Corporate tax, finance and accounting professionals need to keep a sharp eye on shifts in the maze of tax rules and regulations, which can be challenging. The authors of CCH Expert Treatise: Federal Taxation of Corporations and Shareholders, Andrew Eisenberg and Daniel Schneider, track federal taxation trends. They have narrowed the issues down to the top five to watch right now:
1. Congressional conversation about corporate tax rates. The push to make U.S. corporations more competitive worldwide will become more heated as the 2012 elections approach and likely last beyond that time. Eisenberg and Schneider expect the discussion to focus on lowering corporate taxes to make U.S. rates more competitive with those in other countries. The authors, however, can’t predict the outcome.
2. Unless Congress extends it, the lower tax rate on dividends received by individuals will expire at the end of 2012. The uncertainty around whether the lower rates will be extended complicates corporate dividend payment planning. In addition, higher dividend rates will affect the use of redemption transactions to effectuate corporate distributions, which could in turn make stockholders’ ability to pass on family control of company stock more expensive.
3. Stock and asset acquisitions can now qualify more easily as reorganizations under the Internal Revenue Code.This is because the IRS has refinalized the signing date rule in continuity of interest regulations. This rule allows taxpayers to take the position that continuity of interest is based on the signing date value of the issuing corporation stock received in the transaction, rather than the closing date value of such stock.
4. The rule for related party reorganizations, the “D” reorganization, has been updated. It now eliminates the ability of taxpayers to shift tax basis in corporate intergroup restructuring transactions. Taxpayers can no longer shift tax basis among blocks of stock to increase loss and/or reduce gain.
5. The IRS has released guidance on how it will administer penalties under the economic substance doctrine codified in 2010. Under the guidance, agents and counsel must now obtain approval from the national IRS office before imposing penalties related to the economic substance doctrine.
Stay on top of these kinds of key changes with CCH Expert Treatise: Federal Taxation of Corporations and Shareholders.