WEEKEND INSIGHTS: Taxing Non-Income Items and Retirement Plans

This is a weekend roundup of Bloomberg Tax Insights, written by practitioners and featuring expert analysis on current issues in tax practice and policy. The articles featured here represent just a handful of the many Insights published each week. For a full archive of articles, browse by jurisdiction at Daily Tax Report, Daily Tax Report: State, Daily Tax Report: International, Transfer Pricing Report, and Financial Accounting.

Bloomberg Tax Insights articles are written by experienced practitioners, academics, and policy experts discussing developments and current issues in taxation. To contribute, please contact us at TaxInsights@bloombergindustry.com.

This week we look at: unintentionally taxing non-income items and intentionally taxing retirement plans; the increase of tax risk and controversy from the pandemic; New Hampshire’s lawsuit against Massachusetts, and more. We’ll hear from:

• Matthew Lay and Ira Aghai of Deloitte Tax LLP on concerns raised by the proposed treatment of adjustments to non-income partnership items
• Jim Mahaney of Prudential Financial on transferring wealth to the next generation.
• Kate Barton and Luis Coronado of EY Global on tax risk and controversy in the wake of the pandemic
• Jennifer Karpchuk of Chamberlain Hrdlicka on how granting cert in New Hampshire v. Massachusetts could impact Pennsylvania and Philadelphia
• Kendall Houghton of Alston & Bird on consumer protection and privacy risks when states use third-party auditors to identify unclaimed accounts
• Libin Zhang of Fried Frank on breaks for opportunity funds formed in January 2021 or earlier
• Stefanie Perrella, Jennifer Press, and David Ptashne of Duff & Phelps on planning for a successful transition of intercompany Libor positions
• Jeff Carroll of Avalara on the alcohol e-commerce battle
• Jason Scott of JS Consulting, John B. Shoven of Stanford University, Sita Nataraj Slavov of George Mason University and the American Enterprise Institute, and John G. Watson of Stanford on 401(k) autoenrollment
• Christiaan van der Valk of Sovos the EU’s program to make online marketplaces responsible for collecting VAT

The IRS building in Washington. Proposed partnership regulations released by the agency would tax non-income items.

Photographer: Andrew Harrer/Bloomberg

Matthew Lay and Ira Aghai of Deloitte Tax LLP highlight concerns raised by the proposed treatment of adjustments to non-income partnership items provided in the 2020 proposed regulations and other recent guidance relating to the Bipartisan Budget Act of 2015. Read: Proposed Partnership Regulations Would Tax Non-Income Items Under the BBA

A Democratic president and a Democrat-controlled Congress may lead to tax increases. Jim Mahaney of Prudential Financial outlines considerations for transferring wealth to the next generation. Read: IRA/401(k) Tax Hike Considerations and Strategies for Generational Wealth Transfer

Tax administrations played a critical role in helping businesses administer pandemic-related stimulus and support. But as governments face budgetary pressures, and as mobile workers and transfer pricing shifts fuel regulatory change, tax risk and controversy will rise. Kate Barton, EY Global Vice Chair – Tax, and Luis Coronado, EY Global Tax Controversy Leader and EY Global Transfer Pricing Leader, share the findings from the 2021 EY Tax Risk and Controversy Survey. Read: How the Covid-19 Pandemic Will Impact Tax Risk and Controversy in 2021 and Beyond

New Hampshire is challenging Massachusetts’s practice of taxing nonresidents who previously worked in-state but now work remotely from home in New Hampshire—asking for U.S. Supreme Court review. Jennifer Karpchuk of Chamberlain Hrdlicka explains how the outcome of the case could impact taxation of nonresidents by Pennsylvania and the city of Philadelphia. Read: How Granting Cert in New Hampshire v. Massachusetts Could Impact Pennsylvania and Philadelphia

State governments seeking revenue in the wake of the pandemic will only heighten their focus on unclaimed property. Kendall Houghton of Alston & Bird highlights the consumer protection and privacy risks faced by companies when states use third-party auditors to obtain information on accounts with small balances. Read: Top Unclaimed Property Regulatory and Enforcement Challenges in 2021

The IRS released Notice 2021-10 on Jan. 19, 2021 to provide relief for qualified opportunity zone deadlines. Libin Zhang of Fried Frank explains how qualified opportunity funds formed in January 2021 or earlier are given a free pass for all of their 2020 and 2021 asset tests and are required to make their first qualifying investments generally only by June 30, 2022. Read: Opportunity Zone Covid Relief and the Great Fund Formation Rush of January 2021

The end of the London Inter-bank Offered Rate (Libor) is on the horizon. Stefanie Perrella, Jennifer Press, and David Ptashne of Duff & Phelps outline how multinational companies should assess potential exposure points and develop a transition strategy to identify and replace references and dependencies. Planning for a Successful Transition of Intercompany Libor Positions

The pandemic created a boom in online alcohol sales. Jeff Carroll, general manager of beverage alcohol at Avalara, looks at the legislative and legal battles being waged between producers, wholesalers, distributors, and the new players—the e-commerce companies that are disrupting the old three-tier system. Read: The Alcohol E-commerce Battle Heats Up

Jason Scott of JS Consulting, John B. Shoven of Stanford University, Sita Nataraj Slavov of George Mason University and the American Enterprise Institute, and John G. Watson of Stanford question whether it makes sense to automatically enroll young employees in 401(k) plans when such funds might be put to better use paying off debt incurred for education and other needs. Read: 401(k) Autoenrollment—Does One Size Really Fit All?

Many U.S. states now require online marketplaces to collect and remit sales taxes, and the EU is following close behind, making marketplaces like Etsy and Alibaba responsible for collecting and remitting value added tax (VAT) beginning July 1, 2021. Christiaan van der Valk of Sovos outlines the EU program and measures being taken by individual jurisdictions. Read: Marketplaces Beware: Upcoming Enforcement on EU’s VAT E-commerce Package

Corporate Tax Chat: Jose Luis Migoya of Iberdrola

Bloomberg Tax spoke recently with Jose Luis Migoya, head of international tax at Spanish utility group Iberdrola, about growing international fiscal pressures, keeping up with the company’s busy year of M&A, and how to incentivize a transition to clean energy. Migoya has worked at Iberdrola for more than 25 years, as the company has grown into one of the leading international renewable operators working across Europe and the Americas. Read: Corporate Tax Chat: Jose Luis Migoya of Iberdrola

From the Archive

Bloomberg Tax contributors have been identifying and explaining the potential challenges with the new partnership tax audit regime under the Bipartisan Budget Act of 2015 (BBA).

The Internal Revenue Service is moving into the next generation of partnership audits and enforcement following the enactment of the BBA and repeal of its predecessor, the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). Greg Armstrong, Ossie Borosh, Tom Greenaway, and Tom Kane of KPMG LLP outlined some of the issues under TEFRA, several of the key elements of the BBA, how the new IRS enforcement push differs from past efforts, what the IRS is looking for, and what partnerships and their professional advisers can do now.

Coronavirus economic relief legislation included retroactive tax provisions to give businesses immediate access to refunds. However, there were many unanswered procedural questions for partnerships governed by the Bipartisan Budget Act that want to claim those refunds, wrote Rochelle Hodes of Crowe.

Greg Armstrong of KPMG LLP discussed IRS guidance that indicated the IRS Office of Appeals would play a larger role in the new partnership audit procedures under the Bipartisan Budget Act of 2015.

Beyond Tax

What’s happening outside the world of tax?

Client development is an ongoing struggle for attorneys and other professionals during the Covid-19 pandemic. As working from home remains the norm, Deborah B. Farone, founder of Farone Advisors LLC, offers pointers for keeping in touch with current clients, reaching out to new clients, and integrating it all into the work schedule. Read: How to Keep Developing Business During the Pandemic

A congressional proposal to limit the terms of U.S. Supreme Court justices to 18 years and set other guidelines could be coming soon and offers a good apolitical alternative to lifelong appointments, says Tyler Cooper, with Fix the Court. The new Biden Supreme Court reform commission should consider it. Read: Supreme Court Term Limits—Here’s the Best Option

The Senate, unlike the House, still has the filibuster, a procedure used to delay or stop a vote on pending legislation that requires 60 votes to end. Northwestern Pritzker School of Law Professor Tonja Jacobi explains why the filibuster should be abolished and rebuts contrary arguments based on tradition and moderation. Read: Why the Senate Should Abolish the Filibuster

Exclusive Content for Bloomberg Tax Subscribers

(*Note: Your Bloomberg Tax login will be required to read the following content.)
David B. Blair, Larry Eisenstat, Carina C. Federico, and Tyler O’Connor of Crowell & Moring LLP discuss the incentives that Congress has enacted to help launch the carbon capture utilization and sequestration (CCUS) industry in the form of the tax credits available under tax code Section 45Q and the new spending programs for research, development, and commercialization of CCUS technology.