Taxation (CPE)

The Tax Cuts and Jobs Act (TCJA) has been beneficial for companies engaged in research and development (R&D). It kept the R&D tax credit permanent and eliminated other tax credits and incentives in exchange for lower tax rates. However, beginning after December 31, 2021, the taxpayer option to deduct current R&D expenditures was abolished. It now requires the charging of expenditures to a capital account and amortizing them in a specified number of years.

Companies engaging in mergers and acquisitions (M&A) transactions often don’t consider the multistate tax aspects of the deal until the transaction is ready to close. Retroactive sales tax exposure is one item addressed by the purchasing company in the due diligence process and often leaves the seller surprised at the discovery of unexpected liabilities.

Keeping pace with the ever-evolving tax rules is one of the biggest pain points for tax teams.

The Internal Revenue Service (IRS) continues to intensify its enforcement initiatives on delinquent taxpayers through the new issue-focused approach.

As organizations across industries look for new ways to reach customers, many have turned to easily activated ecommerce channels or have begun to sell through third-party marketplaces.

On January 10, 2022, the Office of Chief Counsel IRS Memorandum Number 20214101F1 (IRS CCM) took effect requiring additional documentation for employers when filing for a research and development (R&D) refund on tax returns. The IRS CCM also provides guidance on acceptable documentation when filing R&D Credit refund claims.

The aggressive focus against tax evasion and other criminal activities around the globe is likely to continue. In the U.S., the crackdown on taxpayers who fail to report offshore financial assets and accounts remains to be a top priority for the Internal Revenue Service (IRS) Criminal Investigation Department, including non-compliant virtual currency that should be disclosed under the expanded cryptocurrency reporting.

The Foreign Account Tax Compliance Act (FATCA) landscape has been evolving in recent years. With the Internal Revenue Service’s (IRS’) and the U.S. Treasury Department’s continuous efforts to clamp down tax evasion and other criminal activities, complex reporting requirements have been instituted and several FATCA guidance have been released. Thus, significantly shaping this area of law.

The shifting regulatory paradigm and emerging developments in federal tax laws confront companies with increased scrutiny on their tax planning practices. As the U.S. International Revenue Service (IRS) intensifies its enforcement initiatives, compliance has become more challenging and complex than ever. Thus, making companies more vulnerable to tax controversies. Failure to address and mitigate potential tax issues could mean hefty penalties. 

Transfer pricing presents notable challenges and opportunities for multinational entities. Significantly, the rising disputes and sweeping impact of recent tax reforms have continuously reshaped its regulatory landscape and resulted in an intensified scrutiny. However, with a keen understanding of and proper compliance with the rules, transfer pricing can be substantial in positioning a business both locally and globally.

The introduction of the Foreign Account Tax Compliance Act (FATCA) by the U.S. and Common Reporting Standard (CRS) by the Organisation for Economic Co-operation and Development (OECD) had significantly affected the compliance process of financial institutions around the globe. With the various FATCA/CRS reporting challenges that continue to hound these organizations, coupled with the COVID-19 disruption, it has been a struggle to remain compliant.

Despite deadline extensions and a challenging environment caused by the COVID-19 outbreak, the Internal Revenue Service (IRS) continues its strict tax enforcement. Audit activity is expected to be more aggressive as governments grapple to cover the current budget deficit and falling revenues. However, businesses facing assessments or controversies may be able to settle cases more favorably under the present financial crisis.

The Research and Development (R&D) Tax Credit program remains to be an enticing opportunity for businesses – small and large – to boost their assets. Fortunately, significant reforms have been made over the years and millions of businesses from different industries can now take advantage of its benefits.

In December 2019, the Final Regulations for Qualified Opportunity Zone Program were issued by Treasury and the Internal Revenue Service (IRS). The Final Regulations were reported in the Federal Register in January 2020 and will become final in mid-March.

In April 2019, the Internal Revenue Services (IRS) released its second set of new regulations on the Qualified Opportunity Zone (QOZ) program. The additional guidelines aim to give light on the initial regulations released last 2018. However, several open questions still remain, that investors and related practitioners must be continuously proactive in monitoring the latest regulatory trends and development. Understanding the latest updates and how these might affect their businesses also will help them maximize opportunities while mitigating potential risks and pitfalls.