OMB’s Office of Information and Regulatory Affairs (OIRA) today reported that it has completed review of proposed regulations from the Treasury Department as guidance concerning section 59A—the “base erosion and anti-abuse tax” (BEAT) provision.
Treasury regulations that are identified as “major” regulations are subject to review by OMB’s OIRA before issuance, pursuant to Executive Order 13771. The U.S. Treasury Department and IRS would be expected to release the following proposed regulations now that OIRA review is finished. The regulations are described by OIRA as:
Proposed regulations providing guidance concerning the base-erosion and anti-abuse tax under section 59A
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.
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