Insights & News

Tax Insights, March 23, 2016
Tracking Tax News You Need to Know

March 23, 2016

Publicly Traded Partnership's Income Will Be Qualifying Income
The IRS ruled in Private Letter Ruling 201611017 that gross income derived by a partnership from its freshwater sourcing and distribution services; produced water transportation, recycling and disposal services; marketing of skim oil and other recoverable materials to non-end/retail users; and pressure pumping and production support services constitutes qualifying income under Section 7704(d)(1)(E) (section references are to the Internal Revenue Code of 1986, as amended).

IRS Finds Tax Credit Partner Is Not Bona Fide Partner
The IRS issued a partially redacted field attorney advice, FAA 20161101F, concluding that an investment in a partnership designed to provide a tax credit allocation did not have enough upside or downside, did not constitute a meaningful stake in the success or failure of the venture and, therefore, did not constitute a bona fide partnership interest.

ICI Voices Opposition to Financial Transaction Tax
In a March 16 letter addressed to House Budget Committee ranking minority member Chris Van Hollen, D-Md., the Investment Company Institute stated that the House Democratic budget resolution should not include a financial transaction tax because it would "harm all investors, especially middle-income American workers saving for retirement."

IRS Releases International Practice Units
The IRS made available its international practice units (IPU) on the following topics:

  • Residual Profit Split Method - Outbound: which explains the application of the residual profit-split method transfer pricing method to a transaction where a U.S. parent corporation licenses certain intangible property to its controlled foreign corporation in exchange for royalty payments. The IPU explains to IRS examiners how to determine when the RPSM is the "best method" (i.e., the one that provides the most reliable measure of an arm's-length result) under the Section 482 rules.
  • FIRPTA Withholding Refund Requests: which provides insight on determining whether a nonresident alien's refund request should be granted for taxes withheld under Section 1445 on dispositions of U.S. real property interests.
  • Foreign Personal Holding Company Income: which explains foreign personal holding income which generally includes income of a controlled foreign corporation unless an exception or exclusion applies and is currently included in the income of the CFC's U.S. shareholders even if the income is not distributed in that year.

IRS Requests Suggestions for Priority Guidance Plan
The IRS released Notice 2016-26 asking the public to suggest items for its priority guidance plan for 2016-2017. Taxpayers can submit suggestions for guidance at any time during the year; however, only submissions received by May 16 will be considered for inclusion in the original 2016-2017 plan.

South Dakota Legislation Enables Participation in ABLE Program
South Dakota legislation (L. 2016, H1224), effective July 1, provides South Dakota residents with the opportunity to participate in an "Achieving a Better Life Experience" savings program. The program permits the creation of tax-free savings accounts for individuals with disabilities for use toward qualified disability expenses.

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 © 2016 Stradley Ronon Stevens & Young, LLP. All rights reserved.

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