OMB’s Office of Information and Regulatory Affairs (OIRA) today acknowledged receipt of proposed regulations from the Treasury Department as guidance concerning section 59A—the “base erosion and anti-abuse tax” (BEAT) provision.
Section 59A was added to the Code by the new U.S. tax law (Pub. L. No. 115-97, enacted December 22, 2017) in an effort to "level the playing field” between U.S.-headquartered parent companies and foreign-headquartered parent companies.
The BEAT provision is a new base erosion-focused minimum tax that, in many instances, would significantly curtail the U.S. tax benefit of cross-border related-party payments made by large multinational entities. The BEAT includes within its scope a broad array of outbound payments made by corporations subject to the rule, except for payments treated as costs of goods sold (COGS) or otherwise as reductions to gross receipts (subject to regulatory authority from the Treasury Secretary for anti-avoidance regulations). This limited exception is unavailable for taxpayer groups that "invert" after November 9, 2017. Other than for such inverted groups, the BEAT does not apply, for example, to payments for inventory manufactured outside the United States.
Treasury regulations that are identified as “major” regulations are subject to review by OMB’s OIRA before issuance, pursuant to Executive Order 13771. Read TaxNewsFlash
The U.S. Treasury Department and IRS would be expected to release the following proposed regulations once OIRA review is completed (according to information on the OIRA website):
Proposed regulations providing guidance concerning the base-erosion and anti-abuse tax under section 59A
© 2020 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.KPMG International Cooperative (“KPMG International”) is a Swiss entity.
Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. 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 KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in 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.