Comment Letters

On October 12, 2015, TEI submitted a letter to the Canadian Department of Finance stating that a proposed expansion of the Income Tax Act's subsection 55(2), which is an anti-avoidance provision, would unduly apply to routine transactions that have no anti-avoidance purpose. The proposed legislation would expand the “purpose test” to capture instances in which dividends are paid on a share, not to reduce a capital gain, but instead to (i) significantly decrease the fair-market value of any share, or (ii) significantly increase the total property costs to the dividend recipient.

On September 30, 2015, TEI recommended four state tax reforms that would further the Maryland Economic Development and Business Climate Commission (the Augustine Commission) goals of making Maryland a better place to do business and keeping Maryland competitive in economic and private sector growth and prosperity. TEI recommended: (1) a reduction of the interest rate on underpayments of tax, (2) a legislative directive narrowing the application of the principles espoused in Gore Enterprise Holdings, Inc. v.

On September 29, 2015, TEI submitted comments to the Japanese Ministry of Finance regarding proposed changes to Japan's taxation of cross-border supplies of services, as most recently articulated in Japan's May 2015 Revision of Consumption Taxation on Cross-Border Supplies of Services Guidelines.

TEI has filed two letters with British Columbia's Ministry of Finance proposing changes to British Columbia's provincial sales tax and carbon tax. TEI's August 31, 2015 letter, filed with the Tax Programs Branch, proposes several changes to the provincial sales tax designed to streamline tax administration for businesses and the Ministry. TEI's September 1, 2015 letter, filed with the Tax Policy Branch, proposes several revenue-related changes to the provincial sales tax and carbon tax to be considered in conjunction with the Ministry's annual budget process.

TEI and other stakeholder groups recently met with representatives of the IRS’s Large Business and International Division to review and offer comments on five draft research credit directives. Overall, the dialogue at the meeting was constructive, but the effort to involve stakeholders and obtain their insights could have been more productive. In its September 15, 2015 letter to LB&I, TEI offered observations on the process used to solicit stakeholder input, as well as the content of the draft directives.

On August 28, 2015, TEI submitted a letter to the Canadian Department of Finance urging exception for stock-based compensation programs from potential representation requirements at issue in proposed legislation regarding synthetic equity arrangements. The legislation would require participants in synthetic equity arrangements to affirmatively represent that they are Canadian taxpayers in order to claim a dividends-received deduction in certain transactions involving stock hedging.

On August 14, 2015, TEI submitted comments to the FASB concerning proposed improvements to the employee share-based payment accounting rules—Topic 718. TEI’s comments focus on the FASB’s proposal to account for excess tax benefits and excess tax deficiencies arising from employee stock compensation directly in earnings (the Earnings Approach). The Institute strongly recommended that the FASB not adopt the proposed Earnings Approach, but instead make simplifying adjustments to the existing APIC accounting rules.

On August 3, 2015, TEI submitted comments to the IRS on proposed regulations (REG-132634-14) relating to qualifying income from activities of publicly traded partnerships with respect to minerals or natural resources. The Institute’s comments focused on how the proposed regulations fail to capture the complex processes and activities carried on by publicly traded partnerships and, as a result, propose rules that are inconsistent with section 7704(d)(1)(E) and its legislative history as previously interpreted and applied by the IRS in 27 years of ruling practice.

On July 16, 2015, TEI submitted a letter to Massachusetts Governor Charlie Baker urging his veto of the Legislature's proposed repeal of Massachusetts' FAS 109 deduction as part of the Commonwealth's fiscal 2016 budget. The FAS 109 deduction was adopted as part of Massachusetts combined reporting regime in 2008 and was designed to mitigate the financial reporting impact for publicly-traded companies whose net deferred tax liabilities increased as a result of the shift to combined reporting. 

On June 17, 2015, TEI submitted comments on the OECD revised discussion draft on BEPS Action 8: Hard-to-Value Intangibles. The Institute's comments focused on the need to limit the use of ex post information (hindsight) by tax authorities to price previous transfers of intangible assets as such information is not used in similar transactions between unrelated parties. The Institute noted, among other things, that use of hindsight would likely result in additional controversy and disputes between taxpayers and tax authorities.