The IRS today posted on its website a version of final regulations (T.D. 9921) as rules concerning the source of income for certain sales of personal property under section 863.
The final regulations [PDF 335 KB] (63 pages) finalize regulations that were proposed in December 2019, and according to the preamble “retain the overall approach of the proposed regulations, with certain revisions.”
This version of the final regulations contains the following statement:
This document is in the process of being submitted to the Office of the Federal Register (OFR) for publication and will be pending placement on public display at the OFR and publication in the Federal Register. The version of the final regulations released today may vary slightly from the published document if minor editorial changes are made during the OFR review process. The document published in the Federal Register will be the official document.
The 2017 U.S. tax law (Pub. L. No. 115-97)—the law that is often referred to as the “Tax Cuts and Jobs Act”—amended section 863 regarding special rules for determining the source of income, including income partly from within and partly from without (outside) the United States. Specifically, section 863(b) provides for allocation or apportionment of income from the sale or exchange of inventory property produced (in whole or in part) by a taxpayer within and sold or exchanged outside the United States or produced (in whole or in part) by the taxpayer outside and sold or exchanged within the United States solely on the basis of production activities with respect to that inventory.
Before the 2017 tax law changes, section 863(b) provided that income from section 863(b)(2) sales would be treated as derived partly from sources within and partly from sources outside the United States but without providing the basis for such allocation or apportionment.
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.