Thursday, October 9, 2014

Dawn of the Delta: Taming International Derivatives Tax Abuse

I recently contributed to the Columbia Tax Journal's Tax Matters Series, on Congress' attempt to constrain a particular form of international tax avoidance. The constraint in question is a fairly technical provision found in 871(m), which was enacted as part of the 2010 HIRE Act (also the source of the Foreign Account Tax Compliance Act). You can find my overview at the link above, where I explain what section 871(m) was intended to achieve (it is an anti-abuse rule to stop people avoiding dividend withholding taxes) and how Treasury sought to achieve it with a test (called the delta test), and observe that this test has prompted criticism for being too broad, capturing more transactions than intended. I asked the practitioners to address the mischief of the over-breadth and what could be done to overcome this but still achieve the legislative aims. The practitioners responded as follows:

Section 871(M) and Delta: When Should a Dividend Equivalent be Treated like a Dividend?
By Mike Farber

Taxation Without Authorization: The Proposed “Dividend Equivalent” Withholding Regulations Under Section 871(m)
By Linda Z. Swartz, Shlomo Boehm, and Jason Schwartz

The Most Recent Proposed Regulations Under Section 871(M): The Perfect is the Enemy of the Good
By Andrew Walker Read DOC or PDF


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