Overview
IRS Releases Final Regulations on Electing Out of the Partnership Audit Regime: Today, the Treasury Department and the IRS issued final regulations for electing out of the centralized partnership audit regime enacted as part of the Bipartisan Budget Act of 2015. The rules finalize, with minor changes, the portion of the rules proposed on June 14, 2017 relating to section 6221(b). The final regulations reflect, despite commenters’ suggestions, Treasury’s decision not to expand the definition of eligible partners for qualification to elect out, to continue to require foreign eligible partners to provide TINs for valid elections out, and to continue not to permit unilateral revocations of elections out.
IRS Issues Guidance on Repatriation Tax Under Section 965: Today, the Treasury Department and the IRS issued Notice 2018-07 announcing Treasury’s intent to issue regulations for determining amounts included in gross income by a US shareholder under section 965 as enacted in the tax reform bill on December 22. The notice states that the forthcoming regulations are intended to provide guidance on:
- Determining aggregate foreign cash position, including:
- The allocation between multiple inclusion years
- The treatment of related-party transactions for purposes of determining cash position
- The treatment of derivative financial instruments and hedging transactions for purposes of determining cash position
- Determining accumulated deferred foreign income, including:
- Adjustments to post-1986 earnings and profits to account for certain amounts paid or incurred between related specified foreign corporations between measurement dates
- Determination of amount of diminution by reason of distributions to specified foreign corporations
- Determination of accumulated post-1986 deferred foreign income in the case of a controlled foreign corporation with non-US shareholders
- Coordination between sections 959 and 965 in the inclusion year
- The application of section 961 to amounts treated as Subpart F income under section 965
- Treatment of an affiliated group filing a consolidated return for purposes of section 965
- Determining foreign currency gain or loss under section 986(c)
The Treasury Department states the forthcoming regulations are intended to be effective for the first taxable year in which section 965 becomes effective, which is the last taxable year of foreign corporations that begin before January 1, 2018, and for US shareholders, the taxable years in which or with which such taxable years of the foreign corporations end. The notice states that taxpayers may rely on the rules described in this notice until such regulations are issued. The notice also requests comments on the rules it describes and on any additional guidance needed.