Federal

The Rise of the Excise Tax
Final and proposed regulations for the excise tax on stock repurchases

In August 2022, Public Law No. 117-169—commonly called the Inflation Reduction Act of 2022—enacted Section 4501 of the Internal Revenue Code.1 The statute generally imposes a nondeductible one percent excise tax (the “excise tax”) on the net value of share repurchases by publicly traded domestic corporations in a given tax… Read more »

Key Challenges and Opportunities for Tax Directors in a Tightening Economy
Maximize tax savings but tread carefully with debt restructurings

Navigating a tightening economic cycle—characterized by prolonged high interest rates and uncertainty about future rate cuts—requires care and foresight. In the current financial climate, companies tend to accrue substantial net operating losses (NOLs), tax credits, and other tax assets and face deteriorating investments in their subsidiaries. Debt modifications and forbearances… Read more »

Pillar Two and IRS Notice 2023-80
Offering clarity on QDMTTs and top-up taxes

Internal Revenue Service Notice 2023-80 (hereinafter “the notice”) provides the US government’s view on the foreign tax credit treatment of Pillar Two top-up taxes and makes a clear distinction between qualified domestic minimum top-up tax (QDMTT) and the extra-jurisdictional top-up taxes imposed by an income inclusion regime (IIR) and the… Read more »

Tax Valuation Considerations for M&A Transactions
A close look at purchase price allocations, Section 382 limitation calculations, tax receivable agreements, and more

Public corporations, private equity-backed portfolio companies, and privately held companies often look to mergers and acquisitions (M&As) to drive growth and shareholder value. However, pursuing M&A-driven growth may be complicated, since companies must comply with ever-evolving financial and tax reporting requirements, deal with increasing financial audit and tax authority scrutiny,… Read more »

Purchasing Clean Energy Tax Credits
What corporate tax teams need to know about prevailing wage and apprenticeship requirements

The Inflation Reduction Act of 2022 (IRA) greatly expanded energy-related federal income tax credits and created Internal Revenue Code Section 6418, which allows eligible taxpayers to transfer, or sell, certain clean energy tax credits to unrelated parties for cash. One key area of due diligence when purchasing a tax credit… Read more »

Tax Credit Transferability and Direct Pay Proposed Under the IRA
Potential for interactions with Section 174 complicate a seemingly simple program

The new tax credits in the Inflation Reduction Act (IRA) mean that more taxpayers will have access to more tax credits in the near future. But recent guidance highlights some uncertainties that taxpayers should be aware of before jumping in. The Treasury Department and the Internal Revenue Service recently released… Read more »

The Deference Doctrine—Its History and Possible Future
The Chevron doctrine has weathered changes since 1984, but the biggest one of all may be on the horizon

The doctrine of administrative deference, established in the Chevron case in 1984, requires deference to an agency’s reasonable interpretation of an ambiguous statute.1 The two-part test for requiring deference first addresses whether “Congress has directly spoken to the precise question at issue.”2 If so, the court must enforce the “unambiguous… Read more »

IRS Formalizes Process for Evaluating Advance Pricing Agreement Requests
Practical effects remain to be seen

The Internal Revenue Service has issued interim guidance on the process the Advance Pricing and Mutual Agreement Program (APMA) will follow when determining whether to accept taxpayer requests for an advance pricing agreement (APA).1 Existing guidance already states that APMA has discretion to reject an APA request and identifies some… Read more »

Excising Stock Buybacks From the Corporate Playbook
How will the excise tax be applied to taxpayers in light of the statutory language, Notice 2023-02, and Announcement 2023-18?

On August 16, 2022, the Inflation Reduction Act of 2022 (the IRA) was signed into law.1 Among a number of changes the IRA introduced to the Internal Revenue Code of 1986 was a new excise tax imposed on what are commonly referred to as stock buybacks by publicly traded corporations.… Read more »

New Developments in Canada’s General Anti-Avoidance Rule
Is Canada overreaching with proposed changes?

Editor’s note. This article was written in early May. In Deans Knight Income Corporation v. The King, on May 26 the Supreme Court of Canada reached a seven-to-one decision in favor of the government. The past twelve months have seen two very significant developments in the general anti-avoidance rule (GAAR)… Read more »