Attorney-at-Law

CARRYBACK AND ADVANCE

In Uncategorized on 10/05/2020 at 15:41

Eaton Corporation and Subsidiaries, Docket No. 5576-12, filed 10/5/20, wants to carryback NOLs and FTCs (Foreign Tax Credits) as part of the Rule 155 beancount, off to which Judge Kerrigan sent Eaton and IRS back in 2017.

The backstory can be found in my blogpost “Breaking Bad,” 7/26/17.

But Eaton has to await another case to find out. 2020 T. C. Memo. 147, the subject of my above-cited blogpost (hereinafter “Breaking Bad”), never addressed the carrybacks, nor the availability of Rev. Proc. 99-32 if the carrybacks meant that Eaton had to bring back onshore cash paid to offshores (the subsidiaries). Eaton petitioned the disallowed NOLs and FTCs, but Judge Kerrigan never got to deal with them.

“Petitioner contends that carrybacks should be allowed for the years in issue and that a later adjustment can be made to reflect the outcome of the 2007-10 case. It proposes that the parties agree to a stipulated decision for this case that includes language which allows for subsequent adjustments to be made to the carrybacks contingent on the resolution of the 2007-10 case. By contrast, respondent contends that the carrybacks are an issue in this case that was not determined by the Court and that to allow carrybacks to be included in a decision would cause prejudice to respondent.” Order, at p. 4.

Eaton had BoP, but presented no evidence on the trial in the “Breaking Bad” case. This they can do in the other case. But all is not lost: “To preserve this issue, we agree with respondent’s recommendation to include language below the line in a stipulated decision indicating petitioner would be entitled to refunds for NOL and FTC carrybacks if appropriate as determined in the 2007-10 case.” Order, at p. 5.

 As for Rev. Proc. 99-32, which allows repatriation of offshored cash without negative tax consequences, that’s only for Section 482 adjustments among related entities. Eaton claimed the adjustments IRS made were made to the Advance Pricing Agreements they had with IRS, not Section 482 adjustments, but that Rev. Proc. 99-32 covered APAs as well as 482s

“We disagree with petitioner’s argument that relief under Rev. Proc. 99-32, supra, is available to adjustments other than those made under section 482. Relief under Rev. Proc. 99-32, supra, is only available if the taxpayer’s income has been adjusted by respondent pursuant to section 482 or the taxpayer has increased or decreased its taxable income pursuant to section 482 and section 1.482-1(a)(3), Income Tax Regs. Rev. Proc. 99-32, sec. 5.01-.02, 1999-2 C.B. at 300.

“Petitioner argued previously that its corrections were not section 482 adjustments. In [“Breaking Bad”]  we agreed with petitioner that its corrections were not section 482 adjustments. Petitioner cannot have it both ways. We reject its contention that its corrections meet the requirements of Rev. Proc. 99-32, supra, because these corrections are not section 482 adjustments.” Order, at p. 6.

So do the numbers, guys.

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