Last December 2017, as we were all preparing to break for the holidays, our President and Congress gifted us with the monumental Tax Cuts and Jobs Act of 2017 (TCJA). Not to be outdone as we approach the holiday season this year, the IRS and Treasury have been doling out several gifts to the International Tax community.
On December 13, 2018, the IRS issued the Proposed Regulations on Section 59A Tax on Base Erosion Payments also known as BEAT. These regulations were preceded by the recent issuance of the proposed regulations for the new Section 163(j) Limitation on Deductibility of Interest Expense and proposed regulations on the application of the Foreign Tax Credit related to the changes made by TCJA. Each of these proposed regulations packages consists of several hundred pages of technical guidance perfect reading for all the free time during the holiday season.
Other smaller gifts have been doled out as well and more are still expected before the end of the year.
The IRS and Treasury are still considering what authority they have to limit the impact of the what is perhaps the most vexing provision in the TCJA, the repeal of Section 958(b)(4). The repeal of this provision allowed for so-called downward attribution of ownership of foreign corporations creating unexpected CFCs with extra reporting, inclusions and other unanticipated challenges for taxpayers.
2018 was definitely a busy year for international tax reform, and it appears 2019 will be equally if not more busy!