Tax Conference Program

Conference Location

University of Chicago Gleacher Center
450 North Cityfront Plaza Drive, Chicago, IL 60611

Dinner Date & Location

Friday, November 8, 6:30 p.m.

Mid-America Club
200 East Randolph Drive
Chicago, IL 60601

Schedule

  • Friday, November 8, 2019
    • Registration & Continental Breakfast
      • Room 100 Foyer
    • Welcome & Introductory Remarks
    • Session 1. Do Tax Treaties Matter in a Post-BEPS World?
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      • Historically, tax treaties have served as the primary mechanism by which countries – on a bilateral basis – have allocated taxing rights in a manner that is designed to reduce tax barriers to cross-border trade and investment.  In particular, tax treaties, through their PE and business profits provisions, aimed to resolve conflicting claims to taxation of business income, while other provisions reduced gross source-based withholding taxation in favor of (at least theoretical) residence-based taxation.

        While there has always been some skepticism among developing countries regarding tax treaties, more recently the role of treaties in the international tax system has been heavily criticized by even developed countries, as treaties have been viewed as facilitating double non-taxation.  Many countries and international bodies have shifted their focus to increasing source- and market-based taxation.

        This panel will explore these recent trends, with a focus on the OECD/G20 inclusive framework and the potential challenges it poses to the treaty system.  Specific options being considered that would increase source- and market-based taxation will be evaluated in terms of their compatibility with the fundamental underpinnings of the treaty system.  Attention will also be paid to needed changes to treaty dispute resolution mechanisms. Finally, the panel will consider whether the United States' traditional tax treaty policies can and should survive these economic and political changes.

        Moderator: Josh Odintz, Baker McKenzie LLP

        Lead Presenter: Moshe Spinowitz, Skadden, Arps, Slate, Meagher & Flom LLP

        Panelists: Patricia Brown, University of Miami, David Rosenbloom, Caplin & Drysdale

    • Break
      • -
      • Room 100 Foyer
    • Session 2. Corporate Spin-Offs: International is the Harder Part
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      • Rachel D. Kleinberg
        Deborah L. Paul

        A corporate separation where Distributing Company spins off SpinCo conjures up thoughts and issues such as the active trade or business test, a five-year business history, or potential pre- or post-spin acquisition issues, any of which could make or break the transaction.  But the international issues before, during, and after a spin have become much more prevalent as the typical spin transaction involves splitting up a global group.

        The Sub C experts face intricate issues under sections 355, 361, etc., but benefit from reasonably well settled law and a long history of dialog between the IRS and the advisor community, including a well-worn ruling process.  The typical Sub C issues are modest in comparison to the issues faced in the international tax context, as cross-border asset and stock transfers are penned into the PowerPoint deck.

        Even before Tax Reform, there was a gap between the big issues and clear guidance in the International space, with that gap only having grown as a result of the TCJA.  For example, section 965 and ancillary consequences to $3 or $4 trillion of offshore earnings being taxed in the U.S. and becoming PTI and tax basis changed a number of dynamics.

        While the issues are numerous, and cover multiple international provisions such as sections 367 (which by the way is part of Sub C, remember?), 7874, 959, 961, 951 and 951A, the framework typically falls in two general categories:

        (i)         The international tax consequences and attributes relevant to splitting up a global group through asset and share transfers for purposes of what might otherwise be a ‘plain vanilla’ domestic spin-off.

        (ii)        A cross-border transaction following (or perhaps before) a domestic or foreign spin.

        Typically, the step whereby Distributing Company spins out SpinCo is the last step in a 100-page deck, the first 99 pages of which involve moving the boxes and triangles (and other geometric shapes) around.  This can involve merging, demerging, consolidating, selling assets out of, transferring the stock of, or otherwise restructuring controlled foreign corporations (CFCs) in the group in order to separate the business lines and package SpinCo for purposes of the overall transaction.

        Alternatively, say that U.S. Distributing Company spins a U.S. SpinCo, which then is acquired by a foreign company.  The section 355(e) rules governing whether a post-spin acquisition taints the spin-off, but the section 367(a) regulations under Helen of Troy governing taxation of SpinCo shareholders are almost perfectly reverse synchronized with regard to their requirements.  Can failure of one affect the other?  What happens when gain is recognized by the SpinCo shareholders under Helen of Troy?  How should the inversion rules work in measuring things like the non-ordinary course distributions of U.S. SpinCo before the transaction, along with the predecessor and successor rules?  What about the rule in the section 7874 regulations which reverses the order of a spin for NOCD purposes?

        What if Distributing Company is foreign and SpinCo is foreign, while the post‑merger counterparty is U.S.?  If foreign SpinCo picks up a U.S. sub along the way, what do the inversion rules say and what should they say about measuring ownership in the section 7874 fraction?

        We could go on …

        It is time to explore these issues in the UC forum, both to identify them (a challenge in and of itself) and discuss how they should be analyzed and how Post-TCJA guidance might impact all this.  And, by the way, to prove what should already be apparent: “International is the Harder Part”.

        Moderator: Nick DeNovio, Latham & Watkins LLP

        Lead Presenter: Rachel Kleinberg, Davis Polk & Wardwell LLP

        Panelists: Debbie Paul, Wachtell, Lipton, Rosen & Katz, Gretchen Sierra, Deloitte Tax LLP

    • Lunch. Join fellow conference attendees for an informal buffet lunch
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      • 621 Executive Dining Room
    • Session 3. Attributes of Tax Reform: Shareholder and Corporate Level Determinations Reconsidered
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      • Two attributes -- stock basis and earnings and profits -- have long been staples of the federal income taxation of shareholders of both domestic and foreign corporations.  The issues raised with respect to these attributes include when and how stock basis is or should be created and recovered and what, if any, interconnection exists (or should exist) between basis and earnings and profits.  These issues, in turn, are complicated by the fact that sometimes attributes are determined by looking at the corporation as a whole, while in other cases they are determined on a shareholder by shareholder, class of stock by class of stock or share by share basis.

        Tax reform has both expanded the scope of the inquiry and complicated the analysis by mandating the sharing of certain attributes (e.g., e&p deficits and e&p, tested income and tested loss) across foreign corporations while simultaneously failing to provide clear (or, in some cases, any) guidance with respect to the correlative stock basis and other consequences of this sharing.  As a result current law contains many discontinuities that are only beginning to be understood and explored as regulations implementing tax reform are promulgated and advisors and taxpayers alike have occasion to consider the interactions in the transactional context.

        This panel will explore structural issues presented (or at least heightened) by tax reform as regards various attributes, including:

        1. When and to what extent should earnings and profits continue to have relevance?
        2. When should earnings and profits be viewed as a corporate level attribute as a whole rather than a shareholder level attribute or share by share (or class by class) attribute?
        3. What should the connection be between current taxation of earnings and profits and basis at various levels between the entity earning the profits and the interest holder including the amount in income?
        4. When attributes are shared among separate legal entities, what adjustments are appropriate (and when should they be made) with respect to that attribute sharing, including as regards interest holders having direct or indirect interests in those entities.

        Moderator: Gordon Warnke, KPMG LLP

        Lead Presenters: Gordon Warnke, KPMG LLP, Karen Sowell, Ernst & Young LLP

        Panelists: Bill Alexander, Skadden, Arps, Slate, Meagher & Flom LLP, Elena Romanova, Latham & Watkins LLP

    • Break
      • -
      • Room 100 Foyer
    • Session 4. A Rose by Any Other Name Might Cost You More: Form, Substance and Business Transactions under Subchapter K
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      • Sara B. Zablotney

        The legislative history for Subchapter K indicates that Congress intended to give partners in partnerships a certain amount of flexibility as to how to allocate the tax burden with respect to partnership operations and transactions among themselves.  Indeed, there are several business transactions with respect to partnerships in which partners can arrive at very similar non-tax outcomes through the choice of different formal steps, with very different tax outcomes to individual partners.   However, there are other business transactions involving partnerships where, notwithstanding the availability of different non-tax legal forms, the tax substance is prescribed by the Code, regulations, or other guidance, which tax substance may have very little to do with the non-tax-law substance of the transaction.  This panel will compare and contrast these business transactions and discuss different theories regarding the reasons for such differing treatment.

        Moderator: Bahar Schippel, Snell & Wilmer

        Lead Presenter: Sara Zablotney, Kirkland & Ellis LLP

        Panelists: Kim Blanchard, Weil, Gotshal & Manges LLP, John Rooney, KPMG LLP

    • Reception and Dinner at Mid-America Club
      • 200 East Randolph Drive
      • Dinner Speaker:  Professor Michael Graetz, Columbia University

  • Saturday, November 9, 2019
    • Continental Breakfast
      • -
      • Room 100 Foyer
    • Session 5. Judicial Deference to TCJA Guidance
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      • Joseph B. Judkins

        Taxpayers have found themselves in great difficulty in determining positions to take on tax returns requiring application of the new laws enacted at the end of 2017.  The hastily drafted and yet sweeping changes to the international tax rules are fraught with numerous ambiguities, inaccuracies, and gaps.  And the immediate stakes were high and unavoidable, with the current taxation of massive amounts of pre-reform earnings of a U.S. multinational’s foreign subsidiaries under a bifurcated-rate transition tax.

        The Treasury and IRS have undertaken a herculean effort in issuing hundreds of pages of regulations.  The regulations provide helpful guidance on many issues.  They adopt certain measures, however, that may be inconsistent with well-supported statutory interpretations adopted by taxpayers, and in other situations the regulations appear to “correct” mistakes in the Code and fill in gaps that are not answered by the Code, sometimes without any clear authorization.

        Accordingly, some taxpayers may decide to take positions contrary to regulations, including in particular under sections 78, 245A, 951A, and 965.  The panel will discuss dispute-resolution options for these regulation-validity challenges and how judicial review might proceed—both in normal deficiency and refund litigation options and in potential pre-enforcement challenges.  In addition to arguments that taxpayers and the government might raise, the panel will consider the evolving judicial-deference framework, both with respect to the IRS's interpretation of statutes as well as to the IRS’s interpretation of its own regulations.

        Moderator: David Noren, McDermott Will & Emery LLP

        Lead Presenter: Jud Judkins, Baker McKenzie LLP

        Panelists: Kristin Hickman, University of Minnesota, Bill Wilkins, PricewaterhouseCoopers LLP

    • Break
      • -
      • Room 100 Foyer
    • Session 6. GPUCs in A Post-Tax Reform World: The Proposed Taxation of (Some) Preferred Returns as Interest
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      • Andrew W. Needham

        Description:  The current proposed regulations under Section 163(j) and final regulations under Section 199A treat guaranteed payments for the use of capital, or “GPUCs”, as interest on the basis that they are similar to interest. This panel will discuss whether the current law distinctions between GPUCs governed by Section 707(c) and other types of preferred returns from a partnership are sufficiently well-developed to achieve this objective or will instead require substantial regulatory guidance or even legislation if the purpose of these proposals is to capture preferred returns from a partnership in the nature of interest.

        Moderator: David Schnabel, Davis Polk & Wardwell LLP

        Lead Presenter: Andy Needham, Cravath, Swaine & Moore LLP

        Panelists: Ben Applestein, Deloitte Tax LLP