Madison Square Garden officially announces its intent to seek a tax-free spinoff of its sports and entertainment businesses; business groups want to get their members some repatriation tax refund freedom; and the top accounting lobby asks the IRS to revise its proposed partnership audit rules.
Madison Square Garden Spinoff
Madison Square Garden is pursuing a tax-free spinoff after announcing in June that it was exploring the possibility of separating its sports and entertainment businesses.
The announcement came on the heels of two pieces of Internal Revenue Service guidance on spinoffs—a revenue procedure on private letter rulings and a statement about active trade and business requirements—that tax-profession sources said signaled that the administration has taken a friendly stance toward such transactions.
Madison Square Garden “has made important progress towards the potential spin-off of its sports business by filing a confidential initial Form 10 Registration Statement” with the Securities and Exchange Commission, the entertainment company said in an Oct. 4 news release.
The company said the transaction is to be completed in the first half of 2019 and “would be structured as a tax-free spin-off to all MSG shareholders.”
The deal is unusual in that CEO James Dolan will retain control of both the company he currently presides over and the one it intends to spin off, New York-based tax consultant Robert Willens said in an email to Bloomberg Tax. In these cases, an executive usually “has to choose which company he or she would like to work for” and can’t serve both corporations, he said.
Chamber: Change Repatriation Rules
The IRS should give multinationals flexibility with how they use overpayments of their repatriation tax liabilities, the U.S. Chamber of Commerce and 29 other business lobbying groups wrote in an Oct. 9 letter to Commissioner Charles Rettig.
The agency denied companies refunds on overpayments of their repatriation taxes this year in an Aug. 2 memorandum. Those overpayments also can’t be put toward tax bills not related to repatriation, the memo said. The 2017 tax overhaul amended tax code Section 965 to create a one-time 15.5 percent tax on accumulated overseas cash and cash equivalents and an 8 percent tax on less liquid assets accumulated abroad.
The Chamber—along with the Business Roundtable, Financial Executives International, the S Corporation Association, and the National Association of Manufacturers, among others—requested that the IRS reverse that position and “allow taxpayers with deferred Section 965 tax liabilities to choose how their tax overpayments are applied.”
“Taxpayers often overpay their tax liabilities, either through excessive estimated tax payments or through amendments to earlier returns,” the letter said. “The policy IRS articulated regarding Section 965 liabilities would establish a new penalty for taxpayers who overpay their taxes. It is contrary to Congressional intent and it is contrary to a plain reading of the law.”
Clarify Audit Rules: AICPA
The American Institute of CPAs asked the IRS at an Oct. 9 hearing to clarify certain administrative aspects in proposed rules that make it easier for the IRS to audit large partnerships.
The proposed rules (REG-136118-15) allow partnerships to designate a single representative to communicate with the IRS in the case of any future audits, but certain provisions, such as how the distributive shares of partners’ income are allocated, are unclear, the AICPA said in an Oct. 9 comment letter to the IRS.
The letter addressed 12 issues, most detailing how additional compliance requirements could inadvertently penalize taxpayers.
(Adds brief on U.S. Chamber of Commerce letter.)
To contact the editor responsible for this story: Meg Shreve at email@example.com
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