KPMG Highlights 12 Key Business Tax Issues For 2014
KPMG LLP, the US audit, tax and advisory firm, has released a list of a dozen key tax issues that could impact businesses in 2014.
Among the issues worth watching, according to KPMG: taxation of cloud-related activities, challenges transforming the operational effectiveness of tax departments, the prospect for U.S. and international business tax reform, concerns over base erosion and profit shifting (BEPS), and far-reaching consequences of the implementation of the Foreign Account Tax Compliance Act (FATCA).
The top 12, according to KPMG, are:
- The Foreign Account Tax Compliance Act (FATCA) – Companies will need to continue assessing their FATCA status and their resulting compliance obligations.
- US Business Tax Reform Developments – There continues to be a strong desire among some members of Congress, the Obama Administration and the business community for a tax system that is simpler, more competitive and conducive to economic growth. Companies will need to keep a close watch on the issue as it will continue to remain “on the table.”
- Base Erosion and Profit Shifting – This involves the tax affairs of multinational companies and their ability to shop around for more tax-friendly nations in which to park profits. This practice may result in regulatory action.
- The New Repair Regulations – Beginning January 2014, every business with fixed assets must comply with the “Repair Regulations,” issued by Treasury and the Internal Revenue Service (IRS) in September 2013, which established the federal tax standards for costs incurred to acquire, maintain or approve, and dispose of tangible property. Businesses should review their capitalization policies before 2014 in order to comply with the new regulations and to enhance potential benefits. This may include the filing of accounting-method changes early for 2012 or 2013 to take advantage of certain provisions in the final regulations.
- The Marketplace Fairness Act – The Marketplace Fairness Act is currently stalled in Congress, but companies need to continue to stay alert to potential tax compliance requirements under the proposed law if the situation changes. The bill, which would allow states to require online and other out-of-state merchants to collect and remit sales and use taxes on products and services they sell, is now in the hands of the House Judiciary Committee, after Senate passage earlier in 2013. The Committee is considering possible changes to the Senate bill.
- Taxing the Cloud – The movement of computing services and resources to “the cloud” will continue to drive back- and front-office business transformations during 2014. New taxes on cloud operations are still in the discussion stage, but bear watching.
- A Shifting Landscape for Transfer Pricing – Tax authorities worldwide are sharpening their focus on transfer pricing arrangements, especially higher-risk/higher-value transactions. Taxpayers should expect heightened enforcement – including increased documentation requirements, examination of uncertain tax positions, expanded tax return disclosures – to continue during 2014 and should consider how they can address these challenges.
- Tax Implications of Business Operation Transformation - Moving people, assets or revenue streams can have an impact on direct and indirect taxes and the underlying processes to comply with various tax regulations. Including the tax department in discussions of transformations in the business will help to ensure that compliance and financial reporting processes are captured and tax management opportunities are spotlighted.
- Enhanced IRS Scrutiny – The Internal Revenue Service (IRS) has announced plans to change examination procedures for large corporate taxpayers, making enhanced engagement between the IRS and these taxpayers a priority for 2014.
- Unclaimed Property Liabilities – Potentially significant and costly audit assessments for corporate unclaimed property, coupled with an expanded definition of property reportable as unclaimed, make this an issue to watch in 2014.
- Use of Foreign Trade Zones – As companies look for new ways to strengthen their global competitiveness, the benefits of US Foreign Trade Zones (FTZs) may be an answer for some. These areas, secure within the United States but outside U.S. customs territory, can help companies improve cash flow, manage inventory costs, reduce or eliminate U.S. Customs duties, and generate distribution savings.
- Alignment of Tax-Exempt Activities with Corporate Strategies – This will be a good year for businesses to review their corporate responsibility and philanthropy activities, not only to foster compliance with their tax-exempt status, but also to enhance their alignment with business strategy. A strategic review of employee volunteer programs, partnerships with not-for-profit organizations, philanthropy and grant making, and overall financial support through the lens of corporate identity and goals can help determine whether the programs are benefiting the organizations they serve and aligning with corporate strategy.