Insights & News

Tax Insights, August 5, 2015
Tracking Tax News You Need to Know

August 05, 2015
Tax Court Invalidates Cost-Sharing Regulations...Again
The Tax Court in Altera Corp. et al. v. Commissioner, 145 T.C. No. 3, issued an opinion invalidating the 2003 final cost-sharing regulations in Treasury Regulation Section 1.482-7(d)(2) that require taxpayers to include stock-based compensation when determining operating expenses under qualified cost-sharing arrangements (final rule). The court held that (1) the final rule lacks a basis in fact; (2) Treasury failed to articulate a "rational connection between the facts found and the choice made;" (3) Treasury's failure to adequately respond to commentators frustrated the court's review of the final rule and was prejudicial to affected entities, and (4) the final rule was contrary to the evidence before Treasury when it issued the final rule.

Split Appeals Court Upholds Statute of Limitations Decision
The Federal Circuit in BASR Partnership v. United States, No. 2014-5037, held that, based on the "language, structure and history of the Code," the IRS is limited to the three-year limitations period on assessment and collection under Section 6501(c)(1) (Section references are to the Internal Revenue Code of 1986, as amended) unless the taxpayer possessed the intent to evade tax.

IRS Sheds Light on When Incoming and Outgoing FATCA Information Becomes Confidential
In redacted Legal Advice AM2015-005 issued by the Associate Chief Counsel, IRS has given its opinion on the exact moment when information that it provides to, and information it receives from, foreign tax authorities and other parties pursuant to the Foreign Account Tax Compliance Act (FATCA) through the International Data Exchange Service (IDES) becomes protected under the Internal Revenue Code's confidentiality rules. The outbound transmission of financial data will be protected throughout its transmission on IDES. The inbound transmission of financial data, based on the current facts and circumstances, will be protected upon upload of the data to IDES.

List of Jurisdictions That Received FATCA Notification Is Updated
Treasury has updated a list of U.S. partner jurisdictions to which it sent a model letter under article 7 of the Model 1 intergovernmental agreement implementing FATCA, notifying those jurisdictions of more favorable terms regarding some alternative procedures under the intergovernmental agreement afforded to another partner jurisdiction.

NY Tax Department Says NYC Office Will Not Subject Alien Corporation to Franchise Tax
The New York State Department of Taxation and Finance issued an advisory opinion to a Swiss holding company advising that its wholly owned subsidiary, disregarded for federal and state income tax purposes, will not be subject to the state's franchise tax if it relocates its office from New Jersey to New York City because (1) it is an investment company engaged exclusively in investing in securities in various private equity funds, hedge funds and operating-companies for its own account, which are activities described in Section 864(b)(2); and (2) it is an alien corporation and would have no effectively connected income. However, it may be required to provide any documentation necessary to substantiate that it is not subject to the franchise tax.

Rhode Island Establishes ABLE Accounts for Disabled Individuals
Rhode Island H 5564, signed into law as Chapter 158, establishes private, tax-free savings accounts for qualified disability expenses for disabled beneficiaries under Section 529(A).

FATCA Agreement With Turkey Now Available
The Foreign Account Tax Compliance Act agreement between Turkey and the United States is now available.

Information contained in this publication should not be construed as legal advice or opinion or as a substitute for the advice of counsel. The articles by these authors may have first appeared in other publications. The content provided is for educational and informational purposes for the use of clients and others who may be interested in the subject matter. We recommend that readers seek specific advice from counsel about particular matters of interest.

Copyright © 2015 Stradley Ronon Stevens & Young, LLP. All rights reserved.

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