International Tax Current Developments

Notice 2026-7 is the latest in Treasury's rolling CAMT interim guidance series, modifying prior Notices 2025-46 and 2025-49. It covers several client-critical adjustments to adjusted financial statement income (AFSI): AFSI reductions for tax-deductible repairs on Section 168 property, Section 197 intangible amortization, domestic R&E amortization, film/TV/live theatrical production costs, and low-cost tangible property treated as materials and supplies. It also tightens the anti-abuse rule for covered asset transactions and addresses Section 367(d) intangibles. Proposed regulations are forthcoming. Clients in manufacturing, pharma, entertainment, and real estate need immediate assessment.

Any large corporation with $1B+ in average annual financial statement income is an applicable corporation subject to CAMT. Affected clients in: (1) Capital-intensive industries with heavy Section 168 repair deductions — AFSI adjustments may reduce or eliminate CAMT exposure; (2) Pharma/tech with large Section 197 amortization from acquisitions; (3) Companies with domestic R&E (Section 174) costs; (4) Entertainment/media companies with large production cost deductions; (5) Companies that have done cross-border asset transactions — anti-abuse rule tightening is significant.

Based on Tax Executives Institute survey data, CAMT is both conceptually flawed and operationally brutal. Companies are spending enormous sums — on systems, personnel, external advisers — to calculate CAMT exposures that frequently result in zero liability. Only 23.4% of survey respondents actually work for companies that have paid CAMT. The article predicts CAMT raises little revenue while distorting corporate incentives by taxing book income divorced from taxable income. Congress may revisit this under the OBBBA framework, creating planning opportunity.

Large corporate clients ($1B+ average AFSI) face significant compliance burdens regardless of ultimate CAMT liability. The mismatch between financial accounting rules and tax rules creates unpredictability — a client's CAMT exposure can swing materially based on changes in accounting standards (ASC 842 leases, ASC 805 business combinations, etc.). Companies with large depreciation deductions, R&E costs, or tax-exempt income face the greatest GAAP-to-tax book differences.

OECD Side-by-Side Package (Jan. 5, 2026): U.S. is the only jurisdiction in OECD's central record as a qualified side-by-side system. Requirements: statutory rate ≥20% (including subnational taxes); AFSI-based minimum tax at ≥15% (CAMT satisfies this); no material ETR risk below 15% on domestic operations; comprehensive CFC/branch taxation; substantial BEPS mechanisms. Side-by-side safe harbor exempts U.S. MNE constituent entities from IIR and UTPR globally — but QDMTTs in local jurisdictions still apply to subsidiaries. Other jurisdictions can apply for side-by-side status in 2027-2028. Critical: any U.S. legislative change (e.g., CAMT reform, NCTI changes) triggers a mandatory 90-day OECD notification. (Skinner & Neumann, Fenwick & West, Tax Notes International, Feb. 23, 2026)

Kenneth Kies (acting IRS Chief Counsel and Treasury Assistant Secretary for Tax Policy) stated flatly: 'Pillar 1 is dead.' Treasury DAA for International Tax Rebecca Burch confirmed the U.S. will engage on digital economy taxation but not via Amount A, and not by picking up where negotiations left off. The starting point must challenge foundational assumptions about the arm's-length principle, physical presence, and value creation. Pillar 2 survives via the side-by-side agreement. This is a tectonic shift — the DST/Amount A trade-off that tech and consumer companies relied upon is gone.

U.S.-parented tech, digital platform, and consumer MNEs face ongoing digital services tax exposure in France, UK, Italy, Spain, and other jurisdictions — no DST sunset is coming with Amount A dead. Foreign companies considering U.S. redomicile for side-by-side protection should factor in no near-term resolution on DSTs. Tax planning assumptions built on Amount A relief should be retired. The 2027 UN Treaty timeline for digital services remains in play and may move faster than any OECD successor.

The OECD's January 2026 'side-by-side' agreement protects U.S.-parented MNEs from Pillar 2's IIR and UTPR rules — meaning companies that redomicile to the U.S. get Pillar 2 exemption on top of OBBBA tax benefits and tariff manufacturing incentives. Foreign MNEs are 'definitely' thinking about redomiciling. But the American corporate tax system — BEAT, NCTI, Subpart F, CAMT, complex FTC rules — is a massive deterrent. The message: inversions into the U.S. are real and growing, but each requires bespoke analysis. This is a significant inbound advisory opportunity.

Foreign MNE clients with significant income in low-Pillar-2-adoption jurisdictions may benefit materially from U.S. redomiciliation. European companies subject to high Pillar 2 top-up taxes but with U.S.-favorable income structures should model the U.S. option. Existing U.S. clients who compete with foreign MNEs should understand the landscape. The Inclusive Framework's 2029 review means the window for early-mover advantage exists — but companies that move prematurely and then want to exit face Section 7874 anti-inversion rules.

IRC Section 965 allowed an 8-year installment election for the one-time transition tax on accumulated offshore earnings (15.5% liquid / 8% illiquid assets). Final installment year is 2026. Apple: $8.8B remaining; Cisco: made $2.3B final payment in Q2 FY2026 (adjusted by $720M via Varian T.C. No. 4, Aug. 2024); PepsiCo: $965M final payment due 2026; Amgen: made $1.8B final payment in 2025 and has ~$10.7B controversy in Tax Court (2010-2015 Puerto Rico profit allocation). The Varian decision affects how deemed foreign dividends during the TCJA transition year are taxed — creating potential adjustment and refund claims.

The IRS issued a $5.8M deficiency to the owners of a Miami-based duty-free retailer (Travel Retail Group Holdings LLC), asserting a $19.1M income overstatement arising from a miscalculated Section 956 'investment in US property' by their CFC. The taxpayers fired back on the merits and on a critical procedural ground: the notice of deficiency was issued after the three-year statute of limitations expired in January 2021. If the SOL defense holds, the entire $5.8M bill disappears regardless of the underlying tax math.

Any client that owns an S-corporation with CFC subsidiaries faces identical risk where IRS may challenge Section 956 calculations years after filing. The SOL angle is particularly important — clients should audit whether their statute waivers (Form 872) were properly executed and retained. S-corp pass-through of CFC income magnifies exposure because all income flows to individual shareholders at ordinary rates.

New FASB rules requiring detailed country-level tax payment disclosure just surfaced that Tesla paid $28M in U.S. federal tax vs. $1B+ overseas (including $751M to China), GM paid $277M U.S. vs. $957M overseas, and PepsiCo paid $1.1B U.S. vs. $1.7B to other countries. This data, now mandatory in annual reports, is creating political pressure and investor questions about profit-shifting. For our clients, the new transparency rules mean their tax payment geography is now public — and every outlier will be questioned by boards, investors, and regulators.

Any publicly-traded client with significant overseas operations should review their 2025 annual report tax disclosures immediately. If overseas payments materially exceed U.S. payments, expect board and investor questions. Clients with aggressive transfer pricing structures face scrutiny. Even legitimate tax planning (R&D credits, BEAT, NCTI deductions) may look bad in a table. Private companies are not yet subject but should expect pressure to follow voluntarily.

The IRS issued a notice of deficiency on Dec. 8, 2025, asserting Varian (acquired by Siemens in 2021) owes $1.24 billion from denial of Section 245A dividends received deductions (DRDs) and an increase in Subpart F income for 2021. The government's alternative position disallows the DRD and recharacterizes the transaction as a foreign corporation dividend. Accuracy-related penalties of $248 million are also asserted. The case turns on whether Varian's post-acquisition transfer of subsidiaries to facilitate Siemens integration — a €6.4B subsidiary sale generating $5.98B gain — properly qualified for Section 245A DRD treatment or generated Subpart F income.

Any client that has been acquired by a foreign parent and undergone post-acquisition restructuring to integrate subsidiaries into the acquirer's group faces identical Section 245A/Subpart F risk. The IRS is scrutinizing whether post-acquisition subsidiary transfers genuinely qualify for DRD treatment or represent disguised Subpart F inclusions. Clients using Section 1248 gain/dividend recharacterization in post-acquisition reorganizations need to review their positions given this case.

The 2025 OBBBA changed how U.S. shareholders compute their pro-rata share of CFC Subpart F income — moving from a 'last day of the year' ownership test to an 'any time during the year' attribution approach. The December 2025 transition guidance requires taxpayers to 'determine and document' whether CFC-paid dividends subject to the transition rule increase the taxable income of a U.S. person. The AICPA says this requirement is unclear and burdensome, and has asked Treasury to either eliminate it, narrow it, or create a safe harbor. Until guidance is clarified, clients face documentation risk.

Any U.S. company or individual who owns CFCs and had ownership changes during 2025 (the first year the new pro-rata share rules apply) faces this documentation requirement. M&A activity generating mid-year CFC ownership changes — sales, acquisitions, restructurings — are most at risk. Private equity clients with portfolio companies that own CFCs and where ownership has been modified during 2025 need immediate assessment. Failure to document exposes clients to penalties for Subpart F underpayment.

The authors contend that Gilead routed approximately $36 billion in hepatitis C drug profits (from sofosbuvir/Sovaldi/Harvoni/Epclusa) to a Bahamas-domiciled Irish shell company that had no assets, employees, or operations — despite the drugs being developed and sold primarily from the United States. The key theory: because the Pharmasset acquisition was done through a foreign shell (contrary to public disclosures), the IP should be treated as part of Gilead's existing cost-sharing arrangement, and the massive profit divergence triggers a mandatory periodic adjustment under Reg. 1.482-7(i)(6). This is a landmark warning for any client with a cost-sharing arrangement and aggressive IP location.

Any pharma, biotech, or tech client with a cost-sharing arrangement that has acquired IP-rich companies and routed those acquisitions through foreign entities (Bahamas, Ireland, Cayman) faces the risk of IRS applying the same periodic adjustment theory. This is particularly acute for clients with large divergences between actual profits and cost-sharing contributions. Clients who have terminated or restructured CSAs in recent years also face periodic adjustment risk on prior years. The article will likely prompt IRS LB&I scrutiny of CSA structures across the pharmaceutical sector.

This is a scanned document (image-based PDF) with the metadata title '2026-01-23 Walmart in.pdf' dated January 23, 2026, created February 4, 2026. A '13-month period' request in the tax context most commonly arises in the context of APA (Advance Pricing Agreement) applications, transfer pricing documentation year-end alignment, or specific IRS exam proceedings where a taxpayer seeks a non-standard taxable year or period for computational purposes. Walmart's scale ($600B+ revenue, major global supply chain) means any period adjustment of this nature could affect billions in intercompany pricing. Note: full text could not be extracted from this scanned document.

Large multinational clients undergoing transfer pricing examinations or seeking APAs should be aware that non-standard period requests can both help (better alignment of tested transactions) and create complications (documentation burden, IRS scrutiny of the reason for the request). Walmart's request may signal a template or strategy that other large MNEs could follow in their own APA or transfer pricing proceedings.

IRC Section 892 — T.D. 10042 (final regs, Dec. 15, 2025) and REG-101952-24 (proposed regs, Dec. 15, 2025). The proposed regs tighten 'commercial activity' (borrowing from the Foreign Sovereign Immunities Act of 1976) and expand 'effective control' to include operational/managerial board-level and investor-level decisions. Scarborough confirmed: no retroactive effect for finalized rules; existing market practices will not be penalized during the regulatory process. Government still considering comments on veto-rights/effective-control question — not every veto right will constitute control. (Tax Notes Federal, Feb. 23, 2026)

TEAC Resolutions: April 22, 2025 (appeal no. 5367/2022) and September 24, 2025 (appeal no. 4855/2022). Key distinction: treaty-specific residence certificates (issued for double tax treaty purposes) create a presumption of validity Spain generally cannot override; general-purpose certificates (e.g., HMRC 'for tax purposes' without treaty reference) can be overridden by Spanish territorial nexus analysis. Nexus indicators: corporate formation, registered office, director residence, place of effective management. Isle of Man entity was deemed Spain-resident because all four indicators pointed there. Spanish Supreme Court decision no. 971/2025 (July 15, 2025) protects treaty-specific certificates. (Tax Notes International, Feb. 23, 2026)

Conseil d'État, Nov. 12, 2025, no. 502894 (Carmejane LLC). French domestic law characterizes foreign entities by comparison to French corporate forms — because LLC members have limited liability, the LLC is classified as an SAS, not a SARL, and cannot elect French tax transparency without registering with French authorities. However, Article 7(4) of the France-U.S. Tax Treaty (Aug. 31, 1994) provides that a U.S. tax-transparent partnership passes income through to its partners — if the LLC's partners are U.S. treaty residents, the treaty's transparency principle should override French domestic characterization. Carmejane LLC did not claim treaty benefits. French tax authorities are expected to pursue new audits emboldened by this ruling. (Milhac, CMS Francis Lefebvre Avocats, Tax Notes International, Feb. 23, 2026)

A Country A foreign corporation that owns U.S. operations through a chain of domestic LLCs can restructure to operate directly via a U.S. branch without triggering branch profits tax, because it qualifies as a 'qualified person' under the LOB article as a subsidiary of a publicly-traded parent. The key technical point: the dividend equivalent amount (DEA) is computed at the foreign corporate parent level, not at the disregarded LLC level, so the Article 24(4) fiscally transparent entity limitation in the treaty doesn't block treaty relief. Useful precedent for inbound restructuring clients.

Foreign multinationals operating in the U.S. through tiered LLC structures who are considering consolidation into a direct branch structure can rely on this ruling framework to avoid the 30% branch profits tax if they have a qualifying treaty. Particularly relevant for inbound clients from treaty countries whose parent is publicly-traded (LOB qualification under Article 26(2)(c)). Significant tax savings on annual dividend equivalent amounts.

Treasury published Section 892 final and proposed regulations (T.D. 10042; REG-101952-24) on Dec. 15, 2025, governing U.S. tax exemptions for foreign governments investing in the U.S. But the regs deliberately avoided providing clear definitions of 'commercial activity' and the boundary between exempt and taxable lending activity — a policy of 'strategic ambiguity.' The author argues this creates structural risk: fund managers and sponsors cannot confidently structure sovereign wealth fund investments, potentially diverting massive capital flows away from U.S. markets. The vagueness doctrine challenge risk is real.

Fund sponsors and managers seeking sovereign wealth fund investment must navigate an undefined 'commercial activity' concept that can disqualify an entire entity's income from Section 892 exemption. Private credit funds, real estate funds, and infrastructure funds with sovereign LP investors face uncertainty about whether their structures maintain Section 892 eligibility. Large sovereign wealth funds from Norway (GPFG), Abu Dhabi (ADIA), Singapore (GIC/Temasek), and others rely on Section 892 — vagueness in the regs creates UTP (uncertain tax position) risk for both investors and fund managers.

IRC Section 224 (OBBBA, P.L. 119-21): deduction for 'qualified tips' in occupations customarily receiving tips before Dec. 31, 2024. Treasury proposed regs REG-110032-25 published qualifying occupation list. Regulatory exclusions at issue: Prop. Reg. 1.224-1(c)(6)-(8) (felony/misdemeanor, prostitution, pornographic activity). Section 224(d)(2)(B) already excludes 'specified service trade or business' (white-collar professions under Section 199A(d)(2)). Author (former DOJ Tax Division Appellate Chief Ugolini) argues categorical exclusions exceed Treasury's 'other requirements' delegation under Section 224(d)(2)(C). Post-Loper Bright (603 U.S. 369, 2024): courts independently assess limits of Treasury's delegated authority. FedEx Corp. v. United States (W.D. Tenn. 2025): government overread Section 965's delegating authority. NYU Tax Law Center submitted comments criticizing the exclusions. (Tax Notes Federal, Feb. 23, 2026)

Following the One Big Beautiful Bill Act (P.L. 119-21, July 2025), which made GILTI/NCTI, FDII/FDDEI, and BEAT permanent and improved the FTC haircut, Wolski and Yen at EY identify the unfinished agenda: (1) FTC basket simplification (returning to 2 baskets for active/passive income); (2) elimination of remaining double-taxation of NCTI income; (3) BEAT reform to address continued structural inequities. These are not yet enacted but represent where legislative winds are blowing and what clients should be modeling.

Multinational clients using FTCs to offset NCTI/GILTI taxes should monitor basket reform proposals — a return to 2 baskets would allow greater FTC utilization across income categories and significantly reduce double-taxation on foreign branch income. BEAT-paying clients face continued complexity until reform happens. This legislative roadmap helps clients plan capital structures and IP locations in anticipation of where the law is going.

The UN Framework Convention negotiating committee met Feb. 10-13, 2026 to debate competing nexus proposals for cross-border services. Africa's 54 countries want a nexus based on the location of users or market engagement — a rule that would dramatically increase withholding tax exposure for U.S. service providers in Africa, Asia, and Latin America. Developed nations (EU, others) defended traditional physical presence. A first draft protocol on cross-border services is expected at the August 2026 meeting. The talks target a final deal by end-2027.

U.S. service companies (consulting, digital, financial services, tech) providing services into African, Asian, and Latin American markets face potential new withholding obligations if user-based or market-engagement nexus rules are adopted. This is a longer-term risk (2027+) but structuring decisions made now will determine exposure. Companies relying on physical-presence treaty protections should monitor whether those protections survive in a new multilateral framework.

As knowledge workers can now perform high-value services from anywhere in the world — and as AI automates work that once required physical presence in specific locations — traditional place-of-performance sourcing rules are becoming disconnected from economic reality. The OECD is seeking comments on global mobility (consultation document Nov. 26, 2025). This article is a conceptual framework piece, not a ruling or case, but it directly previews the legislative and regulatory battles over remote work PE risk, cross-border service sourcing, and global mobility taxation that will define the next decade of international tax practice.

Clients with remote/hybrid workers performing services across borders face immediate PE risk under existing rules — an employee working remotely in a foreign jurisdiction for as little as 183 days may create a PE. As AI is deployed to perform services internationally (e.g., an AI tool developed in the U.S. providing services to EU clients), new questions arise about where the income is sourced and whether PE rules are triggered. Financial services, consulting, tech, and professional services firms are most exposed.

Fresh off the Pillar 2 side-by-side success, Treasury officials (Rebecca Burch and Kenneth Kies) signaled willingness to re-engage on digital economy taxation — but explicitly ruled out Amount A as a starting point. The EU (Director General Gerassimos Thomas) and Spain/Italy have signaled openness to alternatives, including a digital permanent establishment concept. Herzfeld provides a sharp autopsy of why Amount A failed: mind-numbing complexity, over-reliance on multilateralism, zero-sum profit allocation politics, and U.S. constitutional constraints. The next framework must be simpler, bilateral-first, and must avoid reopening the foundational value-creation debate. For clients, DSTs remain alive and the next round of negotiations is years away.

U.S. tech and digital platform clients with global revenues should plan for an extended period (likely 5+ years) without a multilateral DST replacement — DSTs in France ($750M+/year for top U.S. tech), UK, India, Italy, and others are here to stay. The 'digital PE' concept being floated by EU members could be worse than Amount A for some clients — it would create taxable presence without a clear profit attribution mechanism, multiplying compliance complexity. Clients should be building DST costs into multi-year financial forecasts.

NTA 2025 Annual Report to Congress (Jan. 26, 2026), Most Serious Problem No. 9 (MSP No. 9). Key findings: (1) harsh and disproportionate FBAR penalties; (2) complex overseas filing requirements (FBAR, Form 8938, Form 3520/3520-A, Form 8621 for PFICs); (3) IRS systems not designed to serve overseas taxpayers; (4) citizenship-based taxation is uniquely American — all other major nations use residence-based taxation. The NTA heavily implies non-compliance by overseas Americans is rational given system complexity. Constitutional concern: obligations driving citizenship renunciations may conflict with the 14th Amendment (Afroyim v. Rusk, 387 U.S. 253). IRC Sections: 6038D (FATCA Form 8938), 6677 (foreign trust penalties), 31 U.S.C. 5314 (FBAR), 877A (exit tax). FATCA information-sharing has dramatically increased detection risk. (Snyder, Tax Notes Federal, Feb. 23, 2026)

The IRS has confirmed via FAA 20260401f (dated Nov. 2022, released Jan. 2026) that charitable LLC donation schemes — where high-income taxpayers donate nonvoting LLC interests to charity while retaining control and ultimately recovering the assets — have no economic substance and will be disregarded entirely. The delay in releasing the memo doesn't reduce the risk; it just means the IRS has been quietly building audit cases. Clients who used these structures between 2017 and 2024 should be told immediately.

High-net-worth clients and closely held business owners who donated LLC interests to charity (especially those using promoters marketing 'charitable LLC' or 'Ultimate Tax Plan' structures) face full disallowance of deductions, 20-40% accuracy penalties, and potential criminal exposure. The 3-year delay in releasing the FAA means the audit window may still be open on 2022 and later years. Promoters and material advisers face Section 6700/6701 penalties and list maintenance requirements.

The IRS's 2023 proposed regulations designating Malta pension plan arrangements as listed transactions (REG-106228-22) have been omitted from Treasury's 2025-2026 Priority Guidance Plan, effectively killing them under the current administration. Kenneth Kies, who previously lobbied for Water Structures LLC (a Malta pension plan promoter) before becoming acting IRS Chief Counsel, now controls whether these regs are ever finalized. Meanwhile, statutes of limitations are expiring on earlier Malta plan transactions, and audits are slow. Former Biden-era Treasury officials and tax professionals are alarmed — billions in capital gains remain sheltered.

Clients who participated in Malta pension plan arrangements face: (1) ongoing IRS audit risk (even if statutes are expiring on early years, more recent transactions remain open); (2) potential criminal referral risk; (3) loss of deductions, ordinary income treatment of purported capital gains, and substantial accuracy penalties. Material advisers who provided opinion letters on these structures face Section 6700/6701 penalties. The political dynamics mean enforcement may be episodic rather than systematic — but the transactions remain legally abusive.

💼 Offer IRS audit defense engagements for clients who used these structures. Also offer proactive 'tax shelter audit readiness' reviews for HNW clients with complex charitable strategies. Urgency: HIGH — audits are active and SOLs are running. Target: HNW practice group and any partner with charitable planning clients.

💼 Offer CSA health-check and periodic adjustment risk assessment to all pharma/tech/biotech clients with existing cost-sharing arrangements. Also offer acquisition structuring advisory to ensure future IP acquisitions are properly integrated into CSAs. High urgency — this article will generate IRS attention and client inquiries immediately. Target: all partners with pharma, biotech, and tech sector clients.

💼 Offer post-acquisition restructuring tax risk review for any client involved in a recent cross-border M&A transaction where subsidiaries were transferred between group members. This is a high-stakes, high-fee advisory. High urgency given active IRS scrutiny. Target: M&A and international tax partners with recently-acquired clients.

💼 Offer specialized IRS audit defense and resolution services for Malta pension plan participants and material advisers. This is a high-stakes, high-fee practice area. Urgency is actually increasing (not decreasing) as SOLs expire and criminal investigations proceed. Target: HNW and UHNW clients, and any partner who knows of Malta plan participants.

💼 Offer Section 956 compliance review / CFC diagnostic to S-corp clients with foreign subsidiaries. Especially valuable for clients who have never had a formal audit. Urgency: medium-high. Target: closely held business owners with international operations.

💼 Offer CAMT diagnostic and modeling service to all large-cap clients. The rolling guidance series creates recurring advisory demand. Consider hosting a client webinar on CAMT compliance updates. High urgency. Target: all partners with Fortune 1000 clients.

💼 Offer strategic advisory on DST management and positioning for the next round of digital economy negotiations. Particularly urgent for U.S. tech and platform companies with significant EU revenue. Consider multi-jurisdictional DST compliance review. High urgency. Target: tech sector clients and any MNE with >5% EU revenue.

💼 Offer CAMT compliance assessment and 'CAMT readiness' service — particularly to clients who may not have a fully built CAMT calculation process in place. For sophisticated clients, model multi-year CAMT exposure including sensitivity to accounting standard changes. Medium-high urgency. Target: large corporate clients in manufacturing, tech, pharma, real estate.

💼 Offer 'tax transparency readiness' advisory — reviewing the FASB disclosures for reputational and audit risk before they go public. Also offer board/audit committee briefings on what the numbers mean. High urgency for any public company client with international operations not yet prepared for this disclosure. Target: public company CFOs and audit committee chairs.

💼 Offer Section 892 structuring advisory to fund managers with sovereign LP investors and directly to sovereign wealth funds investing in U.S. assets. Also offer PLR request services where fact-specific guidance is needed. High-value, complex advisory with urgency driven by ongoing investment activity. Target: private fund partners and any partner with sovereign investor clients.

💼 Offer CFC compliance review focused on the OBBBA transition rules — particularly for clients with mid-year ownership changes in 2025. Also offer OBBBA international tax change briefings to clients who haven't yet updated their international tax models. Medium urgency — 2025 returns are being prepared now. Target: all clients with CFC ownership.

💼 This is one of the highest-value advisory opportunities of 2026. Offer inbound redomiciliation feasibility studies to any foreign MNE that qualifies. Engagements will be large, multi-disciplinary, and ongoing. HIGH urgency — early movers get the most benefit. Target: all partners with foreign MNE clients and any international tax partner with cross-border M&A relationships.

💼 Position the firm as a leader on digital economy taxation advisory — monitoring all tracks (UN Treaty, OECD successor process, EU digital PE, bilateral DSTs) and providing integrated advisory. Consider a dedicated 'Digital Economy Tax Watch' publication for clients. High urgency for tech sector clients with material DST exposure. Target: all tech, platform, and digital media clients plus any partner with EU-revenue clients.

💼 Offer inbound restructuring advisory to foreign corporate clients — especially European and Canadian MNEs with U.S. operations in LLC form. This PLR provides a reliable road map. Medium urgency, high deal value. Target: partners with inbound foreign corporate clients.

💼 Position the firm as the go-to adviser on the UN tax treaty — monitoring all three tracks and advising clients on structuring cross-border service arrangements. Consider a client alert and briefing series on UN tax developments. Medium urgency — long lead time but first-mover advisory advantage. Target: service-sector multinationals with developing-market revenue.

💼 Offer legislative scenario planning advisory to MNE clients — particularly modeling the impact of FTC basket simplification and BEAT reform. Also, clients who can benefit from NCTI optimization under current law should engage for immediate planning. Medium urgency (legislative timeline 1-3 years). Target: MNE clients with large FTC positions, BEAT-paying clients, and any client with foreign branches.

💼 If firm clients have APA applications pending or are contemplating APAs, offer transfer pricing period alignment analysis as part of APA strategy advisory. Medium urgency. Target: transfer pricing partners with large-cap MNE clients in active APA proceedings.

💼 Offer global mobility and PE risk review services to clients with remote international workforces. This is a fast-growing practice area with high urgency given post-COVID work patterns. Also offer AI tax structuring advisory for tech clients deploying AI services cross-border. Medium-high urgency. Target: HR-adjacent tax advisory practices and tech clients with international operations.

⚡ Immediately identify any client who participated in a charitable LLC structure. Consult with those clients about voluntary disclosure options, statute of limitations positions, and penalty abatement strategies. Do not let existing audit representations proceed without this FAA in hand. Material advisers should assess their own disclosure obligations.

⚡ Immediately audit all CSA clients for: (1) whether post-2012 acquisitions of IP-rich companies were properly included in or excluded from the existing CSA; (2) the profit split result vs. arm's-length benchmark in each year; (3) whether periodic adjustments under Reg. 1.482-7(i)(6) have been self-assessed or could be triggered. Prepare defensive documentation for any client whose CSA results show significant profit divergences. This article will drive IRS exam activity.

⚡ Identify clients who have been acquired by foreign companies and engaged in post-acquisition subsidiary transfers generating large gains. Review whether Section 245A DRD claims have been properly documented. Assess adequacy of Section 6664 reasonable cause defense and documentation supporting any penalty protection claim. Consider proactive dialogue with IRS before exam.

⚡ Contact any client who participated in a Malta pension plan arrangement immediately. Assess the audit status of all open years. Given that enforcement may be quieter under the current IRS leadership, evaluate whether voluntary compliance/settlement is still possible before criminal referrals are made. Ensure material advisers have assessed their own exposure and disclosure obligations.

⚡ Pull files on any S-corp client with CFC activity and check (1) whether Section 956 calculations are properly documented and (2) that all statute extension agreements are properly executed and saved. Flag cases approaching or past the 3-year SOL where IRS has not yet audited.

⚡ Update CAMT calculation models for all applicable-corporation clients to incorporate Notice 2026-7 adjustments. Particularly urgent for clients with covered asset transactions or Section 367(d) transactions in recent years. Ensure clients are relying on the most current interim guidance series when computing estimated CAMT payments.

⚡ Advise tech and consumer-sector clients to plan for indefinite continuation of DSTs as a cost of doing business. Model the tax impact of ongoing DST exposure vs. prior Amount A projections. Review any tax reserve positions or uncertain tax positions (UTPs) that assumed Amount A resolution. Update client memos and international tax planning models.

⚡ For all applicable-corporation clients: (1) ensure steady-state CAMT compliance process is fully resourced; (2) identify book-tax differences most likely to generate CAMT exposure; (3) monitor proposed regulations for finalization and model any changes; (4) document one-time implementation costs for potential regulatory comment or legislative engagement. Watch for Part 2 of this article on CAMT's revenue and planning impact.

⚡ For all public company clients: (1) review the new FASB disclosure before the 10-K is filed; (2) prepare a board/investor narrative explaining the drivers of the tax geography (U.S. incentives, Pillar 2 payments, timing differences); (3) assess whether transfer pricing positions are defensible under the new public scrutiny; (4) ensure communications with IR teams are aligned with tax disclosures.

⚡ Review all fund structures with sovereign wealth fund investors to assess 'commercial activity' risk under the new regs. Consider requesting IRS private letter rulings on specific structures where the commercial activity line is unclear. Comment on the proposed regulations to push for greater clarity on the commercial activity definition. Brief sovereign investor clients on the uncertainty and its impact on their U.S. investment structures.

⚡ Identify all clients with CFCs who had ownership changes during 2025 (the transition year). Document the determination of pro-rata share under both the old and new rules. Until Treasury issues a safe harbor, use a conservative documentation approach covering all relevant Subpart F income items. Monitor AICPA's engagement with Treasury for relief guidance.

⚡ Proactively reach out to foreign MNE clients — especially European and Asian companies with significant U.S. business — to model the U.S. redomiciliation option. Prepare a comprehensive cost/benefit analysis including: (a) U.S. tax system entry costs; (b) Pillar 2 savings from side-by-side; (c) OBBBA benefits; (d) tariff manufacturing analysis; (e) exit barriers under Section 7874. Do not let clients move without full analysis.

⚡ For tech and digital platform clients: update multi-year DST cost models to assume no relief for at least 5 years. Identify jurisdictions where DST exposure is most significant and develop mitigation strategies (pricing adjustments, structure). Monitor Treasury's 'first principles' review of digital economy taxation assumptions and position clients to engage in the comment process when it opens. Track EU digital PE discussions as the most likely near-term structural change.

⚡ Review client roster for inbound foreign corporate clients operating through U.S. LLC chains who haven't optimized their branch profits tax exposure. Model the DEA and treaty relief analysis. Consider whether PLR request would be warranted for clients in jurisdictions with similar treaty language.

⚡ Brief clients with significant cross-border services revenue into developing markets on UN treaty timeline and potential exposure. Begin assessing cross-border service revenue streams that would be affected by user-based nexus. No immediate action required, but 2027 is closer than it looks. Track August 2026 draft protocol.

⚡ Model the impact of potential FTC basket simplification on clients' current FTC positions and carryforward situations. Brief clients with significant BEAT exposure on reform proposals and timing. Engage in legislative monitoring/government relations advisory for clients who would benefit from FTC reform. Update international tax planning models to include 'reform scenario' analysis.

⚡ Note this as a data point in our transfer pricing practice monitoring. If we have clients in active APA negotiations or under IRS transfer pricing examination where period alignment is an issue, assess whether a similar request would be strategically beneficial. The inability to read the full scanned document limits analysis — recommend obtaining a text-accessible version for complete review.

⚡ For clients with significant remote/hybrid international workforces: review current PE exposure based on where employees are physically located. Assess whether any remote arrangements have inadvertently created foreign PEs. Monitor OECD global mobility consultation for emerging guidance. For AI-deploying clients, develop a framework for thinking about PE risk from AI services delivered internationally.