The Tax Trotter

A Warm Welcome to the Tax Trotter

Posted by Irina Pisareva on Jan 7, 2021 2:00:36 PM
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Happy New Year and welcome to the Tax Trotter!

The Trotter’s goal is to bring you the insights, analysis and tax news from around the world in a timely, engaging and easy-to-read fashion. Whether you are an employee or an executive of a multinational corporation, an entrepreneur, an investor, a wealth adviser, an asset manager or are otherwise interested in tax and fiscal policy, the Trotter aims to inform and support you. You should expect in-depth weekly posts analyzing all matters tax, breaking tax news bites, monthly or more frequent “Tea with Trotter” podcasts with tax luminaries, weekend “detour” features introducing you to a more entertaining face of tax or things we tax people enjoy in our limited spare time (trust funds for puppies, anyone?) and Proust-style profiles of people in tax and beyond.

What a year 2020 has been! Stock markets running high, travel low, Zoom reigning supreme with the blue light eyeglass filter becoming as popular as the anti-glare… And those of us working from home feeling blessed and yet complaining of cabin fever… Cabin fever swiftly followed by guilt after a run-in with an essential worker (your postman, your Whole Foods cashier, the staff and the drivers at your favorite takeout restaurant, your urgent care nurse practitioner and many others) who has no choice but to interact with the greater world and, therefore, is risking so much more than any of us homebound.

A few specific cases and issues The Trotter is looking forward to in 2021:

On the U.S. tax front, we got about 110 proposed and final regulations, 59 notices and 42 revenue procedures in 2020. As the Treasury and the IRS work hard to complete the 2017 Tax Reform guidance, questions remain and Administrative Procedure Act challenges are starting to roll in. The Trotter is looking forward to the district court ruling in FedEx’s tax refund claim. FedEx is challenging the validity of Treasury Regulation § 1.965-5(c)(1)(ii) and seeking an $89 million refund. The plain-language reading of this regulation prevents taxpayers from claiming credit for foreign taxes paid on earnings of controlled foreign companies if accumulated negative earnings of such companies, as computed for U.S. federal income tax purposes, were used to reduce taxpayers’ income subject to transition tax. FedEx argues that the regulation is arbitrary and capricious and that nothing in the statute, including Section 965, removed taxpayers’ entitlement to credit for foreign taxes paid on these earnings. The Trotter wonders if this matter is causing the Treasury and the IRS to delay the issuance of the final and proposed previously taxed earnings and profits (“PTEP”) regulations? Or is it the sheer complexity of the issue?  One may need a super-computer or, at the very least, a mighty Excel macro to keep track of the new PTEP accounts, be it 10 or 16.

The FedEx complaint also mentions that the IRS and Treasury did not respond to comments questioning validity of the regulation when it was first proposed. The complaint states that FedEx would have challenged the validity of the regulation as soon as it was issued but was prevented by a prohibition placed on pre-enforcement challenges under the Anti-Injunction Act as sustained in CIC Servs. LLC v. United States, 925 F.3d 247 (6th Cir. 2019). The Trotter notes that the proverbial fat lady has not yet sung in CIC Servs as we are eagerly awaiting the Supreme Court ruling on the matter. However, even if the Supreme Court were to side with the petitioner in CIC Servs, it will likely be distinguishable from FedEx’s situation – CIC argued that it is an adviser and not a taxpayer and would not have access to a refund suit (see Argument analysis: Justices struggle to define boundaries of Anti-Injunction Act - SCOTUSblog by Blaine Saito).

Talking about tax authorities looking beyond statutes to support their arguments, the March 3 (the Stryker case, 1071/2020) and September 23, 2020 (the Colgate Palmolive Group case, 1196/2020) rulings by the Spanish Supreme Court were a wonderful example of the exercise of power of judicial oversight to balance the executive agency policies from “across the pond.” In both cases, the Supreme Court rejected the tax authorities’ diverting the plain language of Spain’s bilateral tax treaties. In the Colgate Palmolive case, the Supreme Court rejected the use of the official commentary to the OECD model convention as a basis for applying the beneficial ownership concept within a tax treaty (see Spanish Supreme Court Limits Use of OECD Commentaries in Interpreting Tax Treaties, Tax Notes Int’l, July 27, 2020, and Spanish Supreme Court Rejects Application of Beneficial Owner Concept Not Provided in Tax Treaty, Tax Notes Int’l, December 14, 2020). In the post-MLI, BEPS world, all countries will eventually ponder the interplay between their tax sovereignty and OECD’s non-binding commentaries and policy papers. It will often fall to the courts to hit the brakes if the “soft law” is used as means of extra-statutory rulemaking, similar to the kind of rulemaking that the Administrative Procedure Act guards against in the U.S.

Two more notable U.S. cases the Trotter is watching with the same anticipation as the last season of the Mandalorian, are the Facebook and the Medtronic transfer pricing disputes. The Trotter believes that 2021 is going to be The Year of transfer pricing and intangible property valuation challenges across the globe. Stay tuned for more posts! And talking about the Mandalorian, whatever will happen with the tariffs globally post-Brexit and after the change in the U.S. administration. The Trotter is very curious how the Biden administration will handle the tariffs currently considered in connection with the unilateral digital services tax regimes imposed or considered by multiple foreign jurisdictions. On January 7, 2021, the Office of the U.S. Trade Representative suspended the tariff action in the Section 301 investigation of France’s Digital Services Tax (DST) scheduled to go into effect on January 6, 2021.  See Suspension of Tariff Action in France Digital Services Tax Investigation.

The U.S. Trade Representative has decided to suspend the tariffs in light of the ongoing investigation of similar DSTs adopted or under consideration in Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey and the United Kingdom. Those investigations have significantly progressed but have not yet reached a determination on possible trade actions. The final decision will most likely fall to the Biden-Harris administration and will signal the new administration’s approach to tax policy aspects of digitization and various BEPS initiatives in this field.

With all that’s going on around the world in tax and beyond, the Trotter wishes that the 2021 be a year of better health, sound tax policy and shorter regulations, bullish markets, more compassion and less posturing, gentler speech, radical good deeds, economic recovery and the sort of innovation that previously seemed possible only in science fiction. 

Do let us know if you would like the Trotter to cover a topic or if you would like to be a contributor!

The Trotter’s editor can be reached at


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About the Blog

The Tax Trotter brings you tax insights from around the world.

The material on this site is for general information only and is not legal advice. No liability is accepted for any loss or damage which may result from reliance on it. Always consult a qualified lawyer about a specific legal problem.

Meet the Editor

Irina Pisareva

Irina Pisareva is Tax Partner in Sullivan's New York office. She specializes in tax structuring of cross-border debt and equity transactions, alternative investment funds and investment management companies, international taxation of securities and private capital.

Before joining Sullivan, Irina was a partner at EY where she served as a lead international tax service partner for private equity, credit and multi-strategy asset management firms with $2bln to $300+ bill AUM. In addition to her structuring and transactional practice, Irina developed programs to reduce organizational tax risk and optimize global effective tax rate for companies and family offices.

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