Insights & News

IRS May Allow Partnerships To Make QEF Elections

June 15, 2022

IRS May Allow Partnerships To Make QEF Elections
The IRS is considering allowing partnerships to make certain elections on behalf of their partners under passive-foreign-investment rules, an IRS official said. This move would let partnerships make the qualified electing funds (QEFs) election under new rules on passive foreign investment companies (PFIC). The proposed rule also would continue to allow individual partners to make the QEF election to avoid the harsh PFIC treatment. However, after receiving feedback in favor of allowing partnerships to make QEF elections, the IRS signaled considering partnership-level elections.

CFOs Ask Treasury for Changes in Foreign Tax Credit Rules
Chief financial officers of 28 major companies sent a letter to the Treasury Department to modify new foreign tax credit regulations. The CFOs argued that the controversial rules would burden the U.S. companies competing internationally. The rules issued by the Treasury in December will render many foreign taxes ineligible to be credited against U.S. tax bills, which will result in double taxation of U.S. companies. The rules would also incentivize U.S. companies to develop their patents overseas.

Transition Tax on Foreign Earnings Upheld by Appeals Court
The Court of Appeals for the Ninth Circuit affirmed a lower court’s ruling that upheld the mandatory repatriation, also known as “transition tax.” The appeals court held that the shareholder foreign earnings tax created by the 2017 Tax Cuts and Jobs Act does not exceed Congress’s taxing authority. The Justice Department argued that the tax is not retroactive when considered as a tax on earnings that are deemed to be repatriated. The Ninth Circuit agreed that even if the tax is considered retroactive, the tax will not violate due process rights because it provides a rational method for preventing shareholders from indefinitely avoiding taxes on pre-2018 earnings.

Senators Introduce New Crypto Tax Measures
Sens. Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) introduced a new crypto bill that includes broad-ranging tax measures. The bill provides the de minimis tax exemption for small transactions and clarifies the definition of a broker for tax information reporting purposes. The bill also addresses staking, mining and airdrops of cryptocurrency; cryptocurrency rewards created through staking and mining would be taxed when they are sold rather than when they are created.

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 © 2022 Stradley Ronon Stevens & Young, LLP. All rights reserved.

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