Partnership Tax Audits
|
|
- Herbert Moore
- 8 years ago
- Views:
Transcription
1 New Audit Regime Allows IRS to Assess and Collect Tax at the Partnership Level SUMMARY The Bipartisan Budget Act of 2015 (the Budget Act) replaces the current partnership audit procedures with a very different procedural regime. Under the current procedures, the Internal Revenue Service (IRS) audits partnerships at the partnership level, but the IRS is required to flow any audit adjustments through to the partners who are ultimately liable for any tax due. According to IRS Commissioner John Koskinen, inefficiencies in the current partnership audit procedures make the process very difficult for the IRS. For these reasons, the Commissioner has stated that the IRS audits very few large partnerships. Under the new regime, the default rule provides that the IRS will assess and collect tax, penalties, and interest attributable to audit adjustments at the partnership level instead of the partner level. To avoid that result, a partnership can elect to pass the liability to the partners during the tax year to which the IRS adjustment relates. While this alternative procedure achieves a similar result as the current partnership audit procedures, the key difference is that the partnership rather than the IRS must determine how to flow the audit adjustments through to its partners, and the partnership must report these adjustments to its partners and the IRS. The new partnership audit procedures are effective for tax years beginning on or after January 1, 2018, although partnerships may elect to apply the provisions sooner. The procedures are intended to reduce the IRS s difficulty in auditing partnerships, which should in turn increase both the number of partnership audits and the amount the IRS ultimately collects from those audits. The Congressional Joint Committee on Taxation estimates that this change in audit procedures will result in approximately $9.3 billion in additional revenue over ten years. The new procedures likely will also affect the way future partnership agreements are drafted and negotiated. New York Washington, D.C. Los Angeles Palo Alto London Paris Frankfurt Tokyo Hong Kong Beijing Melbourne Sydney
2 DISCUSSION Most partnerships are currently subject to audit rules adopted as part of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). 1 Under these rules, the IRS conducts a single examination at the partnership level. 2 If the IRS makes an adjustment, the partners during the tax year to which the adjustment relates are responsible for paying any tax due. Before that can happen, however, the IRS must undertake what, according to the IRS, is a time- and labor-intensive process to flow the adjustment through to the partners. This can be especially complicated for partnerships with many partners and for partnerships in tiered structures where the IRS has to flow adjustments up through several levels before reaching the ultimate partners. For example, if a partnership understates its taxable income by $10 million but has 10,000 partners, the IRS could potentially have to assess and collect tax attributable to $1,000 of income from 10,000 different taxpayers. A 2014 report by the United States Government Accountability Office found that the TEFRA audit procedures and the growing complexity of large partnership structures hinder the IRS s ability to effectively audit large partnerships. 3 According to that report, in 2012 the IRS audited only 0.8% of large partnerships compared to 27.1% of large corporations. 4 IRS Commissioner Koskinen has likewise acknowledged that the [a]uditing of large partnerships has become a very challenging area for the IRS, in part because the number and complexity of partnerships has grown significantly over the last several years, and also because of inefficiencies in the partnership audit rules In this regard, the Commissioner explained that having to follow the TEFRA procedures is now more of a burden for the [IRS] than a help See I.R.C (repealed for tax years beginning on or after January 1, 2018). Where the statutory provisions in the Budget Act overlap with the TEFRA statutory provisions, this memorandum uses TEFRA and Budget Act parentheticals to distinguish one from the other. I.R.C (TEFRA). In the case of certain partnerships with ten or fewer partners, the TEFRA audit procedures do not apply. See I.R.C. 6231(a)(1)(B) (TEFRA). Instead, the IRS must issue a separate audit report to each partner and each partner can then act independently to challenge its own audit report under the deficiency procedures that otherwise apply to individuals. See, e.g., I.R.C United States Government Accountability Office, Large Partnerships: Growing Population and Complexity Hinder Effective IRS Audits (July 22, 2014). Id. at 10. Written Testimony of John A. Koskinen, Commissioner, Internal Revenue Service, Before the Senate Finance Committee on IRS Budget and Current Operations 7 (Feb. 3, 2015). Id. -2-
3 Against this backdrop, the Budget Act repeals the TEFRA audit rules and replaces them with a new set of partnership audit procedures. 7 The new procedures apply to partnership tax years beginning on or after January 1, 2018, but a partnership can elect to apply the new rules before then. 8 A. PARTNERSHIPS SUBJECT TO THE NEW RULES Under current law, partnerships with ten or fewer partners, each of whom is an individual (other than a nonresident alien), a corporation, or an estate of a deceased partner, are excepted from the TEFRA audit procedures. 9 The new partnership audit procedures provide a more generous exception that is broader in terms of both number and type of partners. In particular, partnerships with 100 or fewer eligible partners during a tax year can elect out of the new rules with respect to that tax year. 10 The partnership must make the election annually as part of a timely filed tax return. 11 If a partnership elects out of the new procedures and the IRS subsequently makes an audit adjustment, the IRS must issue a separate audit report to each partner and each partner can then act independently to challenge its own audit report under the deficiency procedures that otherwise apply to individuals. 12 For purposes of the exception, eligible partners include individuals, corporations, foreign entities that would be treated as corporations if such entities were domestic, S corporations, and estates of deceased partners. 13 Unlike a prior proposal, real estate investment trusts and regulated investment companies are not specifically excluded as eligible partners. 14 However, as under the TEFRA rules, a partnership cannot elect out of the new audit procedures if any partner is a limited liability company or limited partnership. In the case of an S-corporation partner, the S corporation s shareholders are each counted as partners in determining whether the partnership has 100 or fewer partners. 15 The Budget Act gives the IRS authority Bipartisan Budget Act of 2015, Pub. L. No , 1101(a), (c), 129 Stat. 584, 625. The Budget Act also repealed the partnership audit procedures that apply to electing large partnerships. Id. at 1101(b). Under those procedures, partnerships with more than 100 partners can elect to flow audit adjustments up to the partnership s partners when the adjustment occurs, rather than to the partners during the year to which the adjustment relates. See I.R.C (repealed for tax years beginning on or after January 1, 2018). Bipartisan Budget Act of 2015, Pub. L. No , 1101(g), 129 Stat. 584, 638. I.R.C. 6231(a)(1)(B) (TEFRA). I.R.C. 6221(b)(1) (Budget Act). I.R.C. 6221(b)(1)(D) (Budget Act). See, e.g., I.R.C I.R.C. 6221(b)(1)(C) (Budget Act). See Partnership Audit Simplification Act of 2015, H.R. 2821, 114th Cong. 2(c) (2015) (proposed I.R.C. 6221(b)(3)). I.R.C. 6221(b)(2)(A) (Budget Act). -3-
4 to prescribe similar rules for partners that are not specifically identified as eligible partners, such as limited liability companies and limited partnerships. 16 B. PARTNERSHIP AUDIT ADJUSTMENTS Consistent with the TEFRA audit procedures, the new partnership audit procedures require the IRS to conduct a single partnership-level examination. 17 If the IRS makes an adjustment at the partnership level, the default rule in the new procedures provides that the IRS will assess and collect any resulting tax, penalties, and interest at the partnership level. 18 This is a significant departure from the existing TEFRA audit procedures, under which tax is assessed and collected from the partners. 1. Default Procedure: Assessment and Collection at the Partnership Level Under the default rule in the new partnership audit procedures, the IRS will assess and collect tax, penalties, and interest attributable to partnership audit adjustments at the partnership level. 19 Unlike a prior proposal, partners are not subject to joint and several liability for partnership-level assessments. 20 The new partnership audit procedures, however, do not directly address whether or how audit-year partners will be allowed to increase the basis in their partnership interests to reflect the additional income in respect of which the partnership s payments to the IRS are made. The IRS will determine the tax attributable to a partnership-level adjustment by netting all audit adjustments and multiplying that net amount by the highest tax rate in effect for either individuals or corporations for the reviewed year. 21 Partnerships can demonstrate to the IRS that the tax due should be lower because of partner-specific information for the year under audit. 22 For example, a partnership can provide information as to the tax rates applicable to specific partners (such as individuals, corporations, and tax-exempt organizations) and the specific income to which the IRS adjustment gives rise (such as ordinary income, qualified dividends, or capital gains). 23 A partnership can also reduce the imputed underpayment by showing that one or more partners filed an amended tax return reflecting all partnership-level audit adjustments properly allocable to that partner and paid any resulting tax that is I.R.C. 6221(b)(2)(C) (Budget Act). I.R.C. 6221(a) (Budget Act). Id. I.R.C. 6221(a) (Budget Act). See Partnership Audit Simplification Act of 2015, H.R. 2821, 114th Cong. 2(c) (2015) (proposed I.R.C. 6241(d)(1)). I.R.C. 6225(b)(1)(A) (Budget Act). I.R.C. 6225(c)(1), (7) (Budget Act). I.R.C. 6225(c)(1), (3), (4) (Budget Act). -4-
5 due. 24 The new audit procedures give the IRS authority to prescribe guidance on other information that a partnership can provide to the IRS to reduce the imputed underpayment. 25 While allowing the partnership to present partner-level information to reduce the partnership-level tax is helpful in theory, it may be difficult to implement in practice. For example, in a tiered partnership structure, the lowest-tier partnership may not know the identity of the highest-tier partners. Similarly, a partner may not want to reveal its particular tax circumstances to the partnership or the other partners. Moreover, if a partner has special attributes that a partnership relies on to reduce the partnership-level tax, it is unclear how that partner will reap the full benefit of that reduction. A partnership agreement could provide for a special allocation to a partner whose attributes reduce the partnership-level tax attributable to an audit adjustment. However, it is unclear how that would work in a situation where the relevant partner has left the partnership by the time the partnership pays tax attributable to an audit adjustment. 2. Alternative Procedure: Assessment and Collection at the Partner Level To avoid liability at the partnership level, a partnership can elect an alternative procedure under which the partnership issues adjusted Schedules K-1 to the partners who were partners during the tax year to which the adjustment relates. 26 The partners must take the adjustment into account on their own tax returns for the year in which the partners receive the adjusted Schedules K The partnership must make the election and issue the adjusted Schedules K-1 within 45 days after the IRS issues a notice of final partnership adjustment. 28 Under this alternative procedure, the partners rather than the partnership will bear the tax liability attributable to any partnership-level audit adjustments. In this regard, the Budget Act provides that a partner s tax attributes shall be appropriately adjusted to reflect the partner s share of the partnershiplevel adjustment. 29 Although that provision does not specifically refer to tax basis (and is presumably not limited thereto), the provision seems to provide that a partner can increase its basis in a partnership interest to reflect the additional income allocated to the partner. The new audit procedures, however, provide no guidance on a situation where a partner sells its interest after the audit year but before the I.R.C. 6225(c)(2). I.R.C. 6225(c)(5) (Budget Act). Senator Orrin Hatch has already received comments suggesting that the new partnership audit procedures should identify partner-level passive activity losses as information that a partnership can provide to the IRS to reduce the imputed underpayment at the partnership level. See 161 CONG. REC. S7637 (daily ed. Oct. 29, 2015) (statement of Sen. Orrin Hatch). I.R.C. 6226(a) (Budget Act). I.R.C. 6226(b) (Budget Act). Because the partner must account for the partner s share of the partnership-level adjustment in the year the partner receives the adjusted Schedule K-1, the statute of limitations for assessing tax against the partner for prior years does not seem relevant. I.R.C. 6226(a) (Budget Act). I.R.C. 6226(b)(3) (Budget Act). -5-
6 partner pays additional tax attributable to the audit year. In that case, the partner may be required to file an amended tax return for the sale year to reflect an increased basis, assuming the relevant statute of limitations is still open. The alternative procedure under the new partnership audit procedures is similar to the existing TEFRA audit procedures in that partnership-level audit adjustments flow through to the partners who were partners during the tax year to which the adjustment relates. In that sense, the alternative procedure creates an exception to the otherwise applicable rule under which assessment and collection occur at the partnership level. Nevertheless, the key distinction between the existing TEFRA rules and the new alternative procedure is that the latter requires the partnership rather than the IRS to flow audit adjustments through to the partners. As discussed above, that process can be complicated and labor intensive. Requiring partnerships rather than the IRS to undertake the necessary analysis is intended to alleviate a major source of the difficulty the IRS faces in auditing large partnerships under the TEFRA audit rules. The extent to which partnerships will take advantage of this alternative procedure remains unclear. The decision to pursue this alternative procedure may depend on the number of adjusted Schedules K-1 the partnership would have to issue, the complexity of preparing those Schedules K-1, the extent to which there has been turnover among the partners, and the magnitude of the tax, penalties, and interest the partnership would otherwise have to bear. Another relevant consideration is that if a partnership elects to pursue the alternative procedure, thereby shifting any liability to the partners during the year under audit, underpayment interest will accrue at a rate that is two percentage points higher than the otherwise applicable underpayment rate Treatment When Partnership Ceases to Exist Under the new partnership audit procedures, if a partnership ceases to exist before the IRS makes a partnership adjustment, the former partners will take the adjustment into account under regulations to be prescribed by the Secretary. 31 From the statutory language, it is unclear whether former partners means the partners during the year to which the adjustment relates or the partners during the year the partnership ceased to exist. Additionally, while it seems this provision would apply in a situation where a partnership sells its assets and then liquidates, it is unclear whether the provision would apply where a partnership becomes a disregarded entity, elects to be taxed as a corporation, or undergoes a technical termination. 32 Future regulations may clarify these points I.R.C. 6226(c)(2)(C) (Budget Act); I.R.C. 6621(a)(2), (c). I.R.C. 6241(7) (Budget Act). See I.R.C. 708(b)(1). -6-
7 C. OTHER PROCEDURAL MATTERS The new partnership audit rules require a partnership to designate a person with a substantial presence in the United States as the partnership representative who has the sole authority to act on behalf of the partnership under the partnership audit procedures. 33 Unlike a tax matters partner under the TEFRA audit procedures, the partnership representative does not have to be a partner. 34 If the partnership does not designate a partnership representative, the IRS has authority to do so. 35 Additionally, the new rules make it more difficult for a partner to participate in the audit process. For example, under the TEFRA rules a notice partner can enter into a settlement agreement with the IRS even if other partners do not. 36 In contrast, under the new audit rules it seems that a partner has no independent ability to settle with the IRS. Similarly, under the TEFRA rules a partner can file a petition in the U.S. Tax Court if the partnership s tax matters partner does not. 37 In contrast, the new rules provide that only the partnership can petition the U.S. Tax Court to challenge an IRS adjustment at the partnership level. 38 However, as under the TEFRA rules, the new partnership audit procedures continue to allow a partner to file a tax return that is inconsistent with the partnership s tax return if the partner properly notifies the IRS. 39 D. IMPLICATIONS AND CONSEQUENCES The new audit procedures will make it easier for the IRS to audit partnerships and collect tax, penalties, and interest attributable to resulting adjustments. For that reason, the Budget Act will likely lead to an increase in both the number of partnership audits and the amount the IRS ultimately collects from those audits. 40 From a transactional perspective, existing partnership agreements may need to be reviewed and possibly revised to account for the new partnership audit procedures. Under the existing TEFRA rules, new partners generally have limited risk with respect to tax exposures in prior partnership tax years. This is because any adjustments attributable to prior partnership tax years flow to the partners in those years. But under the new partnership audit rules, a new partner could end up indirectly bearing a share of such I.R.C. 6223(a) (Budget Act). Id. Id. I.R.C. 6224(c) (TEFRA). I.R.C. 6226(b) (TEFRA). I.R.C. 6234(a) (Budget Act). I.R.C. 6222(c) (Budget Act). See, e.g., Laura Davison, Big Deductions, Big Audits? Maybe for Small Partnerships, 209 DTR G-2 (Oct. 28, 2015) ( The rate at which partnerships are audited is expected to increase under the new regime.... ); Aaron E. Lorenzo, More Partnerships Face Audits Under Budget Deal, 208 DTR G-2 (Oct. 27, 2015). -7-
8 historical tax liabilities if the partnership chooses to pay those liabilities instead of pursuing the alternative procedure discussed above. For this reason, partnerships should consider revising existing partnership agreements to make clear whether the partnership intends to (1) follow the default rule and bear tax liabilities attributable to partnership-level audit adjustments, (2) follow the alternative procedure and pass those tax liabilities to the partners during the year to which the liabilities relate, or (3) evaluate IRS audit adjustments on a case-by-case basis. This may be particularly relevant for partnerships that experience high partner turnover. New partners will likely prefer that a partnership follow the alternative procedure to ensure that partners in earlier tax years bear any tax liabilities attributable to those earlier tax years. However, as discussed above, the potential complexities of the alternative procedure as well as the large corporate underpayment rate that applies under the alternative procedure may deter other long-standing partners from agreeing to that approach. If a partnership agreement does not commit to pursing the alternative procedure, new partners should consider asking for representations, warranties, and indemnities regarding pre-closing tax liabilities. As enacted, the new audit procedures give rise to many unanswered questions. However, citing the delayed effective date of the new procedures, Senator Orrin Hatch, Chairman of the U.S. Senate Committee on Finance, has stated: In the coming weeks and months, the Finance Committee will treat the TEFRA partnership reforms as a work in process. As planned, we intend to hear comments and will be prepared to address issues raised by taxpayers, especially those issues that may not have been anticipated. 41 * * * Copyright Sullivan & Cromwell LLP See 161 CONG. REC. S7637 (daily ed. Oct. 29, 2015) (statement of Sen. Orrin Hatch). -8-
9 ABOUT SULLIVAN & CROMWELL LLP Sullivan & Cromwell LLP is a global law firm that advises on major domestic and cross-border M&A, finance, corporate and real estate transactions, significant litigation and corporate investigations, and complex restructuring, regulatory, tax and estate planning matters. Founded in 1879, Sullivan & Cromwell LLP has more than 800 lawyers on four continents, with four offices in the United States, including its headquarters in New York, three offices in Europe, two in Australia and three in Asia. CONTACTING SULLIVAN & CROMWELL LLP This publication is provided by Sullivan & Cromwell LLP as a service to clients and colleagues. The information contained in this publication should not be construed as legal advice. Questions regarding the matters discussed in this publication may be directed to any of our lawyers listed below, or to any other Sullivan & Cromwell LLP lawyer with whom you have consulted in the past on similar matters. If you have not received this publication directly from us, you may obtain a copy of any past or future related publications from Stefanie S. Trilling ( ; trillings@sullcrom.com) in our New York office. CONTACTS New York Andrew S. Mason masona@sullcrom.com David C. Spitzer spitzerd@sullcrom.com James R. Gadwood gadwoodj@sullcrom.com Katherine H. Zhang zhangk@sullcrom.com Washington, D.C. Donald L. Korb korbd@sullcrom.com SC1: v10-9-
IRS Issues Audit Directive on Worthless Debt Deductions for Banks and Bank Affiliates
October 29, 2014 IRS Issues Audit Directive on Worthless Debt Deductions for Banks and Bank Affiliates LBI Directs Its Auditors Not to Challenge Certain Worthless Debt Deductions SUMMARY The Large Business
More informationTax Court Addresses Implied Waiver of the Attorney-Client Privilege
Tax Court Addresses Implied Waiver of the Attorney-Client Privilege The Tax Court Holds That Raising Good-Faith and State-of-Mind Defenses to Accuracy-Related Penalties Could Result in an Implied Waiver
More informationDeductibility of Fiduciary Expenses
IRS Publishes Final Regulations on Deductibility of Fiduciary Expenses Incurred by Estates and Trusts SUMMARY On May 8, 2014, the Treasury Department and the Internal Revenue Service ( IRS ) adopted final
More informationIRS Issues Final and New Proposed Regulations Implementing the 3.8% Tax on Investment Income
IRS Issues Final and New Proposed Regulations Implementing the 3.8% Tax on Investment Income Final Regulations and New Proposed Regulations Implement the 3.8% Tax on Net Investment Income of Individuals,
More informationIRS Addresses Consequences of Purchasing and Selling Life Insurance Contracts
IRS Addresses Consequences of Purchasing and Selling Life Insurance Contracts Revenue Rulings Provide Guidance to Policyholders Who Surrender or Sell Life Insurance Contracts and to Investors Who Purchase
More informationPartnership Debt-for-Equity Exchanges
IRS Issues Final Regulations on Cancellation of Indebtedness Income and Other Consequences of an Exchange of Partnership Debt for Partnership Equity SUMMARY The Internal Revenue Service (the IRS ) recently
More informationNew York State Tax Developments
New York State Executive Budget Proposal Would Make Important Changes to Tax Laws Affecting Individuals and Trusts SUMMARY On January 19, 2010, New York State Governor David A. Paterson released his executive
More informationNew York State Labor Law Amendments Affecting Proof in Pay Discrimination Cases and Employer Policies Concerning Wage Disclosure
New York State Labor Law Amendments Affecting Proof in Pay Discrimination Cases and Employer Policies Concerning Wage Disclosure Amendments Alter Burden of Proof in Gender-Based Pay Cases and Bar Employer
More informationClient Alert. Tax News and Developments
Tax News and Developments North America Client Alert November 17, 2015 Newly-Enacted Legislation Makes a Sweeping and Radical Overhaul to the Partnership Audit Rules and Will Likely Require a Revision
More informationKPMG Report: Preliminary Analysis of Partnership Tax Changes in Budget Act
KPMG Report: Preliminary Analysis of Partnership Tax Changes in Budget Act TAX November 2, 2015 kpmg.com 1 President Obama on November 2, 2015, signed into law H.R. 1314, the Bipartisan Budget Act of 2015
More informationIRS Offshore Voluntary Disclosure Program
IRS Launches Third Offshore Voluntary Disclosure Program SUMMARY On January 9, 2012, the Internal Revenue Service (the IRS ) issued a news release announcing that the IRS is opening a third Offshore Voluntary
More informationSection 4371 Excise Tax on Insurance and Reinsurance Contracts
Section 4371 Excise Tax on Insurance and Reinsurance Contracts D.C. Circuit Holds that Federal Excise Tax Does Not Apply to Wholly Foreign Retrocession Agreements SUMMARY On May 26, 2015, in Validus Reinsurance,
More informationChanges to New York Power of Attorney Law
New York Amends Power of Attorney Law Retroactively SUMMARY The New York Legislature has now passed, and the Governor has signed, amendments to the New York Power of Attorney Law, Sections 5-1501 5-1514
More informationInternal Revenue Service Issues Regulations Affecting REIT Conversions and Spinoffs
Internal Revenue Service Issues Regulations Affecting REIT Conversions and Spinoffs IRS and Treasury Issue Regulations to Extend the Period During Which a REIT Is Subject to Corporate Tax on Built-in Gains
More informationFBAR Reporting Requirements for Foreign Financial Accounts
FBAR Reporting Requirements for Foreign Financial Accounts FinCEN Releases Notice of Proposed Rulemaking to Revise Certain Provisions of the FBAR Regulations SUMMARY The Financial Crimes Enforcement Network
More informationHong Kong Enacts a Statutory Disclosure Regime
Statutory Obligation for Hong Kong-Listed Corporations to Disclose Price Sensitive Information Becoming Effective on January 1, 2013 SUMMARY With effect from January 1, 2013, Hong Kong will implement a
More informationNew York City Council Passes Bill Banning Use of Credit Checks in Employment Decisions
New York City Council Passes Bill Banning Use of Credit Checks in Employment Decisions Amendment to the New York City Human Rights Law Makes It an Unlawful Discriminatory Practice for Most Employers to
More informationDepartment of Labor Proposes New Overtime Regulations
Department of Labor Proposes New Overtime Regulations DOL Proposes Substantially Raising Salary Thresholds Used in Determining Who Is Exempt from Overtime Pay and Requests Comments on Potential Changes
More informationReporting Requirements for Foreign Financial Accounts
Reporting Requirements for Foreign Financial Accounts Proposed FinCEN Regulations and IRS Guidance On Foreign Bank and Financial Account Reporting SUMMARY On February 26, the IRS issued Notice 2010-23
More informationCFTC Chairman Seeks Additional Authority for CFTC
CFTC Chairman Seeks Additional Authority for CFTC Chairman Gensler Requests Clarifying Language for CFTC Regulatory Authority Under the Over-the-Counter Derivatives Markets Act of 2009 SUMMARY In response
More informationRC & IRS ON THE HORIZON: IN THE EUROPE UNITED STATES. risk compliance RISK & COMPLIANCE MAGAZINE. & compliance REPRINTED FROM: JAN-MAR 2016 2014 ISSUE
JAN-MAR 2014 R E P R I N T risk compliance & IRS ON THE HORIZON: PARTNERSHIP DATA PRIVACY AUDIT REFORM IN THE EUROPE UNITED STATES REPRINTED FROM: RISK & COMPLIANCE MAGAZINE JAN-MAR 2016 2014 ISSUE risk
More informationRegistered Adviser Custody Rules
SEC Adopts Final Rules and Issues Guidance to Safeguard the Custody of Client Assets by Investment Advisers SUMMARY The SEC has adopted and published amendments to Rule 206(4)-2 under the Investment Advisers
More informationCourt Addresses (Again!) Employee Stock Option Expenses for Transfer Pricing Purposes
Court Addresses (Again!) Employee Stock Option Expenses for Transfer Pricing Purposes Ninth Circuit Reverses Itself and Holds that the Arm s-length Standard Controls in Determining if Employee Stock Option
More informationNew York Court of Appeals Announces New Rules Governing Practice in New York by Attorneys Not Admitted in the State
New York Court of Appeals Announces New Rules Governing Practice in New York by Attorneys Not Provisions Permit Temporary Practice by Non-New York Attorneys and Registration of Non-U.S. Lawyers as In-House
More informationSupreme Court Clarifies Statute of Limitations Applicable to False Claims Act Whistleblower Suits Against Government Contractors
Supreme Court Clarifies Statute of Limitations Applicable to False Claims Act Whistleblower Suits Against Government Contractors In Kellogg Brown & Root Services, Inc., et al. v. United States ex rel.
More informationNew York Employment Law Update
Recent Legislative Developments in New York State Regarding Reductions in Force and Criminal Conviction Records SUMMARY A number of new New York State statutes of significance to employers will soon become
More informationFDIC Temporary Liquidity Guarantee Program
FDIC Temporary Liquidity Guarantee Program The FDIC Issues Interim Rule Regarding Temporary Liquidity Guarantee Program SUMMARY On Thursday, October 23, the Federal Deposit Insurance Corporation ( FDIC
More informationBroker-Dealer Audit and Reporting Updates
PCAOB Report and New SEC Rules Address Audit, Financial Reporting, Internal Control and Risk Management Issues Relating to Broker-Dealers These Developments May Be Relevant for Audit Committees of Public
More informationBank Levies in the UK, France and Germany
Bank Levies in the UK, France and Germany A Comparison of the New Levies on Banks SUMMARY The United Kingdom, France and Germany have all recently finalised, or are in the process of finalising, details
More informationRecent Developments Regarding Entity Classification for UK Tax Purposes
Recent Developments Regarding Entity Classification for UK Tax Purposes Anson v. HMRC is a Delaware LLC tax-transparent? SUMMARY The question as to whether a non-uk entity such as a Delaware limited liability
More informationGerman Merger Control
German Federal Cartel Office Publishes Draft Guidelines on Jurisdiction for Merger Review SUMMARY On 5 December 2013, the German Federal Cartel Office (Bundeskartellamt) published new draft guidelines
More informationCourt Addresses Employee Stock Option Expenses for Transfer Pricing Purposes
Court Addresses Employee Stock Option Expenses for Transfer Pricing Purposes Ninth Circuit Overturns Tax Court and Holds That Expenses Attributable to Employee Stock Options Are Costs of Developing Intangibles
More informationChanges to New York Power of Attorney Law
Changes to New York Power of Attorney Law New York Imposes New Requirements on All Powers of Attorney Executed in New York by Individuals Effective September 1, 2009 SUMMARY Effective September 1, 2009,
More informationWhistleblower Provisions
SEC Issues Final Rules Implementing the Dodd-Frank Whistleblower Provisions SUMMARY On May 25, 2011, the Securities and Exchange Commission voted 3 to 2 to approve the final rules implementing the whistleblower
More informationSupreme Court Decision Affirming Judicial Right to Review EEOC Actions
Supreme Court Decision Affirming Judicial Right to Review EEOC Actions The Supreme Court Holds That EEOC s Conciliation Efforts Are Subject to Judicial Review, Albeit Narrow SUMMARY A unanimous Supreme
More informationThe FTT will be due irrespective of whether the acquisition is carried out by a company or an individual.
French Parliament Adopts Proposed Legislation on Financial Transaction Tax with Few Amendments SUMMARY Draft legislation to introduce a financial transaction tax (the FTT ) in France was presented by the
More informationCOMMENTARY. New Partnership Tax Audit Rules Will Impact Private Investment Fund Vehicles. Summary
NOVEMBER 2015 COMMENTARY New Partnership Tax Audit Rules Will Impact Private Investment Fund Vehicles On November 2, 2015, President Barack Obama signed into law the Bipartisan Budget Act of 2015 (the
More informationCHANGE IN U.S. PARTNERSHIP TAX RULES WILL REQUIRE CHANGES TO PARTNERSHIP AGREEMENTS
BRIEFING CHANGE IN U.S. PARTNERSHIP TAX RULES WILL REQUIRE CHANGES TO PARTNERSHIP AGREEMENTS NOVEMBER 2015 PROVISIONS IN THE BIPARTISAN BUDGET ACT OF 2015 CHANGE THE RULE FOR TAX AUDITS AND CONTESTS OF
More informationDodd-Frank Whistleblower Provision
Second Circuit, Disagreeing with Fifth Circuit, Defers to SEC s Interpretation of Dodd-Frank Whistleblower Definition and Holds That Internal Whistleblowers Are Entitled to Pursue Dodd-Frank Retaliation
More informationEU State Aid and Tax Law
European Court finds that Spanish tax rules were not unlawful state aid because they did not give a selective advantage SUMMARY In two recent cases on fiscal state aid, the General Court of the European
More informationDeposit Insurance Assessment System
The FDIC Issues a Final Rule Regarding Changes to the Ratios and Ratio Thresholds to Align the With U.S. Basel III Capital Rules On November 18, 2014, the Federal Deposit Insurance Corporation (the FDIC
More informationSarbanes-Oxley Whistleblower Provision
U.S. Supreme Court Significantly Expands Sarbanes-Oxley Whistleblower Provision to Include Employees of Non-Public Contractors and Subcontractors of Public Companies SUMMARY In Lawson v. FMR LLC, No. 12-3
More informationNYSE Amends Rule on Material News Notification and Trading Halts
NYSE Amends Rule on Material News Notification and Trading Halts NYSE Extends the Pre-Market Notification Period During Which Listed Companies Are Required to Notify the NYSE Prior to Disseminating Material
More informationHouse Financial Services Draft OTC Derivatives Legislative Proposal
House Financial Services Draft OTC Derivatives Legislative Proposal House Financial Services Chairman Barney Frank Releases Discussion Draft of the Over-the-Counter Derivatives Markets Act of 2009, on
More informationNew York State and City Tax Law Changes
2010-2011 New York State Budget Is Enacted Four Months Late Imposes Tax Increases on Individuals and Corporations SUMMARY The 2010-2011 New York State Budget (the Budget ) was enacted on August 4, 2010,
More informationCriminal Defense and Investigations
Fraud Enforcement and Recovery Act of 2009 SUMMARY On May 20, 2009, President Obama signed into law the Fraud Enforcement and Recovery Act of 2009 ( FERA ), a statute intended to strengthen the federal
More informationDue Diligence in Regulation D Offerings
FINRA Provides Guidance on the Obligation of Broker-Dealers to Conduct Reasonable Investigations in Regulation D Offerings SUMMARY FINRA has published a regulatory notice providing guidance to broker-dealers
More informationEqual Employment Opportunity Commission v. Abercrombie & Fitch Stores, Inc.: Religious Accommodation in the Workplace
Equal Employment Opportunity Commission v. Abercrombie & Fitch Stores, Inc.: Supreme Court Clarifies that an Employer Can Be Liable for Failing To Accommodate a Religious Practice that the Employer Suspects,
More informationCurrent Market Conditions Create Opportunities for Estate Planning Strategies
Current Market Conditions Create Opportunities for Strategies SUMMARY The recent decline in stock prices and today s low interest rates for intra-family loans present a unique opportunity to transfer wealth
More informationLARGE PARTNERSHIPS. With Growing Number of Partnerships, IRS Needs to Improve Audit Efficiency
United States Government Accountability Office Report to Congressional Requesters September 2014 LARGE PARTNERSHIPS With Growing Number of Partnerships, IRS Needs to Improve Audit Efficiency GAO-14-732
More informationMay 20, 2009 Client Alert
Client Alert Bei j i n g Fr a n k f u r t Ho n g Ko n g Lo n d o n Lo s An g e l e s Mu n i c h Ne w Yo r k Si n g a p o r e To k y o Wa s h i n g t o n, DC International Tax Regime Targeted in Latest
More informationPerez v. Mortgage Bankers Association
Supreme Court Holds that Agencies Can Amend or Repeal Interpretive Rules Without Notice-and-Comment Procedures SUMMARY The U.S. Supreme Court yesterday held that agencies are not required to follow notice-and-comment
More informationCorporate Governance of Delaware Corporations
Corporate Governance of Delaware Corporations Delaware Adopts Amendments to the Delaware General Corporation Law Relating to Corporate Governance SUMMARY The Delaware legislature has enacted a number of
More informationProcedural Issues in Partnership Audits and Tax Litigation
ALI-CLE Partnerships, LLCs, and LLPs February 7, 2013 Procedural Issues in Partnership Audits and Tax Litigation Mary A. McNulty Thompson & Knight LLP mary.mcnulty@tklaw.com 2 1982 Procedural Issues in
More informationScheduled for a Public Hearing. Before the SENATE COMMITTEE ON FINANCE. on April 5, 2001. Prepared by the Staff. of the JOINT COMMITTEE ON TAXATION
OVERVIEW OF PRESENT LAW RELATING TO THE INNOCENT SPOUSE, OFFERS-IN-COMPROMISE, INSTALLMENT AGREEMENT, AND TAXPAYER ADVOCATE PROVISIONS OF THE INTERNAL REVENUE CODE Scheduled for a Public Hearing Before
More informationPrivate Securities Fraud Claims Under Section 10(b) Based on False or Misleading Statements
Private Securities Fraud Claims Under Section 10(b) Based on False or Misleading Statements U.S. Supreme Court Holds that Private Actions May Be Brought Only Against Parties With Ultimate Authority Over
More informationCompleting and Filing Schedule O
Department of the Treasury Instructions for Schedule O Internal Revenue Service (Form 1120) (Rev. December 2012) Consent Plan and Apportionment Schedule for a Controlled Group Section references are to
More informationFrench 50% Withholding Tax on Interest Paid in Tax Havens
French 50% Withholding Tax on Interest Paid in Tax Havens Administrative Guidelines Provide for Safe Harbors under Which Interest Paid with Respect to Certain Notes Would Be Exempt SUMMARY Interest paid
More informationFINAL REGULATIONS RELATING TO OPTIONS GRANTED UNDER EMPLOYEE STOCK PURCHASE PLANS
IRS Issues Final Regulations Relating to Employee Stock Purchase Plans and the Reporting Requirements for Employee Stock Purchase Plans and Incentive Stock Options February 17, 2010 EXECUTIVE SUMMARY In
More informationFSOC Proposes Rules for Board of Governors of the Federal Reserve s Supervision of Nonbank Financial Companies. October 20, 2011
FSOC Proposes Rules for Board of Governors of the Federal Reserve s Supervision of Nonbank Financial Companies October 20, 2011 On October 11, the Financial Stability Oversight Council (the Council) released
More informationSEC Issues Liquidity Risk Management and Swing Pricing Proposal for Open-End Investment Funds
SEC Issues Liquidity Risk Management and Swing Pricing Proposal for Open-End Investment Funds Proposed Rule and Amendments to Rules and Forms Would Require Open-End Funds to Implement Liquidity Risk Management
More informationIRS Offers Filing and Penalty Relief for 2010 Estates; Basis Form Now Due Jan. 17; Extension to March Available for Estate Tax Returns
Media Relations Office Washington, D.C. Media Contact: 202.622.4000 www.irs.gov/newsroom Public Contact: 800.829.1040 IRS Offers Filing and Penalty Relief for 2010 Estates; Basis Form Now Due Jan. 17;
More informationStrengthening the Economy and Increasing Wages by Making the Tax Code Simpler and Fairer for America s Small Businesses. Overview
Strengthening the Economy and Increasing Wages by Making the Tax Code Simpler and Fairer for America s Small Businesses Page 1: Page 2-3: Page 4-6: Page 7: Overview Small Business Draft: Core Components
More informationRegistration Process for Security-Based Swap Entities
Registration Process for Security-Based Swap Entities SEC Proposes Rules on Registration of Security-Based Swap Dealers and Major Security-Based Swap Participants SUMMARY On October 12, 2011, the SEC proposed
More informationScheduled for Markup by the SENATE COMMITTEE ON FINANCE on February 11, 2015. Prepared by the Staff of the JOINT COMMITTEE ON TAXATION
DESCRIPTION OF THE CHAIRMAN S MARK OF PROPOSALS RELATING TO REAL ESTATE INVESTMENT TRUSTS (REITs), REGULATED INVESTMENT COMPANIES (RICs) AND THE FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT (FIRPTA) Scheduled
More informationCash Versus Accrual Accounting: Tax Policy Considerations
Cash Versus Accrual Accounting: Tax Policy Considerations Raj Gnanarajah Analyst in Financial Economics Mark P. Keightley Specialist in Economics April 24, 2015 Congressional Research Service 7-5700 www.crs.gov
More informationFederal, State, and International Tax Audits in the Alternative Investments Industry
www.pwc.com Federal, State, and International Tax Audits in the Alternative Investments Industry April 2013 Contents Introduction...1 The audit landscape... 2 The audit process... 3 Managing the audit...
More informationBasel Intraday Liquidity Framework
Basel Committee Publishes Final Document on Monitoring Tools for Intraday Liquidity Management SUMMARY The Basel Committee on Banking Supervision (the Basel Committee ), in consultation with the Committee
More informationCapital Gains Taxes: An Overview
Order Code 96-769 Updated January 24, 2007 Summary Capital Gains Taxes: An Overview Jane G. Gravelle Senior Specialist in Economic Policy Government and Finance Division Tax legislation in 1997 reduced
More informationThe SEC s New Large Trader Reporting Rule
The SEC s New Large Trader Reporting Rule November 3, 2011 SUMMARY With its recent adoption of Rule 13h-1 (the Rule ) and Form 13H pursuant to Section 13(h) of the Securities Exchange Act of 1934, as amended
More informationClaims Submitted to the IRS Whistleblower Office under Section 7623. This Notice provides guidance to the public on how to file claims under Internal
Part III Administrative, Procedural, and Miscellaneous Claims Submitted to the IRS Whistleblower Office under Section 7623 Notice 2008-4 SECTION 1. PURPOSE This Notice provides guidance to the public on
More informationa) State and Local Taxes Bankruptcy Code 346, 728 and 1146.
a) State and Local Taxes Bankruptcy Code 346, 728 and 1146. Because the United States Constitution provides that all tax legislation must originate in the House of Representatives, the Bankruptcy Code,
More informationItalian Tax Reform. New legislation on abuse of law and statute of limitations. Abuse of law and tax avoidance. Introduction
27 August 2015 Practice Group(s): Tax Italian Tax Reform New legislation on abuse of law and statute of limitations By Vittorio Salvadori di Wiesenhoff The Italian Government has recently approved a new
More informationPART 3 REPRESENTATION, PRACTICE, AND PROCEDURES. Section 3: Specific Types of Representation Part 3 Representing a Taxpayer in Audits/Examinations
PART 3 REPRESENTATION, PRACTICE, AND PROCEDURES Section 3: Specific Types of Representation Part 3 Representing a Taxpayer in Audits/Examinations IRS authority to investigate IRS utilizes internally developed
More informationBusiness Organization\Tax Structure
Business Organization\Tax Structure Kansas Secretary of State s Office Business Services Division First Floor, Memorial Hall 120 S.W. 10th Avenue Topeka, KS 66612-1594 Phone: (785) 296-4564 Fax: (785)
More informationTargeted Tax Reform: Solutions to Relieve the Tax Compliance Burden(s) for America s Small Businesses
Targeted Tax Reform: Solutions to Relieve the Tax Compliance Burden(s) for America s Small Businesses Testimony of Professor Caroline Bruckner, Executive-in-Residence, Accounting and Taxation and Managing
More informationLARGE PARTNERSHIPS Growing Population and Complexity Hinder Effective IRS Audits
For Release on Delivery Expected at 9:30 a.m. ET Tuesday July 22, 2014 United States Government Accountability Office Testimony Before the Permanent Subcommittee on Investigations, Committee on Homeland
More informationGAO TAX ADMINISTRATION. Federal Payment Levy Program Measures, Performance, and Equity Can Be Improved. Report to Congressional Requesters
GAO United States General Accounting Office Report to Congressional Requesters March 2003 TAX ADMINISTRATION Federal Payment Levy Program Measures, Performance, and Equity Can Be Improved GAO-03-356 March
More informationBusiness Organization\Tax Structure
Business Organization\Tax Structure One of the first decisions a new business owner faces is choosing a structure for the business. Businesses range in size and complexity, from someone who is self-employed
More informationHow to Switch to Being a Benefit Corporation
November 2012 How to Switch to Being a Benefit Corporation By William H. Clark, Jr. Note: This outline describes the major issues that should be considered by an existing business evaluating becoming a
More informationSeries LLC Is It Finally Usable?
Originally published in: BNA Tax Management Real Estate Journal November 3, 2010 Series LLC Is It Finally Usable? By: Howard J. Levine and Daniel W. Stahl 1 BACKGROUND Many in the real estate development
More informationINVESTMENT FUNDS. SEC Proposes First Dodd-Frank Investment Advisers Act Rule to Address Family Offices. What Is a Family Office?
OCTOBER 22, 2010 INVESTMENT FUNDS SEC Proposes First Dodd-Frank Investment Advisers Act Rule to Address Family Offices Section 409(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the
More informationIRAs as Shareholders in Subchapter S Corporations Who Is An Individual?
IRAs as Shareholders in Subchapter S Corporations Who Is An Individual? 2321 N. Loop Drive, Ste 200 Ames, Iowa 50010 www.calt.iastate.edu October 1, 2009 by Roger A. McEowen* Updated on March 26, 2012
More informationPROTECTING BUSINESS OWNERS AND PRESERVING BUSINESSES FOR FUTURE GENERATIONS
BASICS OF BUY-SELL PLANNING A buy-sell arrangement (or business continuation agreement ) is an arrangement for the disposition of a business interest upon a specific triggering event such as a business
More informationTREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION
TREASURY INSPECTOR GENERAL FOR TAX ADMINISTRATION Fiscal Year 2015 Statutory Review of Restrictions on Directly Contacting Taxpayers July 7, 2015 Reference Number: 2015-30-061 This report has cleared the
More informationFor the reasons set out below, I believe that COLI arrangements produce inappropriate tax benefits. Specifically:
Statement of Andrew D. Pike * Associate Dean for Academic Affairs and Professor of Law American University, Washington College of Law before the Senate Finance Committee October 24, 2003 Mr. Chairman and
More informationCHOICE OF BUSINESS ENTITY
CHOICE OF BUSINESS ENTITY Presented by James M. Jimenez, Esq. Pacific Business Law Group A Professional Corporation 1601 Cloverfield Boulevard Suite 200 South Tower Santa Monica, California 90401 July
More informationImplementation and Effectiveness of the Small Business Health Care Tax Credit
HEARING BEFORE THE COMMITTEE ON WAYS AND MEANS SUBCOMMITTEE ON OVERSIGHT U.S. HOUSE OF REPRESENTATIVES Implementation and Effectiveness of the Small Business Health Care Tax Credit November 15, 2011 Washington,
More informationChinese Affiliates of Big Four Accounting Firms Ordered Barred from Practicing Before the SEC for Six Months; Suspension Stayed Pending Appeal
Chinese Affiliates of Big Four Accounting Firms Ordered Barred from Practicing Before the SEC for Six Months; Suspension Stayed Pending Appeal Administrative Law Judge Finds that the Firms Willfully Refused
More informationUnited States General Accounting Office. Testimony Before the Committee on Finance, United States Senate
GAO United States General Accounting Office Testimony Before the Committee on Finance, United States Senate For Release on Delivery Expected at 10:00 a.m. EST on Thursday March 8, 2001 ALTERNATIVE MINIMUM
More informationThe Tax Man Cometh For Insurance Cos. In Latest Budget
Portfolio Media. Inc. 860 Broadway, 6th Floor New York, NY 10003 www.law360.com Phone: +1 646 783 7100 Fax: +1 646 783 7161 customerservice@law360.com The Tax Man Cometh For Insurance Cos. In Latest Budget
More informationSection 851. Definition of Regulated Investment Company
Part I Section 851. Definition of Regulated Investment Company 26 CFR 1.851 2: Limitations (Also Sections 7704, 7805; 301.7805 1) Rev. Rul. 2006 1 ISSUE If a corporation enters into a derivative contract
More information2014 Amendments Affecting Delaware Alternative Entities and the Contractual Statute of Limitations
August 2014 Practice Groups: Corporate/M&A Private Equity 2014 Amendments Affecting Delaware Alternative Entities By Scott E. Waxman, Eric N. Feldman, Nicholas I. Froio, Andrew Skouvakis, Zachary L. Sager
More informationTax Night: Planning for Higher Income, Estate, and Medicare Taxes
Tax Night: Planning for Higher Income, Estate, and Medicare Taxes after the 2012 Elections, Attorney Tax Section of the Los Angeles County Bar Association 1, Business and Tax Attorney Law Office of 818-936-3490
More informationChoice of Entity. Paul E. Costantino, CPA, MST Costantino Richards Rizzo, LLP, Wakefield
Choice of Entity Paul E. Costantino, CPA, MST Costantino Richards Rizzo, LLP, Wakefield I. Overview of Entities The entity selection process is one of the first steps in the formation of any business,
More informationChoice of Entity: Corporation or Limited Liability Company?
March 2014 Choice of Entity: Corporation or Limited Liability Company? By Gianfranco A. Pietrafesa* Attorney at Law There are many different types of business entities, including corporations, general
More informationSTATE BAR OF CALIFORNIA TAXATION SECTION INTERNATIONAL TAX COMMITTEE 1
SEPTEMBER 2010 STATE BAR OF CALIFORNIA TAXATION SECTION INTERNATIONAL TAX COMMITTEE 1 PROPOSED GUIDANCE ON FBARS & FOREIGN PERSONS By Patrick W. Martin, Esq. Procopio, Cory, Hargreaves & Savitch LL Patrick
More informationACTION: Notice of proposed rulemaking and notice of public. SUMMARY: This document contains proposed rules for the treatment
[4830-01-U] DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [REG-106031-98] RIN 1545-AW13 Trading Safe Harbors. AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed
More informationFlorida corporate income tax Reporting of federal audit adjustments. By Benjamin A. Jablow, Deloitte Tax LLP
Florida corporate income tax Reporting of federal audit adjustments By Benjamin A. Jablow, Deloitte Tax LLP Tax Law by Benjamin A. Jablow Florida Corporate Income Tax: Reporting of Federal Audit Adjustments
More informationQualified Settlement Funds: A Quick Guide for Trial Lawyers
Qualified Settlement Funds: A Quick Guide for Trial Lawyers By Jason D. Lazarus, Esq. Introduction Assume you just settled a personal injury case for John Doe who is married to Jane. John has a significant
More information