Insights & News

Tax Insights, March 30, 2016
Tracking Tax News You Need to Know

March 30, 2016

Final Regulations Published on Coordination Rule for Stock Transfers
The IRS has released final regulations (TD 9760), substantially identical to the temporary regulations (TD 9615) that were published in March 2013 that affect domestic corporations that transfer property to foreign corporations in certain outbound nonrecognition exchanges. The regulations finalize the elimination of one of two exceptions to the coordination rule between asset transfers and indirect stock transfers for certain outbound asset reorganizations. In general, the coordination rule provides that if, in connection with an indirect stock transfer, a U.S. person (U.S. transferor) transfers assets to a foreign corporation (foreign acquiring corporation) in an exchange described in Sections 351 or 361 (section references are to the Internal Revenue Code of 1986, as amended), Section 367 applies first to the asset transfer and then to the indirect stock transfer. Pursuant to the exceptions to the coordination rule, Sections 367(a) and (d) will not apply to the outbound transfer of assets by the U.S. transferor to the foreign acquiring corporation to the extent those assets (retransferred assets) are transferred by the foreign acquiring corporation to a domestic corporation in certain nonrecognition transactions, provided certain conditions are satisfied. In addition, the regulations finalize modifications to the exception to the coordination rule for Section 351 exchanges so that it is consistent with the remaining asset reorganization exception. The regulations also finalize modifications to the procedures for obtaining relief for failures to satisfy certain reporting requirements. Finally, the regulations finalize certain changes with respect to transfers of stock or securities by a domestic corporation to a foreign corporation in a Section 361 exchange.

IRS Rules on Transaction Distributing Business to Shareholders
In Private Letter Ruling 201612012, the IRS ruled that a transaction in which the parent corporation intended to distribute its business line to its shareholders through multiple restructurings, spinoffs and liquidations in several countries will not be treated as having a principal purpose of avoiding federal income tax under Section 355.

IRS Releases Practice Unit on Computing Foreign Company Income and on Inbound Resale Price Method
The IRS made available its international practice units on the following topics:

2016 Thailand-U.S. FATCA Agreement Available
The text is available of the agreement signed by Thailand and the United States to improve international tax compliance and implement the information reporting and withholding tax provisions of the Foreign Account Tax Compliance Act.

OECD Issues Draft on Treaty Benefits for Non-CIV Funds
In a public discussion draft released March 24, the OECD has asked a number of specific questions related to concerns identified in comments received on previous discussion drafts related to the Report on Action 6, “Preventing the Granting of Treaty Benefits in Inappropriate Circumstances,” as to how the new provisions included in the Report on Action 6 could affect the treaty entitlement of noncollective investment vehicle funds as well as possible ways of addressing these concerns that were suggested in these comments or subsequently. Commentators are asked to respond by April 22, 2016.

California FTB Rules That RIC Organized as Business Trust Is Not Liable for Minimum Franchise Tax
In Chief Counsel Ruling 2016-02, the California Franchise Tax Board ruled that a regulated investment company (RIC) organized as a Delaware Business Trust is not a “corporation” as that term is used in RTC section 23153 and accordingly, a RIC organized as a business trust is not liable for the minimum franchise tax imposed under California law.

Pennsylvania Ends Budget Impasse; No Tax Increases
On March 23, Pennsylvania Gov. Tom Wolf announced that he will allow the 2015-2016 budget to become law without his signature. HB 1801 does not contain any tax increases for the remaining three months of the fiscal year.

New Jersey Governor Announces Study Commission and Places Freeze on Property Tax Rates for Nonprofit Hospitals
New Jersey Gov. Chris Christie announced an agreement that creates a Property Tax Exemption Study Commission and at the same time places a two-year freeze immediately on property tax rates for previously exempt nonprofit hospitals. The announcement follows the governor’s pocket veto of S-3299, a bill that would have made a tax-exempt nonprofit hospital with some for-profit medical providers pay community contributions to its host town. The formation of the commission will eliminate the need to impose a new tax on hospitals and other nonprofits by preserving their exemption until Jan. 1, 2018.

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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