U.S. Treasury and IRS Identify 2014-2015 International Tax Priorities

by: Smith and Howard

September 26, 2014

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The U.S. Treasury and the Internal Revenue Service (IRS) have announced their Priority Guidance Plan for 2014–2015. This plan includes 41 separate projects concerning international issues. The international issues covered are transfer pricing, Subpart F income, inbound transactions, outbound transactions, foreign tax credits, sourcing and expense allocation, treaties, and other general topics.

The plan sets out the administrative guidance and regulations that the two agencies will issue related to 317 projects that are priorities for resource allocation for the twelve months from July 2014 to June 2015. The IRS and the Treasury’s Office of Tax Policy use the annual list to identify and put priorities on the tax issues the two agencies will address through regulations, revenue rulings and procedures, notices and other published guidance.

The Priority Guidance Plan is divided into the major areas of U.S. taxation, including international issues; consolidated returns; corporations and their shareholders; employee benefits; excise taxes; exempt organizations; financial institutions and products; general tax issues; gifts, estates and trusts; insurance companies and products; partnerships; subchapter S corporations; tax accounting; tax administration; and tax-exempt bonds.

Transfer pricing

  • Treatment and allocation of risk,
  • The Annual Report on the Advance Pricing Agreement (APA) Program, and

  • The Advance Pricing and Mutual Agreement (APMA) Program.

Subpart F / Deferral

  • Treatment of transactions involving commodities and nonfunctional currency,
  • Foreign base company sales income and services income,

  • Loans to foreign partnerships and related issues,

  • Treatment of upfront payments on swaps, and

  • Passive foreign investment companies (PFICs).

Inbound transactions

  • Dividend equipment payments,
  • Withholding issues, and

  • Reporting requirements for 25% foreign-owned U.S. corporations and foreign corporations engaged in a U.S. trade or business — that is, filing IRS Form 5472, “Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business.”

Outbound transactions

  • Triangular reorganizations involving foreign corporations,
  • Transfers of intangible property to foreign corporations,

  • Failure to file gain recognition agreements (GRAs) and other required filings,

  • Substantial business activities, and

  • Stock that is disregarded for purposes of measuring stock ownership.

Foreign Tax Credits (FTCs)

  • Covered asset acquisitions,
  • Overall foreign losses,

  • Separate application of the FTC limitation to income resourced under treaties,

  • Foreign tax redeterminations, and

  • FTC splitting events.

Sourcing and expense allocation

  • Allocation and apportionment of interest expense, and
  • The character and source of income, including income arising in transactions involving intellectual property and digital goods and services.

U.S. tax treaties

  • Payments through hybrid entities,
  • Confidentiality of tax convention information, and

  • Procedures for requesting competent authority assistance.

General topics

  • The “presence test” for bona fide residency in a U.S. territory,
  • Certain foreign currency transactions, including hedging, foreign financial asset reporting, foreign trust reporting, and entity classification.

The Priority Guidance Plan also includes an appendix with the regularly scheduled guidance that will be published during the 2014–2015 plan year.

More to come

The Treasury and the IRS jointly said they intend to update and republish the plan periodically during the year to reflect additional items and to report guidance that has been issued.

Copies of the plan are available on the IRS website at

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