A Guide to the New Foreign Tax Credit Rules and Other Revenue Raisers

Worldwide Tax Daily
August 19, 2010

Douglas S. Stransky was quoted in "A Guide to the New Foreign Tax Credit Rules and Other Revenue Raisers" which appeared in the August 19, 2010 edition of Worldwide Tax Daily. This article provides an analysis of the international tax provisions signed into law on August 10, 2010 in an unnamed education jobs and state fiscal relief bill (H.R. 1586, P.L. 111-226). These provisions, intended to be revenue offsets, represent significant changes to certain long-standing U.S. international tax rules.

Mr. Stransky commented about H.R. 1586’s technical correction to Internal Revenue Code section 6501(c)(8). Mr. Stransky noted "that the technical correction is helpful but said taxpayers who have reporting deficiencies will have to evaluate whether they have the ability to establish that those deficiencies were due to reasonable cause and not willful neglect."

Mr. Stransky also said that "in light of this new provision, taxpayers should immediately assess their cross-border transactions to ensure that they have filed all required information reporting forms relating to those transactions. Taxpayers who discover deficiencies in their information reporting and who submit delinquent or amended filings must be sure that those filings contain well-documented reasonable cause statements, requesting relief under section 6501(c)(8) as well as the waiver of any other penalties that might apply."

"From a financial statement perspective, it is unclear whether the auditor will require a reserve for any deficient information reporting in light of the technical correction. This is because the taxpayer is requesting reasonable cause relief from the IRS. Since the IRS does not generally advise taxpayers whether such relief has been granted in the case of delinquent returns, a taxpayer may not have any certainty from a financial statement perspective until the expiration of the statute of limitations. So, auditors may still require a reserve."