Jim Fuller, Adam Halpern
During the last four months of the Obama administration, the Treasury Department and IRS promulgated several major regulations affecting international transactions and operations, write Adam Halpern and James Fuller of Fenwick & West. To a great extent, these regulations reflect the administration’s legislative proposals – proposals that Congress would not enact during Barack Obama’s eight-year tenure.
Under the Trump administration, the Treasury Department has undertaken a review of all tax regulations issued since January 1 2016. Two of the Obama administration regulations have since been delayed in their implementation, as further described below. More significant changes likely will be forthcoming, including, possibly, outright withdrawal of some of these rules.
This has given rise to a period of some uncertainty. These regulations contain important, and highly controversial, new rules.
Treasury and the IRS finalised, without any substantive changes, the § 367(a) and (d) regulations proposed in September 2015. The final regulations eliminate the favourable treatment for foreign goodwill and going concern value that had been in effect under the prior regulations for over 30 years. Intangible property, including foreign goodwill and going concern value, no longer qualifies for the active trade or business exception to § 367(a). The specific § 367(d) exception for foreign goodwill and going concern value has been eliminated. The final regulations apply retroactively to outbound transfers occurring on or after September 14 2015, the date the proposed rules were issued.
In adopting these new rules, Treasury and the IRS ignored the very clear legislative history, the relevant statutory language, numerous written comments, and testimony at the hearings. In the preamble to the final regulations, Treasury and the IRS discussed and rejected virtually every taxpayer comment or suggestion regarding the proposed regulations.
Temporary regulations issued under § 721(c) address certain outbound transfers to partnerships. The regulations implement the rules announced in Notice 2015-54, with certain changes. They are intended to ensure that, when a US person contributes certain property to a partnership with related foreign partners, the income or gain attributable to the appreciation in the property at the time of the contribution will be taken into account by the US transferor, either immediately or over time.
Treasury and the IRS also finalised the § 385 regulations and included certain of the § 385 rules in temporary regulations. The final regulations "reserve" on their application to foreign debt issuers (i.e., their application to outbound taxpayers). Thus, they do not apply when a US parent company makes a loan to its foreign subsidiary (controlled foreign company; CFC), or when one CFC makes a loan to another CFC. It was this area of the proposed rules that caused the most problems from an international tax perspective. We (Adam) testified on this very point at the IRS hearings. Foreign tax credits could have been lost and other serious collateral damage would have resulted.
The rules thus apply primarily to US subsidiaries in foreign-parented multinational groups (i.e. inbound taxpayers). Under the final regulations, the documentation requirements of Treas. Reg. § 1.385-2 were slated to have a delayed effective date, applying to debt instruments issued (or treated as issued) on or after Januaruy 1 2018. Recently issued Notice 2017-36 further delayed the effective date to January 1 2019.
The final regulations largely retain the so-called 'blacklisted transactions' rules of Treas. Reg. § 1.385-3, including the per se funding rule causing a debt issued within 3 years of a distribution, stock acquisition, or certain reorganisations to be treated automatically as equity. The retroactive effective date of April 5 2016 is also retained. A number of changes were made to the blacklist rules in response to comments. These changes offer some relief but also add substantial complexity to the rules.
Treasury and the IRS finalised the § 956 regulations relating to partnerships, Treas. Reg. § 1.956-4. Under one rule, a CFC partner is treated for § 956 purposes as holding its attributable share of partnership property, determined in accordance with the partner's liquidation-value percentage with respect to the partnership. Thus, for example, if the partnership makes a loan to a related US person, a CFC partner is treated as holding a percentage of the loan, resulting in a § 956 investment.
Another rule generally treats an obligation of a foreign partnership as an obligation of its partners for the purposes of § 956. This is perhaps the most important part of the new § 956 partnership regulations. If a CFC lends to a foreign partnership in which the CFC's US parent company is a partner, the CFC will be treated as holding an obligation of a US person, again resulting in a § 956 investment. If the partnership distributes the borrowed funds to the US parent company, the amount of the § 956 investment can be increased.
Treasury and the IRS finalised the 2006 proposed § 987 regulations, generally adopting the proposed regulations' substantive approach, with changes at the margins. The final rules are exceedingly complex and are likely to be challenged as they clearly contradict the statutory mandate in certain respects.
Treas. Reg. § 1.987-3 generally requires a branch to compute its taxable income by translating each item of income, gain, loss, and deduction from its currency to the owner's currency. Certain items are translated at current exchange rates, others at historic rates. This scheme runs directly counter to the statute, which provides for calculation of branch income in the branch's currency, and a simple translation into the owner's currency at a single rate.
Treas. Reg. §§ 1.987-4 and 1.987-5 apply when a branch makes a remittance back to the home office. These regulations apply the foreign exchange exposure pool (FEEP method) to determine § 987 gain or loss in such a case, taking into account currency fluctuations in financial assets (but not hard assets or stock in subsidiaries) since income was earned by, or assets were contributed to, the branch. When a branch experiences a "termination," it is deemed to have made a remittance of all of its assets and liabilities to the home office, resulting in full recognition of the currency gain or loss inherent in the FEEP.
The final regulations become effective in 2018. There are important transition rules for companies that need to switch to the final rules from their current method of applying § 987.
Treasury and the IRS finalised the 2015 temporary and proposed § 871(m) regulations addressing certain dividend equivalent transactions, for example, a notional principal contract linked to dividends and share price of a particular US corporate stock. Consistent with Notice 2016-76, the final regulations were to apply to contracts with a delta of one (i.e., 100% of the contract value is determined by reference to the underlying securities) beginning in 2017 and to other applicable contracts beginning in 2018.
In Notice 2017-42, Treasury and the IRS delayed the implementation date for non-delta-one contracts to January 1 2019. The lenient enforcement standards of Notice 2016-76 for taxpayers making a good faith effort to comply were also extended. They will apply in 2017 and 2018 for delta-one contracts, and in 2019 for non-delta-one contracts.
Expectations for fundamental US tax reform were high after the 2016 presidential election. It was anticipated that a Republican president and a Republican-controlled Congress could work together to enact meaningful reforms to the outdated US international tax system.
As of early September 2017, prospects for fundamental reform have dwindled. House Republican leaders spent the first half of the year promoting their "Blueprint" which included a border adjustability tax (BAT) – similar to a VAT on imported goods, services and intangibles. Importers organised strong opposition to the BAT, and House leaders finally relented, but only after substantial time was lost.
Recent tax proposals from the Trump Administration and congressional leaders seem to be focused on a temporary reduction in corporate and individual rates. An optional repatriation holiday has also been mentioned, along the lines of § 965 from the 2004 Tax Act.
In a development that surprised most taxpayers and tax advisers, the IRS appealed the Tax Court's decision in Medtronic v. Commissioner, T.C. Memo No. 2016-112 (2016), a major transfer pricing case in which Medtronic won a resounding victory.
The IRS contends that the Tax Court erred as a matter of law in adopting Medtronic's transfer pricing method. The Service also contends that the case should be remanded so that certain adjustments may be made to the transfer price adopted by the Tax Court.
The Service asserts that the Tax Court's transfer pricing analysis was wrong as a matter of law because it used a royalty rate as a comparable price for Medtronic's inter-company licenses without first applying the requirements for evaluating whether the relevant agreement qualified as a comparable uncontrolled transaction (CUT).
The government seems to have an uphill battle in pursuing this appeal. It likely will have to establish that the Tax Court made a "clear error" regarding its findings of fact despite its "errors of law" assertions. This is a hard standard to satisfy. The IRS brief articulates the IRS's disagreement with the Tax Court's opinion, but it doesn't seem to establish clear error.
The IRS keeps fighting in the courts regarding transfer pricing issues, but doesn't seem to listen to the pretty clear opinions of these courts.
The Tax Court ruled in favour of Eaton Corp., agreeing with the company that the IRS abused its discretion by cancelling two advance pricing agreements that Eaton and the IRS had entered into to establish a transfer pricing method for covered transactions between Eaton and its subsidiaries. Eaton Corp. v. Commissioner, T.C. Memo. 2017-147. Eaton appears to be the only taxpayer whose advance pricing agreements (APAs) were cancelled retroactively. The IRS then issued a deficiency notice to Eaton based on an alternative transfer pricing methodology.
The IRS argued that it cancelled the APAs for two reasons: (1) misrepresentations, mistakes as to a material fact, and failures to state a material fact during the APA negotiations; and (2) implementation and compliance. The Tax Court disagreed with this IRS argument, and held that only a mistake as to a material fact or a failure to state a material fact is a ground for cancellation, based on Rev. Proc. 96-53, § 11.06(1), and Rev. Proc. 2004- 40, § 10.06(1). Under Rev. Proc. 96-53, 1996-2 C.B. 375, in order to cancel an APA, the material fact must be one that, if known to the IRS, could reasonably result in a significantly different APA (or no APA at all).
The Tax Court held that the cancellation of an APA is a rare occurrence and should be done only when there are valid reasons that are consistent with the revenue procedures. A misrepresentation has to be false or misleading, usually with the intent to deceive, and must relate to the terms of the APA. The Tax Court stated that a different viewpoint is not the same as a misrepresentation and is not grounds for terminating an APA. The Court said an APA is a binding agreement and should only be cancelled according to the terms of the revenue procedures and should not be cancelled because of a desire to change the underlying methodology of a transfer pricing method.
The Tax Court held that based on all the evidence presented, no additional material facts, mistakes of material facts, or misrepresentations existed that would have resulted in a significantly different APA or no APA at all. The IRS had enough material to decide not to agree to the APAs or to reject Eaton's proposed transfer pricing method and suggest another APA at the time the APAs were negotiated.
While the issue was framed differently, the Eaton case bears conceptual similarities to Medtronic (above) and Eli Lilly v. Commissioner, 856 F.3rd 855 (7th Cir. 1988), in that each of these three cases involved § 482, a prior transfer pricing agreement between the taxpayer and the IRS, and the IRS's subsequent decision not to follow the agreement and to assert large tax deficiencies. All three cases were lost by the IRS. In all three, the courts' transfer pricing results were effectively those to which the IRS and the taxpayer had previously agreed, with some minor changes.
The Tax Court decision in Amazon.com Inc. v. Commissioner, 148 T.C. No. 8 (2017), was yet another transfer pricing taxpayer victory. The court rejected the IRS's attempt to relitigate the same cost-sharing transfer pricing issues the IRS lost on in Veritas Software Corp. v. Commissioner, 133 T.C. 297 (2009).
The Tax Court stated that one does not need a Ph.D. in economics to appreciate the essential similarity between the discounted cash flow (DCF) methodology used by the IRS's expert in Veritas, and the DCF methodology used by the IRS's expert in Amazon. Both assumed that the pre-existing intangibles transferred had a perpetual useful life; both determined the buy-in payment by valuing into perpetuity the cash flows supposedly attributable to these pre-existing intangibles; and both in effect treated the transfer of pre-existing intangibles as economically equivalent to the sale of an entire business.
The Tax Court rejected the Service's aggregation argument in Veritas and it rejected it in Amazon as well. The Tax Court stated the type of aggregation proposed does not yield a reasonable means, much less the most reliable means, of determining an arm's-length buy-in payment for at least two reasons. It improperly aggregates pre-existing intangibles (which are subject to the buy-in payment) and subsequently developed intangibles (which are not). It improperly aggregates compensable intangibles (such as software programs and trademarks) and residual business assets (such as workforce in place and growth options) that do not constitute pre-existing intangible property under the cost sharing regulations in effect during 2005-2006.
The Service urged the Tax Court to overrule Veritas if it could not be distinguished on the facts. The Tax Court stated: "We decline his invitation to overrule that Opinion".
Analog Devices won an important § 482 transfer pricing case involving Rev. Proc. 99-32, 1999-2 C.B. 296, which authorises procedures to repatriate cash following, and equal to the amount of, a transfer pricing adjustment. The IRS argued unsuccessfully that the deemed accounts receivable under the revenue procedure constituted real and retroactive accounts receivable and payable that could create serious negative tax consequences under other tax provisions, § 965 in the case of Analog Devices.
A previous case, BMC Software v. Commissioner, 141 T.C. 224 (2013) (BMC), was decided against the taxpayer on this issue, but reversed on appeal by the Fifth Circuit, 780 F.3d 669 (2015). An appeal in Analog Devices would lie to the First Circuit, so BMC's appellate victory was not controlling.
In a 'reviewed by the Court' decision in Analog Devices, the Tax Court agreed to follow the Fifth Circuit, thus overruling its BMC decision. Accordingly, the Rev. Proc. 99-32 deemed accounts receivable is just that, artificial and only a procedural mechanism to repatriate the relevant cash.
Grecian Magnesite Mining v. Commissioner, 149 T.C. No. 3 (2017), addressed Grecian Magnesite Mining (GMM), a Greek corporation that had an interest in Premier Chemicals (Partnership), a US limited liability company treated as a partnership for tax purposes. GMM's partnership interest was later redeemed. Part of the gain was subject to tax under FIRPTA (real estate gain) rules, and taxed accordingly. The issue was how the rest of the gain from the redemption of GMM's partnership interest should be taxed.
Under Rev. Rul. 91-32 the gain recognised by GMM would be treated as effectively connected with a US trade or business to the extent the partnership was so engaged. The Tax Court rejected the revenue ruling as not a proper interpretation of the IRS's own regulations, and stated that it lacked the power to persuade the Court. Further, the Court stated that the revenue ruling's treatment of the relevant partnership statutory provisions was cursory in the extreme, and did not even cite § 731, the tax code rule governing "gain or loss from the sale or exchange of a partnership interest".
This holding was not unexpected. Many practitioners had long viewed the revenue ruling as suspect and of questionable validity. It simply ignored the Code's statutory language.
The Court found that the balance of the gain was treated as gain from the sale or exchange of a capital asset based on the plain language of the statute. The Court stated that Congress intended § 741, if applicable, to provide capital gain or loss treatment on the sale or exchange of a partnership interest by a partner. Indeed, stated the Court, congressional use of the phrase "shall be considered as" in § 741 is unambiguous and mandatory on its face.
The IRS argued that the redemption should be subject to US tax anyway. The disputed gain was foreign source income. The Service argued that the gain was taxable under § 865(e)(2)(A) which provides that: "If a nonresident maintains an office or other fixed place of business in the United States, income from any sale of personal property (including inventory property) attributable to such office or fixed place of business shall be sourced in the United States".
The Service argued that the disputed gain was taxable under this exception if the gain was attributed to the Partnership's US office.
The Service's argument had two strands: first, that the Partnership's office was material to the deemed sale of GMM's portion of the Partnership assets; and second, that the Partnership's office was material to the increased value of that interest that GMM realised in the redemption. The Court stated that the material factor test was not satisfied because the Partnership's actions to increase its overall value were not "an essential economic element in the realisation of the income". Increasing the value of the Partnership's business as a going concern, without a subsequent sale, would not have resulted in the realisation of gain by GMM.
Even if the Court were to decide that the Partnership's office was a material factor in the production of the disputed gain (which it did not), the Court stated that it would also need to find that the disputed gain was realised in the ordinary course of the Partnership's business conducted through its office in order for the gain to be attributable to that office, and thereby to be US source income.
The redemption of GMM's interest in the Partnership was a one-time, extraordinary event and therefore was not undertaken in the ordinary course of the Partnership's business. The Court stated that the IRS conflates the ongoing income-producing activities of the Partnership (magnesite production and sale), which certainly occurred in the ordinary course, and the redemption of GMM's partnership interest, which was an extraordinary event. The Court stated that the Service would effectively eliminate the "ordinary course" test and would allow the "material factor" test to stand for both tests.
Much anticipation surrounds the Trump administration's promise to push through tax reforms. Throughout the presidential campaign, Donald Trump pledged to slash corporate income rate, repatriate foreign earnings and increase the standards of deductions. The Republican Party is well-positioned in the grand scheme of legislative change with a majority in both House and Senate.
Douglas Stransky, head of tax at Sullivan & Worcester, said that passing through comprehensive tax reform will likely prove challenging. "If we do not see a bill in the next few weeks, it is very unlikely that we would see tax reform legislation this year because of political pressure and an unforgiving legislative timetable," said Stransky.
Despite the uncertainty that surrounds reform, some practitioners have affirmed that the US tax system will likely be transposed to a territorial tax regime. "Such a system would put the US on parity with most of the rest of the world with regard to how profits earned overseas are taxed," said Stransky.
However, Rocco Femia, tax member at Miller & Chevalier Chartered, stated: "A territorial system could exacerbate the pressure on US transfer pricing rules, as profits shifted outside of the US would escape US tax. This effect could be mitigated by anti-base erosion rules, although the design of such rules should preserve the competitive benefits of territoriality."
While talk of tax reform on a grand scale have dominated the headlines, tax inversion-curbing legislation introduced by the previous administration is also at risk of being reversed.
On July 28 2017, the IRS issued Notice 2017-38, which placed earnings stripping regulation under renewed review and delayed it from coming into effect by 12 months, until January 2019.
The initial rules, legislated by former president Barack Obama, reclassified certain loans as equity under Section 385 of the US tax code and aimed at closing international tax loopholes by asking companies to submit information on related party debt to the tax authority.
Stransky argued that the regulations in this area are complex and impose significant documentation and analysis requirements on US corporations for ordinary inter-company transactions.
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Fenwick & West LLP has represented over 100 of the Fortune 500 largest corporations in tax planning, transfer pricing, acquisitions, joint ventures and tax dispute resolution, including litigation. Well over 50 are Fortune 100 companies.
Our primary focus is in the international tax area. International Tax Review named us in 2017 as having one of the world's leading tax planning and tax transactional practices.
Dispute resolution also is an important part of our tax practice. We have favorably resolved disputes in over 150 IRS appeals proceedings. We also have been counsel to corporate taxpayers in over 70 federal tax court cases. Many of these cases and appeals proceedings involve or have involved transfer pricing.
Eight Fenwick tax partners appear in International Tax Review's Tax Controversy Leaders (2017), and five have appeared in Euromoney's World's Leading Transfer Pricing Advisors.
Euromoney Legal Media Group named Jim Fuller, one of our tax partners, as one of the top 25 tax lawyers in the world. Ten Fenwick partners, including our tax practice group leader, Adam Halpern, have appeared in Euromoney's World's Leading Tax Advisors. Three appear in Euromoney's Top 30 US Tax Advisors (2017).
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Akin Gump Strauss Hauer & Feld assists clients in M&A transactions, tax planning, state and local taxation, international tax and treaties, structured investments and representation in tax examinations by the IRS, among other things.
Daniel Micciche is a partner in the firm's Dallas office. Micciche is extensively experienced in tax and business planning for acquisitions, divestitures and specialised capital structure planning. In addition, he has represented clients in federal and state matters relating to tax controversy. Timothy Tehan is also a partner in the Dallas office. His tax practice centres on estate planning, trusts, tax controversy, insurance, real estate, and tax planning.
The professionals at Alvarez & Marsal, Taxand USA provide services in international, federal, state and local taxation, transfer pricing, tax controversy and tax restructuring. Brian Cumberland is the managing director of the firm and also heads the tax practice in Dallas.
Cumberland provides tax advisory services to corporate clients on executive compensation, including issues related to stock options, restricted stock, non-qualified retirement plans, deferred compensation and global compensation strategies.
Andrews Kurth has offices in both Dallas and Houston. Its practitioners provide counsel and tax advice to a wide range of public and private clients. The firm is extensively experienced across various sectors, including energy and real estate. Its Houston office is the firm's largest with around 220 practitioners.
Will Becker and Thomas Popplewell are partners in the firm's Dallas office. Becker's expertise includes federal income tax matters, franchise tax, sales and use tax with a focus on real estate, asset securitisation, corporate M&A, corporate spin-offs and split-offs. Popplewell's specialisms are real estate income tax matters, the structuring and implementation of US and international asset securitisation, and M&A.
The professionals at Baker Botts have a wealth of experience addressing the varying tax needs of clients.
Richard Husseini is the chair of the firm's tax group and the Section chair of its income tax practice.
The firm provides tax advisory services in relation to investments, M&A, restructurings and financings, including asset leasing. It has also advises clients on state and local tax matters, including income tax, franchise tax, property tax and sales tax.
The firm has strong expertise in industries such as global energy, including upstream oil and gas; pipelines; liquefied natural gas; power and petrochemical projects; oilfield service; alternative energy; technology; real estate; telecommunications; aviation and mining.
A key member of the firm is Paige Ben-Yaacov, who is the deputy chair of tax in the Houston office. Ben-Yaacov's specialism includes estate planning and estate administration.
Robert Albaral and Susan Stone are partners at Baker McKenzie. The firm offers services in multi-jurisdictional tax planning, post-acquisition restructuring, transfer pricing and supply chain restructuring projects. It also offers a full range of state and local tax services.
Stone is experienced in international tax and business transactions and has advised clients on inbound and outbound transactions as well as in offshore inversion.
Albaral is chair of the North American tax controversy sub-practice group and a member of the Baker McKenzie's global tax disputes resolution steering committee. His practice focuses on administrative audit, appeals and litigation.
The professionals at Bracewell advise clients in federal, state and international income tax matters. Greg Bopp is the managing partner of the firm's Houston office. He has extensive experience in tax structuring, joint ventures, M&A and capital markets transactions for midstream and upstream companies.
Chamberlain, Hrdlicka, White, Williams & Aughtry has strong expertise in tax controversy, litigation and tax planning. Its professionals also offer services in criminal tax defence, employment tax and international tax.
Stewart Weintraub is the SALT (state and local tax) practice chair. Weintraub assists clients with planning and structuring transactions and has represented clients at all stages of audits, trials and appeal proceedings. George Connelly heads the firm's tax controversy practice where he specialises in IRS audits as well as civil and criminal tax litigation matters. Connelly is recognised as one of the leading federal tax litigators in the US.
Chamberlain, Hrdlicka, White, Williams & Aughtry's client list includes public companies, privately held businesses, partnerships, joint ventures, individuals, trusts, estates and tax-exempt organisations.
Deloitte offers solutions to its clients' varying tax needs. Its international tax subgroup helps companies address US outbound and inbound tax issues and helps reduce their global tax burdens. The firm's TP practice assists companies with tax compliance while its indirect tax team advises companies on a wide range of indirect taxes, including VAT/goods and services tax, sales and use tax, customs duties, excise duties, insurance premium tax and more.
John Womack is the US managing partner for international tax, transfer pricing and indirect tax. Womack specialises in restructuring US-based multinational corporations. The firm works with clients across numerous industries, including state governments, consumer products, travel, hospitality and leisure, life sciences and automotive.
Deloitte also offers a number of resources to help clients stay on top of tax issues, including 'Dbriefs' and tax newsletters.
EY is a global firm which offers services in tax planning, international and corporate tax, state and local tax, transactions, M&A, TP planning and compliance services. Jonathan Lindroos is the tax leader in the northeast and Scott Shell leads the southeast. Mark Mukhtar heads the Central region practice while Amy Ritchie leads the southeast. Beth Carr is the leader for the West.
Grant Thornton offers tax, audit and advisory services to clients from 58 offices. Its practitioners advise on international tax, federal, state and local tax, tax accounting and compliance.
The Dallas and Houston offices employ more than 20 tax professionals combined. David Meyer is the tax leader in Dallas and Michael D'Addio is the managing director for the state and local tax services. In its Houston office, Amanda Oakley heads the tax service practice while Susan Floyd-Toups and Amy Throm sit as managing directors for tax service.
Haynes and Boone represents small start-ups, large public companies, non-profit organisations, entrepreneurs and high-net-worth individuals. The firm offers services in tax controversies and local, state, national and international tax. The firm's tax offices in Houston and Dallas house 15 professionals, seven of whom are partners. Chris Wolfe is a senior counsel in the firm's Houston office. His key areas of practice are M&A, tax and businesses planning.
K&L Gates is a global firm highly experienced in international, federal, state and local tax matters. Its client list includes high-net-worth individuals, trusts and tax-exempt organisations.
The firm's Dallas office comprises four tax professionals, including partner Cindy Ohlenforst. Ohlenforst has a broad tax practice and has extensive experience in state and federal tax planning and controversy. Sam Megally is also a partner in the Dallas office. Megally's practice focuses on Texas and multi-state matters, with a focus on tax planning and controversies issues involving income tax, sales tax, franchise tax, and property tax.
KPMG is a global firm that provides services in federal taxes, indirect taxes, inbound investments, international tax, M&A and restructurings, state and local taxes, tax department performance, tax dispute resolution, trade and customs, transfer pricing and valuation.
Randy Sledge is the partner in charge of the tax department in Dallas. Sledge has been with the company for more than 15 years and has developed strong expertise in accounting, auditing, corporate tax and income tax.
Michael Terracina is the partner in charge of the Houston office. Terracina has led a wide range of projects in areas such as co-sourcing, post-merger integration, accounting method reviews, FAS 109-related projects and tax minimisation planning.
Locke Lord Edwards was created through a merger between Locke Lord and Edwards Wildman Palmer in January 2015. The firm has more than 1,000 practitioners worldwide who provide a wide range of tax planning and controversy services for a range of business entities and individual clients.
Mitch Tiras, who resides in Houston and Karl Fryzel, a resident in Boston, are co-chairs of the firm's tax practice. Tiras's practice centres on structuring and capitalisation of limited liability companies, partnerships and corporations. Fryzel's practice focuses on the tax aspects of venture capital and private equity financings, corporate and partnership restructurings, M&A, holding and disposing of real estate among other things.
Mayer Brown's Houston office comprises two partners. The firm offers services in tax audits, pursuing administrative appeals, litigating tax matters and general advisory in areas involving international tax and transfer pricing.
The firm's transactional subgroup provides tax advice to a broad group of clients, including financial institutions, multinational corporations and investment funds. The advice covers the taxation of domestic and cross-border issues at the national, state and local tax level.
This year the firm has assisted BHP Billiton in a tax dispute with the IRS relating to abandonment losses. It also assisted EOG Resources in a tax dispute relating to the alternative minimum tax preference for intangible drilling costs.
A key member in the firm is Shawn O'Brien, who is based in Houston.
McDermott Will & Emery has an interdisciplinary team with in-depth experience in transfer pricing planning, documentation and controversy matters.
Laura Gavioli, Mark Thomas and Todd Welty are partners in the firm's Dallas office. Gavioli is highly experienced in defending individuals and corporations in white-collar prosecutions, civil tax cases, IRS controversies and complex financial litigation. Thomas assists clients in all aspects of tax, including complex civil tax controversies and litigation, transfer pricing and tax planning. Welty is the chair of McDermott's tax controversy practice and is experienced in tax controversy and litigation.
Norton Rose Fulbright's tax practice has extensive experience in all facets of tax controversy, including audits, IRS appeals, summons enforcement, and competent authority relief. The firm has developed a strong Houston-based practice advising on competent authority matters, including the only US-Egyptian competent authority case pending for the past 25 years.
In October 2016, the firm represented the Albritton family estate in a $40.7 million tax refund case against the IRS concerning the valuation of art. The dispute focused on the alleged 'constructive distribution' of several valuable works. The case, contested by counsel Charles Hall and partners Jack Allender and Robert Morris was innovative due to how rare it is for the IRS to challenge the valuation of artwork during refund suits.
Allender served as the interim head of the tax practice, but Robert Morris was appointed as co-head once the dust settled on Norton Rose Fulbright's merger with Chadbourne & Parke, a firm with a strong presence in New York and Washington, DC.
Pre-merger, the firm comprised 13 partners and 23 other fee earners. The professionals are experienced in a full scope of tax-related issues, involving international investments, transactions, financings, reorganisations and restructuring, tax investigations and disputes.
PwC advises on international tax matters, state and local taxation, tax accounting, tax credits, tax controversy and regulatory process, deductions and studies, tax reporting and strategy, transfer pricing and US inbound tax.
Mark Mendola is the vice chairman and US managing partner. He is responsible for the US advisory, assurance, and tax practices.
Sidley Austin's professionals are experienced in advising clients on the tax aspects of private equity and M&A transactions. The firm's tax practice comprises more than 60 tax lawyers, more than half of whom are partners, in the US and London.
Zackary Pullin is tax counsel in Sidley's Houston office and is experienced in complex partnership transactions, debt and equity offerings and restructurings. Tara Lancaster is an associate in the firm's Dallas office. Her practice covers a broad range of international and domestic transactions, including M&A, partnerships and joint ventures, spin-offs and other divisive transactions.
John Cohn oversees the tax practice at Thompson & Knight. The firm comprises 16 partners and 16 other fee earners, including Dean Hinderliter who joined the firm in May 2016.
This year, Cohn advised a national oil company in relation to the tax issues involved in the restructuring of its US operations and a future joint venture. In addition, the firm represented EnCap Investments in connection with the tax issues involved in the formation of its newest private equity fund in North America. It also represented the company in the sale and disposition of approximately $2.5 billion worth of oil and gas properties, midstream and gathering assets. Roger Aksamit, Mary McNulty, Cohn, Jason Loden and Todd Lowther were all involved.
Other key partners include Sharon Fountain, Shelly Youree, Russell Gully and Neely Munnerlyn.
The practitioners in the Dallas office of Vinson & Elkins have a broad range of expertise in tax. The firm's tax, executive compensation & benefits department is led by George Gerachis, an experienced tax practitioner with strong specialism in tax planning and tax controversy.
The firm's tax practice formulates and implements innovative tax strategies across a broad spectrum of transactions, including spinoffs, corporate finance and real estate investment trusts (REITs). The firm has represented privately and publicly-held corporations, partnerships and high-net-worth individuals in all phases of US federal income tax controversies.
The firm is representing clients in a number of high-profile tax lawsuits. This year, it has represented Anadarko Petroleum Corporation in a suit in the Federal District Court for the Southern District of Texas. In this case, Anadarko Petroleum Corporation is seeking a refund of more than $25 million in federal income taxes. Gerachis, Juliana Hunter, Allyson Seger and Curt Wimberly are representing Anadarko Petroleum Corporation in this matter.
The Dallas tax practice of Weil, Gotshal & Manges provides services to international, national and regional clients across the full spectrum of tax issues. The firm has acted in some of the biggest and most complex domestic and cross-border transactions.
Its practice areas include M&A, private equity and private funds matters, restructurings and recapitalisations, securitisations, real estate and REITs, capital markets and other financing matters.
Jonathan Macke is a partner in the firm's Dallas office, where he specialises in the tax aspects of corporate transactions including domestic and cross-border M&A, joint ventures and financing transactions.
|Tier 1 - US: Dallas/Houston|
|Vinson & Elkins|
|Tier 2 - US: Dallas/Houston|
|McDermott Will & Emery|
|Norton Rose Fulbright|
|Thompson & Knight|
|Tier 3 - US: Dallas/Houston|
|Alvarez & Marsal, Taxand USA|
|Chamberlain, Hrdlicka, White, Williams & Aughtry|
|Haynes and Boone|
|Weil, Gotshal & Manges|
|Tier 4 - US: Dallas/Houston|
|Akin Gump Strauss Hauer & Feld|
|Locke Lord Edwards|