On June 1, 2020, the U.S. Supreme Court ruled in Thole v. U.S. Bank N.A. that participants of defined benefit plans lack standing under Article III of the U.S. Constitution to sue fiduciaries for alleged failures to satisfy their duties under ERISA, if the participants cannot establish that they have experienced individual financial loss or the imminent risk thereof. The Court held in a 5-4 opinion that the plaintiffs did not have a stake sufficient to bring a lawsuit because they had received all of their vested monthly pension benefits to date and had not shown how the alleged mismanagement of the pension plan substantially increased the risk that the plan would be unable to pay their future entitlements. As a practical matter, this should make it harder for plan participants to bring suits of this nature in the future

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U.S. Tax Court proceedings will soon resume, however, they will do so entirely remotely until further notice as a result of the COVID-19 pandemic. On May 29, the Tax Court announced that via Press Release that all proceedings would be conducted remotely, and that proceedings would be available to the public via telephone dial-in. The Tax Court also issued Administrative Order 2020-02 governing remote court proceedings. These guidelines became effective immediately and do not contain a sunset date. They provide that trials will be conducted either via telephone or video, as specified within the notice setting a case for trial. Parties are responsible for ensuring—to the best of their abilities—that they and their witnesses are able to participate in the remote proceedings. The orders likewise adjusted pre-trial filing deadlines.

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Kat Gregor, tax partner and co-founder of the tax controversy group, was recently appointed to Law360’s 2020 Tax Editorial Advisory Board. The purpose of the board, according to the announcement, is “to provide feedback on Law360’s coverage and expert insight on how best to shape future coverage.”

 

To learn more about Kat and the other elected board members, please click here.

On May 12, 2020, the IRS released proposed regulations (REG-104591) affecting the deductibility of payments made to governments in settlement of alleged violations of law. The proposed regulations interpret Sections 162(f) and 6050X of the Internal Revenue Code of 1986 (the Code), as amended and introduced by the Tax Cuts and Jobs Act (TCJA), respectively. On June 11, 2020, the IRS released minor corrections to the proposed regulations. Sections 162(f) and 6050X changed the requirements for taxpayers to deduct amounts paid to the government pursuant to court-ordered judgments, settlement agreements, non-prosecution agreements, deferred prosecution agreements, and decisions by certain boards/commissions. At a high level, under Section 162(f), to be deductible, such payments must be restitution, remediation, or an amount paid to come into compliance with the laws, and must be identified as such in either the order or agreement (the “identification requirement”). In addition, taxpayers must maintain records substantiating the nature of their payments (the “establishment requirement”).

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***This legal development is still in progress. We will update this Alert as the Act makes its way through the legislative process.***

On Friday evening (May 15, 2020), the House passed, in a 208-199 vote (mostly along party lines, though 14 Democrats and one Independent voted “No” and one Republican voted “Yes,” with 23 Members abstaining), the Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES Act). The HEROES Act is commonly referred to as Phase 4 of the federal government’s response to the COVID-19 outbreak.

  • Complete language for the HEROES Act can be found here.

The Senate Republicans have declared this act “dead on arrival” (DOA), and the White House has threatened to veto the act.

Nonetheless, further below are highlights of 17 notable tax-related provisions: (i) provisions that may be negotiated further (based in part on current Congressional comments in the press, contrary to the DOA comment above); as well as (ii) provisions that are simply notable because they would change tax law in the CARES Act that one may not expect. Continue Reading House Passes Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES Act)

Tax controversy group co-founder and tax partner Kat Gregor, tax controversy counsel Elizabeth Smith, tax controversy associate Isabelle Farrar and associate Andrew Yarrows recently co-authored an article that appeared in Bloomberg Tax. The article outlines some practical considerations for taxpayers and their advisers in light of federal and state taxing authorities’ enforcement-related responses to COVID-19.

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In this Ropes & Gray podcast, litigation & enforcement partner Dan Ward, ERISA and benefits partner Josh Lichtenstein, and benefits principal David Kirchner discuss the recent $12 million settlement that has been agreed to in the Oracle 401(k) fee litigation, which includes some non-monetary requirements that could have a ripple effect on the routine cross-selling activities of third-party recordkeepers and other service providers to plans.

 

In a recent Bloomberg Law article, tax controversy associate Ellen Gilley comments on how foreign individuals stuck in the U.S. due to coronavirus-related travel restrictions are at risk of having their overseas bank accounts closed under FATCA reporting requirements to the IRS.

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