Daily Tax Update - December 15, 2016: IRS, Treasury Issue Final Regulations on Treatment of Foreign Goodwill and Going Concern Value in Outbound Transfers

IRS, Treasury Issue Final Regulations on Treatment of Foreign Goodwill and Going Concern Value in Outbound Transfers:  Today, the IRS and Treasury issued final regulations (TD 9803) that generally subject outbound transfers of foreign goodwill and going concern value to tax under either section 367(a) or section 367(d).  The final regulations, generally consistent with proposed regulations issued September 14, 2015, eliminate the foreign goodwill and going concern value exception under Treas. Reg.  § 1.367(d)-1T(b) and narrow the scope of the section 367(a)(3) active trade or business exception to apply only to certain tangible property and financial assets.  The final regulations do not take a position on whether goodwill and going concern should be characterized as a section 936(h)(3)(B) intangible and essentially allow taxpayers to elect to apply either section 367(a) or section 367(d) to transfers of such items.   The final regulations generally apply to transfers occurring on or after September 14, 2015, and to transfers occurring before that date resulting from entity classification elections filed on or after September 14, 2015.

IRS Issues Guidance on Construction of Energy Facilities:  Notice 2017-04 updates and clarifies guidance released in June regarding the beginning of construction requirement for energy facilities under sections 45 and 48.  The notice specifically addresses the extension and modification of the continuity safe harbor, the prohibition against combining methods by which to satisfy the beginning of construction requirement, and the costs that may be included in the five percent safe harbor for retrofitted renewable energy facilitates.