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Proposed regulations: Classification of cloud-computing transactions, transactions involving digital content

Classification of cloud-computing transactions

The U.S. Treasury Department and IRS this afternoon released for publication in the Federal Register proposed regulations (REG-130700-14) regarding the classification of cloud transactions for purposes of the international provisions of the Internal Revenue Code.


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The proposed regulations also modify the rules for classifying transactions involving computer programs, including by applying the rules to transfers of digital content.

Read the proposed regulations [PDF 352 KB] (13 pages as published in the Federal Register)

Comments and requests for a public hearing must be received by November 12, 2019.

In brief (according to the preamble), these proposed regulations:

  • Clarify the treatment under certain Code provisions for income from transactions involving on-demand network access to computing and other similar resources
  • Extend the classification rules in existing Reg. section 1.861-18 to transfers of digital content other than computer programs, and clarify the source of income for certain transactions governed by the existing regulations
  • Address a comprehensive basis for categorizing many common transactions involving what is referred to as “cloud computing”—typically characterized by on-demand network access to computing resources such as networks, servers, storage, and software
  • Concern other transactions that are not solely related to computing, but still involve on-demand network access to technological resources (“cloud transactions”)

The purpose of this report is to provide text of the proposed regulations.  

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