In this sixth episode of our Ropes & Gray podcast series addressing emerging issues for fiduciaries of 401(k) and 403(b) plans to consider as part of their litigation risk management strategy, Doug Hallward-Driemeier, chair of Ropes & Gray’s appellate and Supreme Court practice, and Josh Lichtenstein, a benefits partner and head of the ERISA fiduciary practice, discuss the Supreme Court’s decision to hear the Northwestern University retirement plan case next term, which will examine what the applicable pleading standard should be for bringing a claim of fiduciary imprudence in violation of ERISA in connection with the management of a defined contribution plan. The podcast also includes an update on the DOL’s cybersecurity guidance.

Update on LB&I Campaigns: Hear the Latest from the IRS–Northeast WIN Webinar. Northeast regional WIN-IFA chapters will co-organize a webinar on August 10. The webinar will provide an overview of LB&I campaigns focused on international and partnership issues, including the recently-announced campaign looking at “whether foreign investors were subject to U.S. tax on effectively connected income from lending transactions engaged in through a U.S. trade or business.”  The webinar will discuss the campaign process in general and how these new initiatives fit in overall. John Hinding, Director, Cross Border Activities Practice Area and Cindy Kim, Program Manager, Practice Network, both of the IRS and Ropes tax partner Kat Gregor will serve as panelists and Natallia Shapel, Partner, International Tax Services at BDO USA will moderate the discussion.

IBA Tax Open Forum – Pillar 2 Agreed? A New Era of Minimum Corporate Taxation. Kat Gregor was a discussion leader during an International Bar Association (IBA) webinar, presented by the IBA Taxes Committee. This webinar focused on the Organisation for Economic Cooperation and Development’s Pillar 2 proposals.

On Thursday, June 24, 2021, President Joseph R. Biden announced support for a $1.2 trillion Bipartisan Infrastructure Framework (“Infrastructure Framework”), created by a bipartisan coalition of 21 senators, including eleven Republicans, nine Democrats, and one independent. The White House released a fact sheet outlining the Infrastructure Framework. The Infrastructure Framework focuses on traditional infrastructure improvements, with the largest item for roads, bridges, and other major projects. The Infrastructure Framework does not contain any of the tax increases proposed by the American Jobs Plan or American Families Plan (see Ropes & Gray American Jobs Plan Alert and American Family Plan Alert). The Infrastructure Framework does rely on funding achieved by increased IRS enforcement to reduce the tax gap, along with other sources of funding.

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In this fifth episode of our Ropes & Gray podcast series addressing emerging issues for fiduciaries of 401(k) and 403(b) plans to consider as part of their litigation risk management strategy, David Kirchner and Jack Eckart, both from our benefits consulting group, discuss pooled employer plans (or PEPs). PEPs allow employers to join a group retirement plan that is administered by third-party service providers who will assume the majority of the administrative and investment fiduciary responsibilities (and risks) of managing a defined contribution retirement plan. While the marketplace is just beginning to take shape, PEPs may potentially be an attractive option for small and larger employers, as well as private equity sponsors that oversee plans of multiple companies across their portfolio.

 

In Bloomberg Tax, tax associates Isabelle Farrar,  Alec Oveis, Phillip Popkin, and Joshua Thomas evaluate new IRS guidance regarding employee retention credits which are included in various legislative pandemic relief packages. The tax attorneys summarize the IRS notices, explaining guidance on how businesses can simultaneously take advantage of both Paycheck Protection Program (PPP) loans and the employee retention credit (ERC) program.

The Treasury Department issued three notices in March and April 2021 regarding employee retention credits.

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On June 10, 2021, the IRS’s Large Business and International Division (“LB&I”) announced a broad compliance campaign targeting “financial service entities engaged in a U.S. trade or business.” Through issue-based audits, the LB&I campaign will examine “whether foreign investors were subject to U.S. tax on effectively connected income from lending transactions engaged in through a U.S. trade or business.” The campaign’s description explains that there is a safe harbor rule under Section 864(b)(2) of the Internal Revenue Code (the “Code”) for foreign investors who only trade stocks and securities for their own accounts and are not engaged in a U.S. trade or business. That safe harbor is unavailable for dealers in stocks or securities, including entities engaged in a lending business, or to foreign investors in partnerships engaged in these activities.

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ABA/IBA/IFA Virtual U.S. and Latin America Tax Practice Trends: Kat Gregor is co-chair of a panel titled “Digital Economy – OECD Pillar 1 & 2 Developments & the LATAM Digital Taxes in Practice” during the co-organized ABA/IBA/IFA Virtual U.S. and Latin America Tax Practice Trends, taking place June 21-24, 2021. This panel will examine the digital economy as it affects Latin America, will review what changes in tax law have been implemented so far and what legislation and solutions are now under consideration for the future. Both direct and indirect taxation will be addressed.

IFA USA New England Spring Symposium: Lessons from the Coca-Cola Co. U.S. Tax Court Decision. Elizabeth Smith was a panelist during the IFA USA New England Symposium on May 20, 2021. The one day symposium focused on “Lessons from the Coca-Cola Co. U.S. Tax Court Decision,” during which Elizabeth examined the litigation strategy and the implications of the decision.

President Biden’s Tax Plan: Beyond the First 100 Days. Elizabeth Smith and tax partner David Saltzman participated in a Boston Bar Association (BBA) webinar titled “President Biden’s Tax Plan: Beyond the First 100 Days” on May 19, 2021. The webinar discussed the substantive aspects of the tax changes in the Rescue Plan, proposed tax changes that we are likely to see enacted in both parts of the Recovery Plan, and the various legislative obstacles to major tax reform that President Biden will face beyond the first 100 days. In addition to changes at the federal level, the webinar also addressed how these changes will affect taxpayers in states that may or may not conform to the Internal Revenue Code and how those aspects of the Rescue Plan and the Recovery Plan that are likely to result in increased IRS enforcement and tax controversy.

Tax Open Forum Discussion: what next for Pillar One?: Kat Gregor spoke on an IBA webinar on March 30, 2021, which focused on taking a look at Pillar one within the OECD/G-20 Inclusive Framework. The webinar discussed where we are on Pillar One; talked through some of the roadblocks and considered what the potential solutions might look like.

 ABA/IBA/IFA Virtual 21st Annual U.S. and Europe Tax Practice Trends Conference: Kat Gregor was co-chair of the co-organized ABA/IBA/IFA Virtual 21st Annual U.S. and Europe Tax Practice Trends Conference, taking place March 22-25, 2021. The conference focused on practical tax practice trends for multinational corporations and their international advisors as well as provide insight into how government tax officials might view the international tax landscape in light of international developments that affect corporate taxpayers. Kat led a panel looking at recent global transfer pricing developments.  Tax associate Franziska Hertel also spoke on “Responding to a Mess(ier) Crypto Tax Landscape” panel.

71st Virtual Midyear Conference: Kat Gregor was a panelist on “Preserving Privilege in the Virtual World” during the virtual 71st TEI Midyear Meeting on March 23, 2021.

International Tax Disputes, Joint Webinar with A&L Goodbody.  Kat Gregor  jointly hosted a webinar on international tax disputes with tax partners Amelia O’Beirne and Paul Fahy from A&L Goodbody on March 3, 2021. The webinar discussed the Irish and U.S. tax disputes landscapes with a particular focus on transfer pricing related disputes and competent authority procedures.

Litigation & enforcement partner Dan Ward, benefits partner Josh Lichtenstein, and benefits consulting principal David Kirchner co-hosted a webinar on May 25 focused on the recent wave of retirement plan litigation focused on not-for-profits and how to mitigate risk for employers and plan sponsors. Plaintiffs’ firms are aggressively targeting 403(b)/401(k) retirement plan sponsors in a wave of lawsuits, alleging that record-keepers and mutual funds are overcharging fees to plan participants; a lack of prescribed process and documentation of the plans’ fund selection; and a lack of cybersecurity protection of plan participant accounts. Plan sponsors must understand and manage these risks to ensure they are taking the proper steps to follow good fiduciary governance practices. The webinar featured a discussion on the closely watched cases brought against 403(b)/401(k) plans and not-for-profit organizations. Panelists examined some of the background and unique issues that 403(b) plans face, the current litigation landscape and potential vulnerabilities for plan sponsors, and the steps plan sponsors should be considering to help mitigate and protect themselves against these potential risks. Attendees included nationwide general counsel and benefits executives from colleges and universities, health care institutions and other non-profit organizations. A link to the initial firm posting is here.