United States

IRS updates priority guidance plan with 4 new international tax items


The Treasury has released its 2016-2017 Priority Guidance Plan (the Plan) which outlines the projects that the Treasury and IRS intend to prioritize for the upcoming year. With regard to international tax items, there were four new projects added to the list and several updates to prior listed items. In total, there are 37 international projects on the list.

The four new items are as follows:

  1. Regulations under sections 897 and 1445 relating to changes to FIRPTA from the Protecting Americans from Tax Hikes Act of 2015. These rules will be of great interest to taxpayers investing in U.S. real estate and REITs. We expect guidance regarding the types of foreign pensions that qualify for tax relief under the new statutory rules.
  2. Additional guidance in response to Notice 2015-54, released on Aug. 6, 2015, on transfers of property to partnerships with related foreign partners and controlled transactions involving partnerships. Taxpayers who have put intellectual property (IP) migration projects on hold will want to keep an eye on this project because the guidance could make it easier (or harder) to execute IP migrations going forward.
  3. Guidance on country-by-country (CbC) reporting regarding the procedures for U.S. persons that are ultimate parent entities of multinational enterprise groups to voluntarily report certain information on a tax jurisdiction-by-tax jurisdiction basis for reporting periods beginning on or after Jan. 1, 2016, and before the applicability of section 1.6038-4. Taxpayers should watch this for detailed guidance on how to “early adopt” and report under the U.S. CbC rules in order to avoid having to report in other countries, which should minimize global CbC reporting burdens significantly.
  4. Regulations under section1256(g)(2) regarding the definition of a foreign currency contract, in light of the decision in Wright v. Commissioner, 809 F.3d 877 (6th Cir. 2016) where the Tax Court sided with the taxpayer in allowing foreign currency contracts that are options to be marked to market under section 1256.

Significant updates to prior published priority items include:

  1. Guidance under section 954(c) was revised to include the active rents and royalties exception
  2. General guidance on withholding under Chapter 3 and Chapter 4 was narrowed to specifically address sections 1441-1446 and 1471-1474

Many of the items listed in the Plan are a carryover from prior years so there is no guarantee that all of the items listed will be addressed in the upcoming year. Furthermore, the list does not bind the Treasury to guidance only on the listed items. However, the Plan offers insights into what the Treasury views as its priority. Some of the international items, such as the one calling for final regulations under section 5000C, have already been addressed since the release of the Plan. (For more information on the section 5000C update please see our post and tax alert.)

The full text of the Plan can be found on the IRS website.

Jamison Sites



Areas of focus: Washington National TaxInternational Tax Planning