On August 6, 2020, the IRS issued proposed regulations (REG-132434-17) limiting the role of contractors hired to assist the IRS in audits, including during summons interviews. The proposed regulations implement Section 7602(f), enacted by the Taxpayer First Act (P.L. 116-25), which became effective on July 1, 2019. They withdraw and replace proposed regulations issued in March 2018 (prior to the passage of the Taxpayer First Act) that placed looser restrictions on the roles of contractors.

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After the Supreme Court declined to review the Ninth Circuit’s decision in Altera Corporation v. Commissioner, 926 F.3d 1061 (9th Cir. 2019) (cert denied — S. Ct. — (June 22, 2020)), the IRS has confirmed that it is examining taxpayers that did not include stock-based compensation costs as intangible development costs under Treasury Regulations §§ 1.482-7A(d)(2) and 1.482-7(d)(3) (the “Regulations”). As reported in a prior post, the IRS lifted its administrative moratorium on examining such cost-sharing arrangements in the wake of the Ninth Circuit’s reversal of the Tax Court’s 2015 decision. More coverage of the Altera decision is available here.

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The IRS has announced that it will begin enforcing Section 965’s repatriation tax in October 2020. Section 965 and its regulations require United States shareholders to pay a one-time transition tax on untaxed foreign earnings of certain foreign corporations as if these earnings had been repatriated to the United States. Cash holdings are taxed at 15.5% and non-cash or non-liquid assets are taxed at 8%. Taxpayers can make payments over eight years. Prior to the repatriation tax, which was enacted in 2017 as part of the Tax Cuts and Job Act (“TCJA”), companies could defer tax on any earnings made and held abroad, and would be taxed on such income at a rate of 35% only upon repatriation.

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On July 27, 2020, the Senate Republicans proposed the Health, Economic Assistance, Liability Protection and Schools Act (HEALS Act) in response to the House passing the Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES Act). The HEALS Act is a combination of eight individually proposed bills from the Senate. Both the HEALS Act and the HEROES Act are commonly referred to as Phase 4 of the federal government’s response to the COVID-19 crisis.

As the Senate Republicans had done with the HEROES Act, the House Democrats have declared this proposal “dead on arrival.”

Nonetheless, below are (i) tax highlights of the notable tax-related provisions of the HEALS Act and the HEROES Act, as they may be negotiated further; (ii) how they compare to each other; and (iii) how they compare to the CARES Act (also known as Phase 3 of the federal government’s response to the COVID-19 outbreak). Hyperlinks to the Ropes & Gray Alerts on both the HEROES Act and the CARES Act can be found in the respective headings of the table below.

The cost of the HEALS Act is projected to be approximately $1 trillion. The cost of the HEROES Act is projected to be approximately $3 trillion.

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Mornings are different, all around the country — and world.

Due to travel limitations imposed in response to the COVID-19 crisis, instead of taking trains, buses and cars to commute to work, people are going to work at home. This new work location has created concerns for both businesses and individuals as to what authority will be trying to tax work that happens from homes.

Foreign countries — and the Organization for Economic Cooperation and Development — the U.S. federal government and state governments have issued guidance and implemented temporary policies to help businesses and individuals navigate complex questions surrounding whether they have a taxable presence in a jurisdiction, withholding obligations, or individual residency and reporting obligations.

This article surveys current policy developments at the U.S. federal and state levels and provides practical considerations for practitioners and taxpayers.

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