BRIEFLY NOTED: The IRS is under fire from taxpayers who charge that it is violating a moratorium by cracking down on a tax planning technique
BRIEFLY NOTED: The IRS is under fire from taxpayers who charge that it is violating a moratorium by cracking down on a tax planning technique that some US companies used to defer US taxes on gain from the sale of foreign projects between January 1997 and November 1999. The companies sold shares in foreign subsidiaries. However, they made elections just before the sales to treat the foreign subsidiaries as “disregarded” for US tax purposes. This had the effect of letting them defer US taxes on gain by retaining the sales proceeds in an offshore subsidiary. US companies charge that retroactive application of the new policy violates a promise by the Treasury not to enforce new Treasury rules on “hybrid branches” — entities that are treated as real in a foreign country but are disregarded for US tax purposes — before 2006 at the earliest . . . . An Arizona congressman has introduced a bill to make it easier for Indian tribes to issue tax-exempt bonds to finance projects on Indian reservations. Although tribes have bond authority currently, restrictions in the US tax code make it nearly impossible to use such bonds to finance a power or other infrastructure project.