Corporate Tax, McDermott Will & Emery updates

USA

Contributed by McDermott Will & Emery
Deductible payments to CFCs can result in exorbitant BEAT
  • USA
  • June 22 2018

A minimum tax has been imposed on domestic corporations with substantial amounts of deductible payments made to related foreign persons, referred to as the 'base erosion and anti-abuse tax' (BEAT). BEAT is particularly onerous if a controlled foreign corporation's income is subject to foreign taxation because, while foreign income taxes can be used as a credit to reduce regular tax liability, no foreign tax credit is permitted to offset the BEAT.

IRS implementation of tax reform continues to move forward
  • USA
  • June 15 2018

The latest announcement by the Internal Revenue Service (IRS) focuses on the $10,000 cap on the amount of state and local taxes that can be deducted for federal income tax purposes. In a press release and release of guidance in the form of Notice 2018-54, the IRS announced that proposed regulations will be issued to help taxpayers understand the relationship between federal charitable contribution deductions in exchange for a tax credit against state and local taxes owed.

IRS announces HSA contribution limit increase for 2018
  • USA
  • June 01 2018

The Internal Revenue Service has increased the 2018 maximum deductible health savings account (HSA) contribution for taxpayers with family coverage under a high deductible health plan to $6,900. Employers that previously lowered their plan's contribution limit for HSAs to $6,850 should consider how to address the increased limit and whether any changes or employee communications are necessary.

Waiver leads to double tax liability on patent royalties
  • USA
  • May 25 2018

Declining to address whether certain technology licensing royalties should be subject to taxation as income or capital gains, the US Court of Appeals for the Third Circuit found that a patentee-taxpayer had waived his claim on appeal and affirmed the Tax Court's decision that the royalties should be treated as income. The Third Circuit acknowledged that a patentable invention may be subject to capital gains treatment even without a patent or patent application.

Timely opinion regarding state taxation of Subpart F income and dividends from foreign affiliates
  • USA
  • May 18 2018

The New Mexico Administrative Hearings Office recently issued an opinion that addressed the following questions: under what circumstances can a state constitutionally impose tax on a domestic company's income from foreign subsidiaries, including Subpart F income; and when is factor representation required? Since many state income taxes are based on federal taxable income, inclusion of these new categories of income at the federal level could potentially result in their inclusion at the state level.


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