United States: Tax Policy Update - May 6, 2014

Last Updated: May 14 2014
Article by Russell W. Sullivan

NUMBER OF THE WEEK: $1.4 Billion

This is the projected amount Pfizer Inc. could save in annual taxes by restructuring and moving its tax residence to the U.K., according to several news reports citing a Barclays analysis of Pfizer's $100 billion bid to buy U.K.-based AstraZeneca. The U.K.'s corporate tax rate will drop to 20 percent by next year, compared to the 35-percent rate for corporations in the United States. Pfizer has disclosed that it pays an effective 27-percent rate under current U.S. law.

LEGISLATIVE LANDSCAPE

House: Permanent R&D Credit Heads to Floor. Following last week's Ways and Means Committee markup of six business tax "extender" bills, the House will vote later this week on just one of the six plucked from the bunch: a bill to permanently extend the research and development (R&D) tax credit (H.R. 4438). The R&D credit is one of the most widely supported of the business tax extenders — and the most expensive. Its permanent extension would cost more than $155 billion over 10 years, and the bill is not offset by spending cuts or revenue raisers elsewhere, which is why many House Democrats say they cannot support it. The bill nevertheless is expected to pass this week, but it is unclear if the House will send it over to the Senate for consideration any time soon. Many House members want to avoid going to conference once the Senate passes its version of extenders legislation, which presents a stark contrast to the piecemeal approach we're seeing in the House.

Senate: Extenders Vote Next Week? The Senate is gearing up to pass an $85 billion package (also unpaid for) that would extend almost all of the 55 expired provisions retroactively through 2015. You can review the Finance Committee's report on the bill here. Consideration of the bill could begin as early as next week, although we would not be surprised to see it put off until the week of May 19. It's unclear if the bill will be open to amendments or if Senate Majority Leader Harry Reid (D-NV) will "fill the tree," in order to prevent votes on politically controversial issues, like the repeal of the medical device tax.

REGULATORY WORLD

IRS Now Challenging Caterpillar. Following a tense hearing last month before the Senate Permanent Subcommittee on Investigations (PSI) on its international tax practices, Caterpillar Inc. now faces challenges brought by the Internal Revenue Service regarding the company's "overseas transactions involving its spare-parts business," according to a regulatory filing disclosed Friday. The hearing is the latest effort from PSI Chairman Carl Levin (D-MI) to crack down on what he alleges is tax evasion. Levin said Caterpillar had made a "paper change" to book U.S. profits in Switzerland that saved the company $2.4 billion in U.S. taxes from 2000 to 2012. Caterpillar execs and their tax accountants testified that all of their tax practices, past and present, fully comply with U.S. law.

Treasury to Keep Eye on Pfizer, Other Inversions. Drug maker Pfizer Inc. announced on April 28 that its $99 billion bid to take over U.K.-based AstraZeneca would result in a restructuring under which both companies would be owned by a new U.K. parent, reducing Pfizer's tax bill from the U.S. 35-percent corporate rate to the U.K. rate, currently 21 percent and decreasing to 20 percent next year. The company's operational headquarters would remain in New York under the deal. As of this writing, Pfizer raised its bid to $106 billion, with AstraZeneca assuming a resistant stance to the deal. Read more about the possible move here.

Following the news of Pfizer's potential inversion, an unnamed U.S. Treasury official told Reuters that "cracking down on companies that reincorporate overseas to reduce their U.S. taxes is a priority for the administration." President Obama's budget proposal for FY 2015 contained a provision that would make inversions more difficult to execute. Read more here.

FATCA Enforcement Eases Up. The IRS and Treasury Department issued Notice 2014-33 on Friday, May 2, which would grant grace periods to foreign banks that make "good faith" attempts to comply with the reporting and withholding requirements of the Foreign Account Tax Compliance Act, slated for enforcement beginning July 1, 2014. Treasury officials said foreign banks' compliance efforts during the 2014 and 2015 transition period will be considered when determining whether to launch enforcement actions.

Like Bs to Money. The IRS announced on April 25 that it will revisit the "Killer B" regulations to Section 367(b), which relate to the treatment of property used to acquire parent stock or securities in certain triangular reorganizations involving foreign corporations. IRS Notice 2014-32 said the agency plans to eliminate the deemed contribution model under the existing regulations, modify the amount of income and gain taken into account for purposes of applying the priority rules of section 367(a) and (b), and clear up ambiguities in the application of the anti-abuse rule.

COURTS & LEISURE

$1.6 Billion Settlement in the Works? Credit Suisse Group AG is reportedly in talks with the U.S. Department of Justice to pay as much as $1.6 billion to resolve an investigation into the bank's role in helping Americans evade U.S. taxes, according to a Reuters report. Credit Suisse is the largest of 14 Swiss banks currently under U.S. criminal investigation as part of the Justice Department's crackdown on offshore tax evasion.

LOOKING AHEAD

This week in Washington, the research and development tax credit and a renewed focus on the IRS targeting scandal will highlight the House floor agenda. The Senate Finance Committee is holding a hearing on innovative ways of financing highways and transit, and Senate leaders will try to reach an agreement to take up energy efficiency legislation as controversy persists over including an amendment that would greenlight the Keystone XL Pipeline. Meanwhile, Federal Reserve Chair Janet Yellen will appear before the Senate Budget Committee, the Joint Economic Committee and the Financial Stability Oversight Council.

Please see below for further detail on these events and others in Washington this week:

Relevant Congressional Activity

House Financial Services Committee

On Thursday, May 8, 2014, the House Financial Services Committee will hold a hearing entitled "Annual Testimony of the Secretary of the Treasury on the State of the International Finance System." Witness testimony will be given by:

  • The Honorable Jacob J. Lew, Secretary
    Department of the Treasury

Senate Finance Committee

On Tuesday, May 6, 2014, the Senate Finance Committee is holding a hearing entitled "New Routes for Funding and Financing Highways and Transit." The witnesses include:

  • Dr. Joseph Kile, Assistant Director for Microeconomic Studies Division Congressional Budget Office
  • Mr. Aubrey L. Layne, Jr., Secretary of Transportation
    State of Virginia
  • Mr. Jayan Dhru, Managing Director, Corporate & Infrastructure Ratings
    Standard & Poor's Ratings Services
  • Ms. Samara Barend, Senior Vice President and P3 Development Director AECOM Capital
  • Mr. Chris Edwards, Director, Tax Policy Studies
    Cato Institute

Senate Banking, Housing, and Urban Affairs Committee

On Wednesday, May 7, 2014, the Senate Banking Subcommittee on Economic Policy will hold an open hearing entitled "Drivers of Job Creation." Witnesses will be:

  • Ms. Jennifer Erickson, Director of Competitiveness and Economic Growth
    Center for American Progress
  • Mr. Derek Smith, CEO
    Clean Energy Works Oregon
  • Mr. Emil Frankel, Visiting Scholar
    Bipartisan Policy Center
  • Dr. Robert Dietz, Vice President for Tax and Market Analysis
    National Association of Home Builders

Senate Budget Committee

On Thursday, May 8, 2014, the Senate Budget Committee will hold a hearing entitled "The U.S. Economic and Fiscal Outlook." Witness testimony will be given by:

  • The Honorable Janet L. Yellen, Chair
    Board of Governors of the Federal Reserve System

Joint Economic Committee

On Wednesday, May 7, 2014, the Joint Economic Committee will hold a hearing entitled "The Economic Outlook." Witness testimony will be given by:

  • The Honorable Janet L. Yellen, Chair
    Board of Governors of the Federal Reserve System

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions