The IRS has postponed the application date of the final regulations for translating foreign branch income, published as T.D. 9794. In addition, certain provisions of the related temporary regulations, published in T.D. 9795, will also be postponed for one year.
These regulations were identified in Notice 2017-38, I.R.B. 2017-30, 147, as significant tax regulations requiring additional review under Executive Order 13789. As part of that review, the IRS will consider changes to the regulations that would allow taxpayers to elect to apply alternative transitional rules and alternative rules for determining gain or loss.
Application Date Delayed
The final and temporary regulations were effective on December 7, 2016. Generally, they applied to tax years beginning on or after one year after the first day of the first tax year following December 7, 2016. The IRS will amend the regulations to provide that they will apply to tax years beginning on or after two years after the first date of the first tax year following December 7, 2016. Accordingly, for a taxpayer whose first tax year after December 7, 2016, begins on January 1, 2017, the final and temporary regulations will apply for the tax year beginning on January 1, 2019.
A taxpayer may apply the final regulations and the related temporary regulations to tax years beginning after December 7, 2016. However, the taxpayer must consistently apply the regulations: (1) to all Code Sec. 987 qualified business units (QBUs) owned by the taxpayer on the transition date; and (2) to all QBUs owned on the transition date by members that file a consolidated return with the taxpayer or by any controlled foreign corporation in which a member owns more than 50 percent of the voting power or stock value.
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