Treasury and IRS have made progress on prioritizing and issuing guidance, working to meet varied deadlines such as those imposed by the Foreign Account Tax Compliance Act (FATCA) and the expiring proposed anti-inversion regulations, officials said May 11.

The Tax Court has held that a corporate taxpayer’s investment in a foreign corporation was more appropriately characterized as debt, rather than equity, thereby eliminating claimed foreign tax credits. In addition, it held that the taxpayer was not entitled to claim a capital loss on the sale of its interest in the foreign corporation. Hewlett-Packard Company, TC Memo 2012-35.

On May 11, 2012, Arizona Governor Jan Brewer signed business tax legislation that makes changes to existing corporate, personal and premium tax credits and features increased capital gains tax deductions. (L. 2012, H2815, generally effective 08/02/2012 and as provided below.) The legislation amends the provision relating to net operating loss carryforwards for corporations by increasing the term from five to 20 years for losses arising in taxable periods beginning from and after December 31, 2011. Net operating losses arising in taxable periods through December 31, 2011 continue to have a 5-year carryforward. For corporate and personal income tax purposes, bonus depreciation rules applies to property that is placed into service beginning with tax year 2012.

During its review of Schedule UTP (Uncertain Tax Position Statement) filed by taxpayers for the 2010 year, IRS has discovered that descriptions of some disclosed tax positions were more “concise” than they should have been. A new page on its website provides specific examples of acceptable and unacceptable descriptions.

In February of this year, IRS issued proposed regs and a Joint Statement regarding the implementation of the Foreign Account Tax Compliance Act (FATCA). Many comments were received in response to the regs, several of which are explored below. Common themes included the need for more time to implement the various FATCA requirements and the fact that, given the complexity of the regs and the relatively short period for commenting, further issues are likely to arise.

IRS has issued temporary and proposed regs on the treatment of upfront payments made under certain notional principal contracts (NPCs) for federal income tax purposes. They provide that certain obligations of U.S. persons arising from upfront payments made by controlled foreign corporations (CFCs) under contracts that are cleared by a derivatives clearing organization or clearing agency don’t constitute U.S. property. TD 9589, 05/10/2012 ; Reg. § 1.956-2 ; Preamble to Prop Reg 05/10/2012.

Some practitioners have stated that FATCA and the extensive Proposed Regulations thereunder could be a factor in getting more countries to sign automatic information exchange agreements with the United States.

The Department of Revenue has issued a Tax Information Publication that summarizes the 2012 legislative changes affecting the Florida corporate income tax. Recent legislation amends Florida law to adopt the Internal Revenue Code retroactively to January 1, 2012 so that Florida will follow the computation of federal taxable income. However, Fla. Stat. § 220.13(1)(e) requires adjustments for the special bonus depreciation (placed in service before January 1, 2013) and excess Code Sec. 179 expense above $128,000 (tax years beginning before January 1, 2013). Also, effective for tax years beginning on or after January 1, 2013, the Florida corporate income tax exemption will be increased from $25,000 to $50,000. This will eliminate the tax on corporations with $50,000 or less in Florida income; however, all corporations are still required to file Florida corporate income tax returns. In addition, all estimated tax payments previously due on June 30, 2013 are due on or before June 28, 2013. Finally, effective for tax years beginning on or after January 1, 2013, the renewable energy technologies investment tax credit ( Fla. Stat. § 220.192 ) and the Florida renewable energy production credit ( Fla. Stat. § 220.193 ) are reenacted. Taxpayers may apply to the Department of Agriculture and Consumer Services for both tax credits. ( Florida Tax Information Publication 12(C)01-01, 05/04/2012 ).

On May 8, the Senate voted 52 to 45, 1 present, against the motion to invoke cloture (i.e., cut off debate) on the motion to proceed to S. 2343, the “Stop the Student Loan Interest Rate Hike Act of 2012.” Senate Republicans were opposed to the bill because it would have paid for keeping the current 3.4% loan rate in place with a tax change, i.e., closing an S Corporation employment tax “loophole.”

On April 27, the House of Representatives by a vote of 215 to 195 passed its version of the student loan bill, H.R. 4628, the “Interest Rate Reduction Act.” That Republican bill would pay for keeping federal student loan interest at current levels by eliminating funding designated for prevention and public health programs by the 2010 health care reform law. The White House has said if the President is presented with H.R. 4628, as passed by the House, his senior advisors would recommend that he veto the bill.

It’s widely expected that the two parties will come to some sort of compromise before July 1 on how the student loan relief bill would be paid for. On that date, the interest rate on federal student loans is set to double.