to implement the subject-to-tax rule in their bilateral tax treaties when requested to do so by developing jurisdictions. Developing jurisdictions are ones for which the gross national income per capita is $12,535 or less in 2019, 2020, 2021, or 2022. More than 70 jurisdictions are considered developing.

OECD Comments

South Centre

The South Centre, an intergovernmental organization representing developing countries, submitted comments and recommendations on the OECD’s “Pillar One — Amount B” proposal. The comment letter articulates the concerns of developing countries on the importance of addressing profit shifting, particularly in distribution activities. The countries express concerns about certain risks associated with amount B and advocate for alternative B, which they believe is more beneficial for developing countries.

The South Centre comment letter illustrates the competing interests that jurisdictions have in how amount B operates. Every jurisdiction wants amount B to operate in a way that allocates more income to their jurisdiction. The South Centre’s comment expresses a concern that amount B may capture non-baseline distribution functions as well, and deprive developing countries of tax revenues.

Overall, the South Centre’s comments and recommendations aim to ensure that the OECD’s amount B proposal is fair and beneficial to developing countries.

National Foreign Trade Council

The NFTC also provided comments on the OECD’s “Pillar One — Amount B” proposal. The NFTC comments were in line with the Tax Committee of the United States Council for International Business comments and the Information Technology Industry Council comments that we covered in our column last month.4

The NFTC recognizes the importance of providing certainty to enterprises conducting cross-border operations through international tax and transfer pricing norms. The NFTC supports the objectives of amount B, aiming to simplify and streamline the pricing of marketing and distribution activities in market jurisdictions.

Unlike the South Centre, the NFTC recommends alternative A over alternative B and raises concerns that alternative B’s subjective criteria related to support functions could lead to disputes over scoping.

Like the United States Council for International Business’s Tax Committee, the NFTC recommends allowing amount B to act as an elective safe harbor.

Like the Information Technology Industry Council, the NFTC strongly recommends including the distribution of digital goods and services within the scope of amount The NFTC emphasizes the importance of a broad scope for amount B, without subjective criteria or undue compliance burdens to promote simplicity and transparency while minimizing disputes.

The NFTC recommends disclosing data and assumptions behind the pricing matrix so that taxpayers can better understand and replicate the matrix outputs in various cases, as some members have observed the matrix starting point is at the high end of the range typically seen for routine distribution activities. The NFTC does not support jurisdiction-specific adjustments because the underlying data already reflects globally blended results and because such adjustments undermine the general objectives of amount B and would complicate administration.

The NFTC suggests further consideration of dispute prevention and resolution mechanisms because, it says, the current bilateral tax treaty framework can be ineffective and time consuming. The NFTC suggests the OECD consider using a multilateral instrument to implement amount B as an effective, broadly applicable mechanism available in all jurisdictions that ensure uniform adoption and aid in avoiding disputes.


1 For prior coverage, see James P. Fuller, “U.S. Tax Review,” Tax Notes Int’l, Jan. 9, 2017, p. 191.

2 Polk v. United States, No. 1:22-cv-00896 (Fed. Cl. 2023).

3 For prior coverage, see Larissa Neumann, Julia Ushakova-Stein, and Mike Knobler, “U.S. Tax Review: OECD Pillar Guidance, FTC Regs Relief, ABA on APA, and CFC Loss Guidance,” Tax Notes Int’l, Aug. 7, 2023, p. 693.

4 See Neumann, Ushakova-Stein, and Knobler, “Corporate AMT, Digital Asset Broker Reporting, FATCA, and Amount B,” Tax Notes Int’l, Oct. 16, 2023, p. 369.


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