“Substantial economic presence” nexus standard formally embodied in regulation. As expected after recently having filed an economic impact statement, the Mississippi Department of Revenue on November 1 filed its final remote seller use tax regulation with the Secretary of State. The new regulation will be effective December 1, 2017, and contains numerous changes from the original proposal issued in January (see prior Jones Walker coverage here, here, here, and here). The notice contains no public hearing or comment period, so it is unlikely there will be any further revisions prior to the effective date. … [Read more...] about Mississippi Files Final Remote Seller Use Tax Regulation
No new SEPs or SIMPLE 401(k) plans. The 2014 Tax Proposal would have prohibited employers from establishing new Simplified Employee Pensions (“SEPs”) and Savings Incentive Match Plans (“SIMPLE 401(k)s”). Under current law, certain employers may make contributions to SEPs up to the maximum permitted, which, for 2017, is the lesser of $54,000 and 25% of compensation. In a SIMPLE 401(k), which is available to employers with no more than 100 employees, participants may make deferrals on a pre-tax basis (up to $12,500 in 2017) and employers make either a 2% matching contribution for the employee deferrals or a 3% profit-sharing contribution to all eligible employees. … [Read more...] about Potential Impact of Trump Tax Reform Plan on Retirement Plans: What’s Old Could Be New Again
There is little authority on what constitutes tax-exempt income tax for this purpose. It is generally believed that only income that is permanently exempt from tax should result in a basis increase under Section 705(a)(1)(B). For example, interest on tax-exempt government bonds that is excluded under Section 103 and life insurance proceeds that are excluded under Section 101(a) should be covered by this provision, whereas income that is realized but not recognized in connection with a like-kind exchange (Section 1031), condemnation (Section 1033), or reorganization (Section 354) should not trigger a basis increase under Section 705. The rationale being that the latter provisions are intended not to forgive the tax on income realized, but merely to defer it until some future time. The question is which category of income should PTI fall under – income that is permanently exempt from tax or income that is realized but not recognized until some future time. … [Read more...] about Is a Distribution of Previously Taxed Income “Exempt from Tax”?
Other U.S. Tax ConsiderationsIt is important to note that, if the intermediary holding company is a CFC (controlled foreign corporation) for U.S. purposes, further planning may be needed to avoid triggering subpart F income on the company’s receipt of the dividend from the Chilean company (unless an exception already applies, e.g., the high-tax exception). In addition, given the high effective tax rates in Chile, foreign tax credit issues also will need to be addressed to avoid taxation of the same income multiple times. Finally, if the U.S. shareholder is a pass-through entity, rather than a C corporation for U.S. purposes, individual owners of that entity may benefit from receiving “qualified” dividends in the United States when dividends are received from the intermediary treaty resident company. This tax benefit would not otherwise be available to such shareholders if they received dividends directly from a Chilean entity, given that the Treaty is not yet in … [Read more...] about Recent Chilean Tax Reform Reinforces Need for U.S. Tax Treaty
Unlike U.S. persons who are subject to U.S. federal income tax on their worldwide income, foreign persons generally are subject to U.S. taxation on two categories of income: (i) certain types of passive U.S.-source income (e.g., interest, dividends, royalties and other types of “fixed or determinable annual or periodical income,” collectively known as FDAP), which are subject to a 30-percent gross basis withholding tax; and (ii) income that is effectively connected to a U.S. trade or business (ECI), which is taxed at graduated tax rates applicable to U.S. persons. Although the statutory rate of withholding on U.S.-source payments of FDAP income to a foreign person is 30 percent, most, if not all, income tax treaties concluded by the United States reduce or even eliminate the U.S. withholding tax on payments of dividends, interest, royalties and certain other types of income. … [Read more...] about Local Law Shopping Through “Derivative Benefits” re: Tax on Foreign Income