1. Manage Efforts Related to the Foreign Account Tax Compliance Act (FATCA): Implementation has evolved since FATCA was enacted, but it is clear the implications surrounding this new regime are wide-ranging for foreign institutions, U.S. financial institutions, and non-financial entities that make withholdable payments to non-U.S. entities. Companies need to continue assessing their FATCA status and the resulting compliance obligations.
2. Monitor U.S. Business Tax Reform Developments: A strong desire continues 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.”
3. Understand Base Erosion and Profit Shifting: Increased concern about base erosion and profit shifting (BEPS) has triggered a public debate about the tax affairs of multinational companies and a call to action at the highest levels of government. Companies need to be aware of public perceptions, guard against reputational risks, and prepare for the reality of potential changes in tax rules and standards.
4. Be Aware of Opportunities Connected with the New Repair Regulations: Beginning in January 2014, every business with at least some fixed assets — that is, virtually every business — has had to comply with so-called “Repair Regulations” issued by Treasury and the Internal Revenue Service (IRS) in September 2013. The regulations established federal tax standards for costs incurred to acquire, maintain or improve, and dispose of tangible property. Certain industries, such as retail, manufacturing, hospitality and utilities, may be particularly affected. Some taxpayers would be wise to review their capitalization policies to comply with new elections and to enhance potential benefits; others should also consider filing accounting-method changes early for 2012 or 2013 to take advantage of certain provisions in the final regulations.
5. Check Progress of the Marketplace Fairness Act: While the Marketplace Fairness Act has moved off the legislative fast track, companies need to continue to remain alert to potential tax compliance requirements under the proposed law. 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, is in the hands of the House Judiciary Committee after Senate passage in 2013. The committee is considering possible changes to the Senate bill.
6. Add Tax in the Cloud to Your Business Conversations: The movement of computing services and resources to “the cloud” is expected to continue to drive back- and front-office business transformation initiatives during 2014. It’s critical that tax executives take a more active role in getting a “seat at the table” for their company’s cloud discussions. Not doing so may lead to missed incentives and planning opportunities, as well as increased potential for risk and unforeseen liabilities.
7. Navigate a Shifting Landscape for Transfer Pricing: Tax authorities worldwide are continuing to sharpen their focus on transfer pricing arrangements, especially higher-risk and higher-value transactions. Taxpayers should expect heightened enforcement — including increased documentation requirements, examination of uncertain tax positions, and expanded tax return disclosures — to continue during 2014, and should consider how to address these challenges.
8. Include Your Tax Department in Business Operation Transformation: Finance leaders would be wise to include their tax departments in business improvement and operational transformation programs they consider to mitigate risk and enhance value opportunities. Moving people, assets or revenue streams can have an effect on direct and indirect taxes and underlying processes to comply with various tax regulations. Ensuring tax is part of any business transformation initiatives will help ensure compliance and financial reporting processes are captured and tax management opportunities are spotlighted.
9. Expect Enhanced IRS Scrutiny: Recent announcements from the Internal Revenue Service (IRS) on its plans to change examination procedures for large corporate taxpayers are making enhanced engagement between the IRS and these taxpayers a priority for 2014. Taxpayer-friendly changes to the IRS’ Information Document Request (IDR) process, which now require IDRs to be more narrowly issue-focused, and a call for more taxpayer involvement in determination of information due dates, are balanced by a new set of nearly automatic enforcement triggers if due dates are breeched that start a series of delinquency notices, pre-summons letters and summonses.
10. Focus on 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. Companies in all industries need to evaluate their reporting requirements closely since unclaimed property remains an important source of revenue for state jurisdictions.
11. Use FTZs to Meet International Trade Challenges: As continued economic pressure on international trade leads many companies to look for new ways to strengthen their global competitiveness, the benefits of U.S. 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.
12. Better Align Tax-Exempt Activities with Corporate Strategies: The coming year may be a good time for companies 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 programs are benefiting the organizations they serve and aligning with corporate strategy.
As companies assess these and other developments, finance leaders should weigh the potential impact on their bottom lines and plan how to best respond to the challenges and opportunities they may present.
Jeff LeSage is vice chair of Tax Services at KPMG LLP, the U.S. audit, tax and advisory firm.
These comments represent the views of the author only, and do not necessarily represent the views or professional advice of KPMG LLP. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.