Archive for February 26, 2021

Looming Transfer Pricing Exams & IRS Preparedness Measures (Part 4 of Series): “TPEP Resolution Phase & Takeaways”

Transfer Pricing Exams & IRS Preparedness Measures

In this fourth article in our Looming Transfer Pricing Exams & IRS Preparedness Measures series, we briefly summarize the IRS’s Transfer Pricing Examination Process (TPEP) Resolution Phase, which is the final phase of the TPEP’s three phases, and we list extrajudicial taxpayer courses of action such as Appeals.

The goal of the Resolution Phase is to reach agreement on the tax treatment of each transfer pricing issue examined. Important parts of the Resolution Phase include the IRS’s presentation of the issue and its resolution, case closing, and when necessary, issuing a Revenue Agent Report with adjustments, penalties (if the taxpayer failed to timely provide documentation), and tax liability.

The TPEP instructs the issue team to provide the taxpayer an opportunity to agree or disagree with the findings for each transfer pricing issue developed during the examination. For a transfer pricing issue to be resolved, there must be an open discussion between the issue team and the taxpayer in three areas: 1) factual development, 2) the law(s) that applies to the facts, and 3) each party’s interpretation of the law(s). The issue team should meet with the taxpayer to discuss all issues and determine whether a “principled resolution” can be reached. If a field resolution is not reached, the issue team will finalize the Notice of Proposed Adjustment (“NOPA”) and Economist Report.

The TPEP discusses options that the taxpayer can pursue, including Appeals,[1] and when a tax treaty country is involved, U.S. Competent Authority (CA) requests, Accelerated CA Procedures to cover subsequent taxable years, and Simultaneous Appeals Procedures whereby Appeals works jointly with the Advance Pricing and Mutual Agreement (APMA) Program and the taxpayer prior to APMA’s consultations with the foreign CA(s). Taxpayers may request CA assistance after receiving a NOPA and are not required to wait until the conclusion of an examination to file a CA request. If APMA accepts a CA request, it will assume jurisdiction over the transfer pricing issues. Otherwise, the case remains under the jurisdiction of the issue team.

We invite you to read our article Six Time-Tested TPEP Takeaways where we share pertinent insights that are even more important today than a few years ago when the TPEP was still hot off the press.

Stay tuned for the next blog post in this series, where we discuss the IRS’s April 2020 transfer pricing guidance, Transfer Pricing Documentation Frequently Asked Questions (FAQs).

If you have any questions or would like more information on the issues discussed in this article, please contact the authors:

Guy Sanschagrin, Principal in Charge of Transfer Pricing and Valuation Services, WTP Advisors (Minneapolis, MN, USA) guy.sanschagrin@wtpadvisors.com

Doug Schwerdt, Transfer Pricing and Valuation Specialist, WTP Advisors (Houston, TX, USA) doug.schwerdt@wtpadvisors.com

 

Read Blog Post Part 1 in this Series

Read Blog Post Part 2 in this Series

Read Blog Post Part 3 in this Series

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[1] The TPEP reaffirms that the IRS requires 365 days to remain on the statute of limitations for taxpayers to request Appeals consideration.

Written by | Posted in Transfer Pricing • WTP Advisors

Tax Treaties: United States And Poland

Tax Treaties: United States And Poland

Quick Summary.  Situated in Central Europe, Poland is bordered by Germany, Ukraine, Russia, Belarus, the Czech Republic, Slovakia and Lithuania.  Poland is a republic with a bicameral parliament comprised of the Sejm and Senate.  Poland is comprised of 16 provinces.

The Constitution of Poland, which was adopted in 1997, serves as the supreme law and the legal system is governed by a code of civil law.  Poland’s judiciary serves as an independent branch of government and incorporates a four-tier court system headed by the Supreme Court.

Article 26(2e) of the Corporate Income Tax Act provides for new withholding rules and exclusions/restrictions that became effective in 2020.

In addition, in 2019, Poland introduced an “IP Box” tax relief program whereby income derived from “eligible intellectual property rights” is subject to a preferential tax rate.

Poland is a member of the European Union (EU), the North Atlantic Treaty Organization (NATO), the World Trade Organization (WTO), and the Organisation for Economic Co-operation and Development (OECD).

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Written by | Posted in Tax Treaties: United States And Poland

Congressional Budget Office: The Budget And Economic Outlook 2021 To 2031

Congressional Budget Office: The Budget And Economic Outlook 2021 To 2031

The Congressional Budget Office regularly publishes reports presenting projections of what federal budget deficits, debt, revenues, and spending—and the economic path underlying them—would be for the current year and for the following 10 years if current laws governing taxes and spending generally remained unchanged. For this report, the latest in the series, the projections are based on the laws in effect as of January 12, 2021. CBO’s economic assessment is identical to the forecast the
agency published on February 1, 2021.

• Deficits. CBO projects a federal budget deficit of $2.3 trillion in 2021, nearly $900 billion less than the shortfall recorded in 2020. At 10.3 percent of gross domestic product (GDP), the deficit in 2021 would be the second largest since 1945, exceeded only by the 14.9 percent shortfall recorded last year. Those deficits, which were already projected to be large by historical standards before the onset of the 2020–2021 coronavirus pandemic, have widened significantly as a result of the economic disruption caused by the pandemic and the enactment of legislation in response.

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Written by | Posted in Congressional Budget Office

Georgia State Department Of Revenue: Corporate Tax Credits

Georgia State Department Of Revenue: Corporate Tax Credits

Note: A return is required to be filed electronically if the return generates, allocates, claims, utilizes, or includes in any manner a Series 100 credit.

Disregarded Single Member LLC Credit Instructions. If the taxpayer owns or is owned by a disregarded single member LLC, the single member LLC should be disregarded for filing purposes. All credits should be claimed on the owner’s return. All tax credit forms should be filed in the name of the single member LLC but included with the owner’s return. This is necessary so that the returns can be processed and the credits flow to the proper taxpayer.

Note: The Timber Tax Credit (145) is not refundable directly to a partnership. Instead it is refundable to the owners of a partnership (if not purchased).

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Written by | Posted in Georgia State Department Of Revenue: Corporate Tax Credits

Government Accountability Office: Medicare Will Be Depleted In 2024 (US Government Can Only Meet 83% Of Costs in 2025)

GAO - Medicare Depleted By 2024
Facing Our Fiscal Challenges

GAO has long been concerned about the federal government’s fiscal outlook given the growing debt. The long-term fiscal path is unsustainable because debt is growing faster than the economy. The COVID-19 pandemic has necessitated a major federal response to address our national public health emergency and resulting economic turmoil.  While it is essential to confront COVID-19 and heal our economy, these efforts further complicate our government’s fiscal condition. As the economy becomes stronger and public health goals have been achieved, a plan to address these fiscal challenges will be needed. In October, the U.S. Comptroller General testified that the federal government does not have a long-term fiscal plan to control the growing debt.

With this as a backdrop, the government will also be confronting challenges to funding many programs that millions of Americans rely on for their retirement security.

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Written by | Posted in Government Accountability Office (GAO)

The CARES Act And IC-DISC: 3 Significant Provisions

The CARES Act And IC-DISC: 3 Significant Provisions

There are three significant provisions that impact 2018, 2019, and 2020 income taxes and your use of the IC-DISC.

Net Operating Loss Carrybacks
The provisions enacted as part of the Tax Cuts and Jobs Act at the end of 2017 eliminated the ability to carry back net operating losses to obtain tax refunds.  The CARES Act provides for a five-year net operating loss carryback for losses generated in years beginning after December 31, 2017 and before January 1, 2021.

Section 461(l) Delayed Effective Date
Section 461(l) limits the deductibility of losses for taxpayers other than corporations.  The provisions, enacted as part of the Tax Cuts and Jobs Act at the end of 2017 limited the current deductibility of these losses to $500,000 for married filing jointly taxpayers ($250,000 for all others).  The CARES Act delays the impact of this provision until taxable years beginning after 2020 for most taxpayers, however the provision was completely eliminated for excess farm losses.

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Written by | Posted in The CARES Act And IC-DISC: 3 Significant Provisions

Florida Tax Incentives For Businesses

Florida Tax Incentives For Business

Florida offers tax credits, refunds, and other incentives to promote business development and job creation within the state. To learn more about specific tax incentives, use the following links:

Corporate Income Tax Incentives Sales and Use Tax Incentives
Film in Florida Sales Tax Exemption
 Scholarship-Funding Organizations – Tax Credits for Contributions
Fuel Tax Incentives
 Severance Tax Incentives
Insurance Premium Tax Incentives

Use the table below to view the available tax incentives. To filter on a column, hover over the column title until a small drop down arrow appears in the upper-right corner. Select the drop down arrow and then choose a filter or sort option.

View List Of Florida Tax Credits And Incentives

Written by | Posted in Florida Tax Incentives For Business

New York State: How To Obtain A Copy Of Your Tax Return

New York State: How To Get A Copy Of Your Tax Return
E-filed Returns

Log in or create an Online Services account to view and print a copy of your e-filed return for the following tax types:

  • corporation (ten most recent filing periods since 2008)
  • sales and use (five most recent filing periods)
  • fuel use (six most recent filing periods)
  • withholding (nine most recent filing periods)
  • fiduciary (ten most recent filing periods since 2008)

Tax professionals: View your client’s e-filed returns through your Tax Professional Online Services account by having your client complete and sign E-ZRep Form TR-2000, Tax Information Access and Transaction Authorization.

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Written by | Posted in How To Obtain Copy Of Tax Return • New York State

Texas State: Sales And Use Tax Exemptions

TEXAS STATE Tax Credits And Incentives
State Of Texas: Manufacturing Exemptions

State sales and use tax exemptions are available to taxpayers who manufacture, fabricate or process tangible personal property for sale.

Texas sales and use tax exempts tangible personal property that becomes an ingredient or component of an item manufactured for sale, as well as taxable services performed on a manufactured product to make it more marketable.

The exemption also applies to tangible personal property that makes a chemical or physical change in the product being manufactured and is necessary and essential in the manufacturing process. Some items, such as hand tools, are excluded from the exemption. A hammer, for example, is taxable even if it is used in fabricating a product for sale.

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Written by | Posted in Sales And Use Exemptions • Texas

Things Taxpayers Should Know When Choosing Between Standard And Itemized Deductions

Things Taxpayers Should Know When Choosing Between Standard And Itemized Deductions

Deductions reduce the amount of taxable income when filing a federal income tax return. In other words, they can reduce the amount of tax someone owes.

Most taxpayers have a choice of either taking the standard deduction or itemizing their deductions. The standard deduction may be quicker and easier, but, itemizing deductions may lower taxes more, in some situations. It’s important for all taxpayers to look into which deduction method best fits them.

New this year
Following tax law changes, cash donations of up to $300 made by December 31, 2020 are deductible without having to itemize when people file a 2020 tax return.

Here are some details about the two methods to help people decide deduction to take:

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Written by | Posted in IRS Rules • Itemized Deductions • Standard Deductions

California Competes Tax Credit: How To Apply

CALIFORNIA STATE - LEGISLATIVE COUNSEL

What is the California Competes Tax Credit?

The California Competes Tax Credit is an income tax credit available to businesses that want to locate to California or stay and grow in California and create quality, full-time jobs in California that might not otherwise be created by the business of any other business. Tax credit agreements will be negotiated by Go-Biz and approved by a statutorily created by “California Competes Tax Credit Committee” consisting of the State Treasurer, the Director of the Department of Finance, the Director of Go-Biz, and one Appointee by the Speaker of the Assembly and senate Committee on Rules.

How much in Tax Credits will be available?

The tentative amount of credits that can be allocated by Go-Biz is as follows:
– $180 Million in each fiscal year 2018-2019 and 2022-2023

Can any business apply for the California Competes Tax Credit? Is the credit restricted to only certain industries or locations in California?

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United States: New Jersey Sales Tax Exemptions

United States: New Jersey Sales Tax Exemptions

The sales tax rate was reduced from 6.85% to 6.625% rate. New Jersey applies sales tax on the retail sale, lease or rental of most goods and some services. There are no additional local sales taxes in the state of New Jersey. More information is provided below about reduced sales tax rates and major exemptions.

In Salem County, the sales tax rate is 3.5% and the 7% state sales tax rate does not apply. This 3.5% Salem County rate only applies to retail sales of tangible personal property made in person at a place of business located within Salem County.

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Written by | Posted in TaxConnections
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