Banks and other businesses that work with payment cards and third-party network transactions just received a bit of a breather. In Notice 2011-88, the IRS postponed for one year the effective date for potential backup withholding obligations for payments made in settlement of payment card and third party network transactions, or section 6050W payments. The initial regulations required that backup withholding apply to section 6050W payments made after December 31, 2011, if a payee hadn’t provided a correct taxpayer identification number (TIN) to a section 6050W payor. This notice pushes the requirements out one year, so they apply to 6050W payments made after December 31, 2012.

An FAQ posted on the IRS website provides a bit of background on the requirements. Section 6050W was part of the Housing Assistance Tax Act of 2008, and required some payors to provide information returns covering payments made to settle merchant card and third-party payment network transactions. “Third-party information reporting has been shown to increase voluntary tax compliance, improve collections and assessments within IRS, and thereby reduce the tax gap,” the FAQ said, in explaining the new requirement. more

As almost any contractor that does business with the government knows, section 511 of the Tax Increase Prevention and Reconciliation Act of 2005, or TIPRA, required the federal government, along with most state and local government entities, to withhold three percent from most of their payments to these contractors, as this summary from the IRS explains. Section 511 initially was to be effective for payments made after December 31, 2010, although this later was postponed, and wouldn’t take effect January 1, 2013.

This week, the three percent withholding rule took one more step toward extinction. On Wednesday, the House passed a bill, H.R. 674, to remove Sec. 3402(t), which followed from Section 511, from the Internal Revenue Code. H.R. 674 received almost unanimous support in the House, with 405 Congressional representatives voting in support of it, versus just 16 opposed, according to Govtrack.us. Twelve members either weren’t present or didn’t vote. The bill now heads to the Senate. more

The Basel Committee on Banking Supervision has adopted two technical changes to regulations regarding capital adequacy when it comes to trade finance. The Basel Committee on Banking Supervision, located at the Bank for International Settlements in Basel, Switzerland, provides a forum for discussion and cooperation on bank supervisory issues. It is best known for setting international standards on capital adequacy, among other activities. Members come from the U.S. and several dozen other countries.

These changes are explained in the report, “Treatment of trade finance under the Basel capital Framework.” As the report notes, the Committee consulted with the World Bank, the World Trade Organization and International Chamber of Commerce before making its changes.

As a starting point, the Committee agreed to waive the one-year maturity floor for some trade finance instruments, under what’s known as the advanced internal ratings-based approach (AIRB) for credit risk. The report notes that, the average trade finance transaction is significantly less than a year. Waiving the floor for issued and confirmed letters of credit (LOC) reduces capital requirements for banks engaged in trade finance and that use the AIRB. This will be particularly helpful for lower-income countries importing goods. more

In April, Proctor & Gamble announced that it was merging its Pringles business into Diamond Foods, the company behind Pop Secret popcorn and Kettle Brand potato chips, among other goodies. The transaction value comes in at about $2.35 billion, P&G said. Included in that number is $1.5 billion in Diamond common stock, which consists of 29.1 million shares, equal to about 57 percent of the outstanding shares of the combined company, along with the assumption of $850 million of Pringles debt. Diamond’s existing shareholders will continue to own approximately 43 percent of the combined company.

The shift in ownership makes sense; P&G’s largest markets are in health and beauty and household care. The company’s household care division, which boasts such names as Tide and Downy, rang up more than $24 billion in sales in fiscal 2011, while revenue for its health and beauty brands, such as Pantene and Olay, topped $20 billion. In contrast, snacks and pet care, including the Pringles division, accounted for just $3.2 of P&G’s $82.6 billion in sales.

What’s more, the transaction is going to be structured – legally – in such a way that the company avoids taxes. In fact, this is the latest of several deals P&G has been able to structure so that it earns a profit, yet avoids having to pay taxes, as this recent article in Fortune points out. more

More than 40 trade and professional associations, from the Aeronautical Repair Station Association to the Wood Machinery Manufacturers of America, recently wrote the chairs of the House Ways and Means Committee and the Senate’s Committee on Finance, asking that the legislators charged with reforming the tax code bear in mind three principles:

1) That any reform be comprehensive and include both individual and corporate tax rates. The letter notes that most U.S. workers are employed by businesses organized as pass-through entities, which pay taxes at the individual rate. A recent study by Ernst & Young which found that “in the US, pass-through entities account for some 90 percent of businesses, employ more than 50% of the private sector workforce and report more than a third of all business receipts. Moreover, individual owners of pass-throughs pay 44 percent of all business taxes on their allocable income. In 1980, 83 percent of businesses chose a pass-through form; that number had jumped to 95 percent in 2008, the study notes. more