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.

Please click here to read the full article.

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.

Tax partner Kat Saunders Gregor  has been elected to the prestigious American College of Tax Counsel as a fellow. The College recognizes leading members of the Bar who have made significant contributions to the understanding and improvement of the U.S. tax system. Membership in the College is by nomination from a current fellow and an election by existing members.

Kat routinely advises clients in U.S. and international tax matters, with a particular focus on the asset management industry, the life sciences industry and cross-border investments. As a co-founder of the tax controversy group, Kat has earned wide acclaim for her work representing private equity and asset management firms as well as public and private companies before the U.S. Tax Court, the U.S. Court of Federal Claims and other federal and state courts. Kat also advises clients on the impact of international investment treaties on tax matters and since 2009 has been a dual-certified solicitor in England/Wales.

In 2019, Kat argued a winning multimillion-dollar appeal before the Massachusetts Supreme Judicial Court, resulting in a unanimous opinion on behalf of a client.

More information about the American College of Tax Counsel, and eligibility requirements can be found here.  To read the initial firm announcement, please click here.

Tax authorities around the globe have focused on combatting tax evasion and other financial crimes associated with cryptocurrency in recent years. More recently, investigative efforts have broadened to include the FinTech industry. In late March 2021, the Joint Chiefs of Tax Enforcement—or the J5—held a coordinated international tax investigation into the FinTech industry and cryptocurrency. As reported in an earlier post, the J5 is a consortium of the taxing authorities of Australia, Canada, the Netherlands, the U.K. and the U.S. formed in 2018 to leverage the agencies’ collective resources to root out financial crimes. The group has held an annual event (dubbed “The Challenge”) in each of the last four years that focused on generating investigative leads, including with respect to tax evasion committed in connection with cryptocurrency. Past Challenges have resulted in measurable results, including an arrest associated with a cryptocurrency mining scheme.

Please click here to read the full article. Please contact the Ropes & Gray tax controversy team with any questions you may have or for further information. To learn more about Ropes & Gray’s FinTech practice, please click here.

In this fourth episode of Ropes & Gray’s podcast series addressing emerging issues for fiduciaries of 401(k) and 403(b) retirement plans to consider as part of their litigation risk management strategy, ERISA & benefits partner Josh Lichtenstein speaks with Ed McNicholas, co-chair of the data, privacy & cybersecurity practice, and David Kirchner, a principal in the benefits consulting group, about the U.S. Department of Labor’s new cybersecurity guidance, which identifies steps that plan sponsors, service providers and participants should take for safeguarding retirement benefits and personal information.


In this episode of Ropes & Gray’s podcast series Disputing Tax, Isabelle Farrar, an associate in the tax controversy group, is joined by Kat Gregor, a tax partner and tax controversy group co-founder, and Elizabeth Smith, counsel in the tax controversy group, to examine some potential areas of focus for IRS enforcement efforts in 2021.

**These legal developments are still in progress. We will update this Alert as the Plan makes its way through the legislative process.***

On Wednesday April 28, 2021, President Joseph R. Biden announced the American Families Plan, designed to expand access to education, child care, and health care, among other initiatives. The White House released a fact sheet outlining the plan, and Biden detailed the plan in an address to Congress.1 The American Families Plan would be funded by increasing tax enforcement on corporations and high-income taxpayers, enforcement of which would be supported by newly enhanced information reporting from financial institutions. The initiatives would also be funded by raising taxes on high-income taxpayers, including (i) increasing the top income tax rate to 39.6% from 37%, (ii) increasing the capital gains rate to 39.6% from 20% for those earning $1 million or more, (iii) eliminating a step-up in basis for gains in excess of $1 million, (iv) eliminating the carried interest loophole, (v) eliminating the special real estate tax break on gains greater than $500,000, (vi) extending the limitation that restricts excess business losses, (vii) and ensuring those making over $400,000 pay the same consistent 3.8% Medicare tax. These proposals are summarized in this Alert.

President Biden has also recently proposed investing $80 billion in the Internal Revenue Service (IRS) for enforcement funding and giving IRS the authority to regulate paid tax preparers.2 The plan did not address expansion of the state and local tax (SALT) deduction, which is currently capped at $10,000. The American Families Plan follows the $2.3 trillion American Jobs Plan and Made in America Tax Plan released at the end of March and is the second part of President Biden’s Build Back Better agenda. (See Ropes & Gray April 6, 2021 Alert.) Continue Reading American Family Plan—Summary of Certain Key Tax Components

Kat Gregor, tax partner and co-founder of the tax controversy group, was recently appointed to Law360’s 2021 Tax Authority International Editorial Advisory Board. In addition, Elizabeth Smith, tax controversy counsel, was recently appointed to Law360’s 2021 Tax Authority State & Local Editorial Advisory Board. The purpose of these boards, according to the announcements, 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, and to learn more about Elizabeth and the other elected board members, please click here.