This week’s Tax Advisor Weekly covers key updates for financial professionals. We begin with guidance on navigating property tax considerations during business mergers and expansions. Next, we explore the growing need for C-suite awareness of transfer pricing implications. We also break down the latest developments in Beneficial Ownership Information (BOI) reporting—while requirements have been temporarily lifted for domestic entities, foreign companies remain affected. In addition, we look at how the Internal Revenue Service (IRS) Criminal Investigation unit is leveraging banking data to detect financial crimes, and examine a proposed 5 percent payroll tax in Washington state that could significantly impact businesses.
Did you miss last week’s edition? You can find it here.
How to Anticipate and Navigate Property Tax Scenarios for Businesses
(Carl Hoemke, CPA Practice Advisor)
Property taxes and business license compliance present a complex landscape, especially when significant business events involving mergers, acquisitions, or expansion occur. Understanding which business events can trigger changes to your property tax obligations or business license requirements can help you avoid surprises, stay compliant, and manage costs effectively. In this blog post, we’ll cover key business events that impact property tax and business licenses, along with what you need to consider for each.
Transfer Pricing: The C-suite Needs to be Informed
(Steven C. Wrappe, J.D., LL.M., and Chris Lee, MTax The Tax Adviser)
“Transfer pricing” refers to the setting of the internal price for transactions between entities owned or controlled by the same entity for goods, services, intangible property transfers, rents, and loans. In transactions between unrelated parties, economic forces such as the law of supply and demand produce a fair price; when the entities to the transaction are controlled by the same party, the pricing of the transaction is within the group’s control. Thus, the transfer price controls the allocation of income and loss between the group’s related parties and the taxable income in the countries where the MNC has operations.
BOI Reporting Changes Don’t Affect CTA’s Constitutionality, Filing Says
(Martha Waggoner, Journal of Accountancy)
The federal government, in a court brief, continued to defend the constitutionality of the Corporate Transparency Act (CTA), P.L. 116-283, even though the government has, at least temporarily, eliminated the need for domestic companies to report beneficial ownership information (BOI) as part of the legislation. The BOI filing requirement still applies to foreign companies registered to do business in the United States under the interim final rule from the Financial Crimes Enforcement Network (FinCEN), which administers the CTA, the anti-money laundering law that Congress passed in 2021. The interim final rule, announced Friday by FinCEN, was published Wednesday in the Federal Register.
IRS Leverages Banking Data for Criminal Investigations
(Michael Cohn, Accounting Today)
The Internal Revenue Service’s Criminal Investigation unit has embarked on a new initiative for engaging with financial institutions as it makes greater use of banking data to uncover tax and financial fraud. IRS-CI released FY24 Bank Secrecy Act metrics Friday, demonstrating how it uses BSA data to investigate financial crimes. During fiscal years 2022 through 2024, 87.3% of IRS-CI’s criminal investigations recommended for prosecution had a primary subject with a related BSA filing, and adjudicated cases led to a 97.3% conviction rate, with defendants receiving average prison sentences of 37 months. IRS-CI also leveraged BSA data to identify $21.1 billion in fraud linked to tax and financial crimes, seize $8.2 billion in assets tied to criminal activity, and obtain $1.4 billion in restitution for crime victims.
A New State Payroll Tax Could Drive Jobs out of Washington
(Jared Walczak, Tax Foundation)
Washington state lawmakers are considering a raft of new tax proposals, including a new 5 percent tax on employee payroll above the Social Security wage threshold, under which about 5,300 businesses (those with more than $7 million in payroll) would be liable at an estimated $2.3 billion a year in higher taxes. Proponents are selling the bill, SB 5796, as “removing the cap” on federal Social Security taxes, which currently apply to the first $176,100 of income, though this framing obscures more than it reveals. From the outset, Social Security was designed as a social insurance program, and since benefits are capped, the amount of compensation subject to tax is also capped. Some federal policymakers have called for raising or even eliminating the cap to further fund Social Security, but there is no meaningful way in which a completely separate Washington tax, for unrelated purposes, is simply the removal of that cap.
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