In the international area, many of our tax lawyers are regularly engaged in handling a wide variety of matters involving both inbound and outbound tax planning and compliance work. With respect to outbound investments, we have extensive experience regarding the corporate and tax aspects of establishing, maintaining and ultimately winding up such operations, including questions arising in the transfer pricing area. We advise from both a tax and corporate standpoint as to various types of specialized international transactions, such as structuring and implementing overseas financings, and establishing overseas insurance companies or investment companies such as mutual funds.
The growth of our practice in the area of inbound investment from Europe and Asia has tracked the substantial growth of such investment in the United States. Work in the inbound area includes both acting as tax and corporate counsel to the U.S. operations of foreign companies and handling special projects, such as acquisitions, sensitive tax audit matters, immigration matters, technology transfers and project financing for U.S. investments.
We also have extensive experience in such areas as intercompany transfer pricing, foreign currency borrowings, swaps, and hedging transactions, international mergers and acquisitions, international licensing and technology transfers, foreign tax credit, Subpart F, international joint ventures, FIRPTA, competent authority and other treaty-related matters, as well as problems relating to the repatriation of earnings and the start-up or dissolution of foreign operations by U.S. companies and U.S. operations by foreign companies. Our tax lawyers have also served as advisors to the British Government with respect to California's system of unitary taxation.
Mergers and Acquisitions
In recent years, as the international M&A field has expanded, tax partners of the firm concentrating in the international area have served as tax advisors in some of the largest acquisitions and dispositions occurring outside of the U.S. This advice has included establishing the most tax efficient structure for the acquisition (or disposition), pre-acquisition tax due diligence, financing of the acquisition, and in many instances "hedging" the foreign currency purchase price of the acquisition. Another very significant aspect of the firm's international tax practice involves the post-acquisition restructuring and rationalization of the overseas affiliates of the acquired company (both U.S. and foreign). Advice in this area draws heavily on the firm's work in sections 367 and 1491, the subpart F provisions, the branch profits tax provisions, and the foreign tax credit provisions.
A substantial segment of the firm's international tax practice involves financial products. Over the last five years, we have served as special tax counsel with respect to over one hundred billion dollars of public and private debt offerings, primarily in foreign markets. The terms of those offerings have been extremely diverse, and have included zero coupon and other discount obligations, floating rate obligations, foreign currency obligations and other short-, medium- and long-term obligations. We provide advice to issuers on the tax consequences of issuing such obligations and, in public offerings, also draft disclosure language discussing the tax consequences to purchasers.
Another major component of our financial products practice involves the taxation of "notional" principal contracts, such as interest rate swaps and currency swaps, forward contracts, and interest rate caps, floors, collars, futures, options and related products. Our involvement with these products has included not only rendering advice as to the tax consequences of entering into, maintaining and closing out such transactions, but also drafting the tax and other provisions of the related documentation and meeting with the Internal Revenue Service and the Treasury Department on proposed legislation, regulations and other guidance affecting such products. One of our international tax partners, Clifford E. Muller, assisted by three associates, recently co-authored the extremely comprehensive and well received Tax Management Portfolio on "Tax Aspects of Foreign Currency."
Finally, over the past few years we have been extensively involved with structuring centralized hedging and liquidity management centers in Europe, the Far East, and Latin America. The tax consequences of the particular structure are extremely important in determining whether there is a net overall economic benefit of establishing such a structure. In virtually all situations the firm has been able to devise a structure that achieves the business objectives while (1) avoiding the tax pitfalls associated therewith and (2) maximizing the tax planning opportunities.
Intercompany transfer pricing is one of the most significant areas of our international tax practice. The firm has unique experience in this area, both in terms of planning and controversy work, and has several partners, counsel and associates who assist clients in this area. Our attorneys are intimately familiar with the new transfer pricing regulations and their application to a wide array of transactions of U.S. and non-U.S. based multinationals, and are presently engaged in several ongoing projects for major multinational corporations to ensure compliance with the new regulations. Such compliance is imperative in light of the valuation misstatement penalties applicable in this area, which have become even more burdensome in light of the more stringent penalty provisions contained in the Omnibus Budget Reconciliation Act of 1993. The firm's experience in this area extends to both U.S. and non-U.S. based companies, and to all manner of intercompany transactions (tangible and intangible property, services, etc.). The firm also has experience in securing Advance Pricing Agreements, which in many cases have become more attractive in light of the new regulations.
Insurance and Foreign Mutual Funds
The firm has practiced for more than 30 years in tax matters affecting the life insurance and property and casualty insurance industries. Recently, the firm's international insurance tax practice has included advice to a large Canadian life insurance company on the U.S. income and branch profits tax implications of the incorporation of its U.S. branch, and advice on restructuring alternatives to a large U.K. reinsurance company that is owned by several major U.S. insurance companies. We also have assisted in the formation of several Bermuda and Barbados group "captive" insurance companies that insure U.S. risks of their U.S. shareholders.
Over the past few years, we also have been actively involved in the establishment of mutual funds in Ireland, Guernsey and Luxembourg. In this connection, we have given particular attention to the potential application to a foreign mutual fund's indirect U.S. shareholders of the "passive foreign investment company" or PFIC provisions of the Code. We also have anticipated enactment of the "passive foreign corporation" provisions contained in H.R. 13, the Tax Simplification Act of 1993.
Litigation and Other Controversy Work
Another significant aspect of the firm's international tax practice is its controversy work. As the Internal Revenue Service has stepped up its enforcement in the international area, our involvement in assisting clients respond to IRS inquiries has increased exponentially. This aspect of the practice includes drafting responses to IRS requests for information and proposed audit adjustments, as well as protests to the Appeals Office. We typically provide extensive behind-the-scenes advice on audit strategy. Where necessary, we have assisted our clients in dealing face-to-face with IRS examiners and Appeals Officers.
While we always seek to avoid the time and expense of litigation of tax controversies, we have no hesitancy in turning to litigation to protect a client's interests. Our lawyers are experienced in every facet of tax litigation and have appeared before federal courts throughout the country. In Barclays PLC v. Franchise Tax Board of California, which challenged California's method of worldwide unitary taxation, we filed an amicus curiae brief with the Supreme Court on behalf of the Government of the United Kingdom. We also filed a separate amicus brief on behalf of the Governments of Austria, Australia, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, The Netherlands, Norway, Portugal, Spain, Sweden, and Switzerland. We have an impressive list of victories, including in particular two of the most significant and frequently cited international tax cases — Hershey Foods in the Tax Court involving section 367 and Procter & Gamble in the Tax Court and Sixth Circuit involving section 482.
© 2013 Sutherland Asbill & Brennan LLP