On November 4, 2019, the IRS announced that the LB&I division will begin examining 2017 and 2018 tax returns for compliance with the so-called repatriation tax under Internal Revenue Code Section 965. The examinations will target US-based multinational companies.
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On October 9, 2019, IRS released Revenue Ruling 2019-24, 2019-44 IRB, which provides new guidance on the Service’s handling of cryptocurrencies and is the first of such guidance to be released since March 2014 when IRS issued Notice 2014-21. The ruling was issued after prodding from a bipartisan congressional coalition. The ruling, and attached Frequently Asked Questions (“FAQs”), address three issues identified by members of Congress as being in “urgent need” of IRS clarification: (i) provide some clarity as to IRS’ taxation of cryptocurrency forks and detail methods for (ii) calculating and (iii) assigning cost basis.
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In a corporate tax special report by Financier Worldwide Magazine, tax partner and tax controversy group co-founder Kat Gregor and tax controversy associate Ellen Gilley co-authored a piece that discusses international arbitration as a new avenue for challenging tax enforcement.
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On September 11, a Ropes & Gray team secured a significant victory on behalf of Veolia Energy Boston, Inc. in the Supreme Judicial Court of Massachusetts.
Affirming a 2016 decision by the state Appellate Tax Board and denying the Boston Board of Assessors’ appeal, the court ruled that Veolia will be refunded $1.96 million in personal property taxes paid to the city of Boston. The court concluded that Veolia’s system of underground steam pipes was considered machinery and exempt from taxation.
“There is long-standing precedent in Massachusetts supporting manufacturers like Veolia, and we are pleased that the court recognized that in its ruling,” said tax partner Kat Saunders Gregor.
Veolia is represented by a Boston-based team led by Ms. Gregor, litigation associate Erin Macgowan, and tax counsel Elizabeth Smith.
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In a recent Law360 article, tax partner and tax controversy group co-founder Kat Gregor and tax controversy counsel Elizabeth Smith examine the top five modern tax challenges for digital health companies.
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On August 16, 2019, the Ninth Circuit upheld Amazon’s cost-sharing arrangement and valuation of its intangible assets, affirming the Tax Court’s 2017 decision. In essence, the holding confirms that U.S. companies transferring all intangibles to foreign subsidiaries need not include global goodwill and going concern value of the business when calculating the mandatory buy-in payment (at least with respect to pre-2009 cost-sharing regulations).
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It is no secret that cryptocurrency holders are facing increased scrutiny by the IRS. In 2018, the agency announced a virtual currency compliance campaign that included outreach and examinations. As part of its latest sequence this summer, the IRS recently publicized that it has begun sending letters to cryptocurrency holders advising them of their reporting and payment obligations and warning that failure to properly report transactions or pay taxes owed might result in penalties or criminal enforcement. Following on the heels of this announcement, the IRS also began sending notices to taxpayers that claim a discrepancy in the income reported on tax returns. The IRS expects to send up to 10,000 letters to cryptocurrency holders by the end of August 2019, but there is no information on the number of notices that will be issued.
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In the wake of the IRS’ Ninth Circuit victory in Altera Corporation v. Commissioner, 926 F.3d 1061 (9th Circuit 2019), the IRS’ Large Business and International (LB&I) Division issued Memorandum LB&I-04-0719-008, informing examiners that they may once again open examinations to require taxpayers to include stock-based compensation costs as intangible development costs under Treasury Regulations §§ 1.482-7A(d)(2) and 1.482-7(d)(3). In Altera, a Ninth Circuit panel reversed a 2015 Tax Court decision invalidating the Treasury Regulation § 1.482-7A(d)(2) requirement that related parties allocate stock-based compensation costs when entering into cost-sharing arrangements to develop intangible assets. For more about the Altera decision, including prior actions by the Ninth Circuit, click here.
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In Law360, tax partner and tax controversy group co-founder Kat Gregor discusses the top summer book recommendations for tax attorneys, including “First: Sandra Day O’Connor” by Evan Thomas and “How to Win in a Winner-Take-All World: The Definitive Guide to Adapting and Succeeding in High-Performance Careers” by Neil Irwin.
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