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lunch beat

Bramwell's Lunch Beat: Coca-Cola’s Back Taxes, FATCA Regs, Belize Probed

Sep 21st 2015
Staff Writer and Editor AccountingWEB
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Coca-Cola: IRS says $3.3 billion in back taxes owed
Coca-Cola was notified by the IRS that it owes $3.3 billion more in federal taxes, as well as interest, for 2007 to 2009, the company said on Sept. 18, the Associated Press reported. The Atlanta-based company said in a regulatory filing that it believes the assessments from the IRS are without merit and plans to pursue “all administrative and judicial remedies necessary to resolve the matter.” Coca-Cola says the disagreement is over how much it should report as taxable income in the United States, in relation with licensing that allows its foreign affiliates to sell products like soft drink concentrates to bottlers overseas. In a filing with the US Securities and Exchange Commission, Coca-Cola said it has been following the same methodology for determining its taxable US income for nearly 30 years.

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Treasury to delay enforcing part of tax law that curbs offshore tax evasion
The US Treasury Department said on Sept. 18 it would delay enforcement of one key part of the Foreign Account Tax Compliance Act (FATCA), a 2010 law aimed at curbing offshore tax evasion, in a regulatory victory for banks, wrote John D. McKinnon of the Wall Street Journal. The law requires foreign banks to start handing over information about US-owned accounts to the IRS. The latest move by Treasury will push back the start of withholding for many types of transactions – such as stock trades – from 2017 until 2019. Withholding for some other types of payments has already begun. The change will give banks more time to come into compliance with FATCA, and governments and the financial industry more time to work out some of the difficult details involved in withholding on more-complex financial transactions.

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US tax-evasion probe expands to Belize
US authorities have targeted Belize-based banks in a new expansion of their hunt for Americans suspected of evading taxes by hiding income and assets in offshore accounts, wrote Kevin McCoy of the USA Today. A federal court in Miami on Sept. 16 approved special “John Doe” legal summonses seeking information about US taxpayers who may hold undeclared accounts at Belize Bank International Limited or Belize Bank Limited. The court order gave federal investigators authorization to seek records of so-called correspondent accounts the Belize banks maintain at Bank of America and Citibank. Information from those accounts, which enable foreign banks without a US presence to handle transactions in US dollars, is expected to help the IRS identify US taxpayers who hold or held accounts at the Belize financial institutions.

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IRS technical guidance roundup (week of Sept. 14)
The IRS issued the following technical guidance last week:

Revenue Procedure 2015-43 supplements Rev. Proc. 2015-3, 2015-1 I.R.B. 129, which sets forth areas of the Internal Revenue Code on which the IRS will not issue letter rulings or determination letters (no-rule areas). The revenue procedure adds to the list of no-rule areas any issue relating to the qualification, under Section 355 and related provisions of the tax code, of certain distributions in which property becomes the property of a regulated investment company or a real-estate investment trust, in which the active business is small relative to other assets, or in which there is a substantial amount of investment assets.

Revenue Procedure 2015-45 describes conditions under which the IRS will treat a regulated investment company (RIC) that invests in one or more other RICs as satisfying the asset diversification requirements of Section 851(b)(3)(B) (the 25 percent tests) of the Internal Revenue Code.

Revenue Procedure 2015-47 sets forth procedures for retirement plan administrators and plan sponsors who are required to file electronically Form 8955-SSA, Annual Registration Statement Identifying Separated Participants With Deferred Vested Benefits, and Form 5500-EZ, Annual Return of One-Participant (Owners and Their Spouses) Retirement Plan, to request a waiver of the electronic filing requirement due to economic hardship.

Revenue Procedure 2015-48 provides guidance for issues related to the enactment of § 125(a), § 125(c)(2), and § 127(d) of the Tax Increase Prevention Act of 2014, Pub. L. No. 113-295, 128 Stat. 4010 (Dec. 19, 2014) (TIPA). Section 125(a) of the TIPA amended § 168(k)(2) of the Internal Revenue Code by extending the placed-in-service date for property to qualify for the 50 percent additional first-year depreciation deduction.

Notice 2015-59 is issued concurrently with Rev. Proc. 2015-43 and announces that the Treasury Department and the IRS are studying issues under sections 337(d) and 355 of the Internal Revenue Code relating to certain distributions, described in Section 355 of the tax code, in which property becomes the property of a regulated investment company or a real-estate investment trust, in which the active business is small relative to other assets, or in which there is a substantial amount of investment assets. The notice describes the transactions that concern the Treasury Department and the IRS and requests comments concerning those transactions.

Notice 2015-61 provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under § 417(e)(3), and the 24-month average segment rates under § 430(h)(2) of the Internal Revenue Code. In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I).

Notice 2015-62 confirms that under Section 4944 of the Internal Revenue Code, private foundation managers may consider the relationship between a particular investment and the foundation's charitable purpose when exercising ordinary business care and prudence in deciding whether to make the investment.

Notice 2015-63 announces the special per diem rates effective Oct. 1, 2015, which taxpayers may use to substantiate the amount of expenses for lodging, meals, and incidental expenses when traveling away from home.

Notice 2015-66 announces that the Treasury Department and the IRS intend to amend regulations under sections 1471-1474 to extend the time that certain FATCA transitional rules will apply. Specifically, the amendments will extend:

  1. The date for when withholding on gross proceeds and foreign pass-thru payments will begin.
  2. The use of limited branches and limited foreign financial institutions (limited FFIs).
  3. The deadline for a sponsoring entity to register its sponsored entities and redocument such entities with withholding agents.

In addition, in order to reduce compliance burdens on withholding agents that hold collateral as a secured party, the notice announces that Treasury and the IRS intend to amend the regulations under Chapter 4 to modify the rules for grandfathered obligations in relation to collateral.

The transitional rules provided in the notice facilitate an orderly transition for withholding agents and FFIs regarding FATCA compliance and respond to comments regarding how the phase-out of transitional rules may affect information reporting and withholding systems. In light of these comments and the successful engagement of Treasury and partner jurisdictions to conclude intergovernmental agreements (IGAs) to implement FATCA, the notice provides additional time for withholding agents and FFIs to modify their systems in stages as necessary to address the phase-out of the above-mentioned transitional rules consistent with the information reporting and compliance objectives of FATCA. Finally, the notice also provides information on the exchange of information by Model 1 IGA jurisdictions with respect to 2014.

Notice 2015-67 finalizes and supersedes Notice 2014-17. It provides a general rule that per-capita distributions to Indian tribe members made from funds held in trust by the Secretary of the Interior (“trust account”) are excluded from the gross income of the members of the tribe receiving the per-capita distributions. This notice also provides an exception to the general rule. Distributions to tribal members from a trust account will constitute gross income under 26 U.S.C. § 61 to the members of the tribe receiving the distributions if the trust account is used to mischaracterize taxable income as nontaxable per-capita distributions.

Notice 2015-68 advises taxpayers that the Treasury Department and the IRS intend to propose regulations under § 6055 (1) providing that health insurance issuers must report coverage in catastrophic health insurance plans, (2) allowing electronic delivery of statements reporting coverage under expatriate health plans unless the recipient explicitly refuses consent or requests a paper statement, (3) allowing filers reporting on insured group health plans to use a truncated taxpayer identification number to identify the employer on the statement furnished to a taxpayer, and (4) specifying when a provider of minimum essential coverage is not required to report coverage, such as in a health reimbursement arrangement, of an individual who has other minimum essential coverage.

Quick Links

  • BoE tells banks not to slow preparations for bad loan accounting rule (Reuters)
  • Veterans group that hosted Trump lost tax-exempt status (CNN)
  • How would Jeb Bush's tax plan affect you? (Wall Street Journal)
  • Yelling ‘Cut!' for moviemaking tax breaks (Wall Street Journal)
  • As casinos falter, Mississippi sells debt backed by gambling tax (Bloomberg)

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