On December 21, 2018, IRS and Treasury issued final regulations implementing the partnership audit regime (T.D. 9844). The final regulations largely adopt, with some changes, the proposed regulations issued in August 2018. By issuing almost 200 pages of preamble, the final regulations provide extensive discussion of which comments were incorporated and why others were not.  Likely, IRS is thinking ahead to litigation over the validity of the regulations by issuing such broad discussions of the comment process.  The most significant changes to the proposed regulations are changes to the definition of partnership-related items and changes allowing administrative adjustment of partnership-related items.

To read the full article, please click here.

On November 20, 2018, IRS issued a memo on its new voluntary disclosure program (“Voluntary Disclosure Program” or “Program”), following the offshore voluntary disclosure program’s termination on September 28, 2018. The Voluntary Disclosure Program provides taxpayers with a process for voluntarily disclosing tax noncompliance for both domestic and offshore assets to avoid potential criminal liability and prosecution. IRS has discretion to apply the Voluntary Disclosure Program’s procedures to all domestic voluntary disclosures received on or before September 28, 2018. Taxpayers have long been able to disclose voluntarily their tax noncompliance to IRS, either pursuant to IRS’s long-standing practice of allowing voluntary disclosure, under IRM 9.5.11.9, or using the streamlined compliance procedures. However, the Voluntary Disclosure Program is arguably better for taxpayers, in that it provides precise procedures and guarantees that participant taxpayers will not be criminally prosecuted. Under the prior practice, voluntary disclosure was only a factor taken into consideration when determining whether to prosecute criminally.

Continue Reading IRS Announces Voluntary Disclosure Program for Domestic and Offshore Assets

On December 13, 2018, the IRS published proposed regulations (REG-104259-18) on the Base Erosion and Anti-Abuse Tax (the “BEAT”), a new tax regime under the Tax Cuts and Jobs Act (“TCJA”).  BEAT is designed to discourage multinational corporations from profit-shifting behavior by making deductible payments to their foreign affiliates, such as interest, high-margin service payments, rents and royalties.  While the proposed regulations shed light on the implementation mechanism of BEAT, there are some unwelcome surprises and open questions that taxpayers should be aware of.

To read the full article, please click here.

Data analysis is not a new concept, but it nonetheless is the center of a social and technological revolution. In recent months, we have gained significant insight into how the IRS and state taxing authorities are leveraging advanced technology and machine learning to mine the petabytes of taxpayer data that they collect and retain.

To read the full article, which was recently posted to Law360, please click here.

The Internal Revenue Service (IRS) and other global taxing authorities are continuing to focus on bringing taxpayers who hold cryptocurrencies into compliance.

As cryptocurrencies have made some investors very wealthy, concern has arisen that investors are not reporting gains to taxing authorities. Internationally, governments are committed to bringing these investors into compliance. The most important compliance-related variables are how to characterize gains and losses, and at what point a reporting obligation arises. While many questions remain to be answered, taxing authorities have issued initial guidance on the treatment of cryptocurrencies, and have scored important victories in obtaining access to information necessary to bring taxpayers into compliance.

Continue Reading IRS Makes Cryptocurrency a Compliance Priority

In a recent Law360 article, Kat Gregor commented on the IRS’s final guidance on partnership audit rules. This new guidance finalizes a subset of the IRS rules implementing the audit regime passed in the 2015 Bipartisan Budget Act. A key aspect of the final rules is the definition of “partnership related items,” which looks to historic rules to define the scope of the new regime. While some may argue that the ambiguity of the TEFRA rules has crept into the new partnership audit regulations, Kat noted that “TEFRA had a ‘robust body of case law’ behind it that could help resolve future disputes around what a partnership- related item is.”

To read the full Law360 article, please click here.

During the January 2019 ABA Tax Section 2019 Midyear Tax Meeting, Kat Gregor, tax partner and co-founder of the tax controversy group, discussed the new EU mandatory disclosure rules (known as DAC6 related to aggressive tax positions) and the ethical obligations of U.S. attorneys to adhere to these rules. Kat noted that “the EU rules are, on the one hand, trying to be more precise as to what they’re interested in catching, rather than in the U.S., where they say any transaction over a certain dollar value has to get reported. But on the flip side, it’s going to be really difficult for people to make the judgment call on whether or not something falls in.”

To read the full article with more insights from Kat, please click here.

In this Ropes & Gray podcast, Isabelle Farrar, a senior associate in the tax controversy group is joined by Harvey Cotton, a principal in the tax and benefits group, and Elizabeth Smith, counsel in the tax controversy group, to discuss the December 2018 decision from the Northern District of Texas in Texas v. United States. This case deals with the constitutionality of the Individual Mandate in the Patient Protection and Affordable Care Act.

In December 2018,  the U.S. District Court for the Southern District of New York ruled that New York’s $600 million fee on the sale of opioids into the state unconstitutionally prohibits pharmaceutical companies from passing the cost onto consumers. Furthermore, the Court ruled that the Opioid Stewardship Act (OSA) violated U.S. Constitution’s dormant commerce clause and, therefore, was unconstitutional. The OSA would have forced manufacturers and distributors of opioid medications to pay pro rata shares of a $100 million annual penalty (using a volumetric calculation based on opioid strength, rather than price) while forbidding manufacturers and distributors from passing any portion of that annual cost to New York purchasers.

Please see this Law360 article to read more about the case.

In this Ropes & Gray podcast, Alec Oveis, an associate in the tax and benefits group is joined by Kat Gregor, a partner in the tax group and co-founder of the tax controversy group, and Andy Howard, a partner in the tax group, to discuss the investigations now underway in Europe involving so-called “cum-ex dividend trades.”