Regulations Regarding the Transition Tax Under Section 965 and Related Provisions; Correction, 14260-14261 [2019-07012]

Download as PDF 14260 Federal Register / Vol. 84, No. 69 / Wednesday, April 10, 2019 / Rules and Regulations List of Subjects in 18 CFR Part 381 DEPARTMENT OF THE TREASURY § 1.965–2 Adjustments to earnings and profits and basis. Electric power plants, Electric utilities, Natural gas, Reporting and recordkeeping requirements. Internal Revenue Service * * * * (j) * * * (5) * * * (i) Facts. (ii) Analysis. * * * * 26 CFR Part 1 Issued: April 4, 2019. Anton C. Porter, Executive Director. [TD 9846] RIN 1545–BO51 In consideration of the foregoing, the Commission amends part 381, chapter I, title 18, Code of Federal Regulations, as set forth below. Regulations Regarding the Transition Tax Under Section 965 and Related Provisions; Correction Internal Revenue Service (IRS), Treasury. ACTION: Correcting amendments. AGENCY: PART 381—FEES 1. The authority citation for part 381 continues to read as follows: ■ 3. In § 381.303, paragraph (a) is amended by removing ‘‘$39,610’’ and adding ‘‘$42,310’’ in its place. This document contains corrections to final regulations (TD 9846) that were published in the Federal Register on Tuesday, February 5, 2019 (84 FR 1838). The final regulations implement section 965 of the Internal Revenue Code (the ‘‘Code’’). Section 965 was amended by the Tax Cuts and Job Act, which was enacted on December 22, 2017. DATES: This correction is effective on April 10, 2019. FOR FURTHER INFORMATION CONTACT: Natalie Punchak at (202) 317–6934 (not a toll-free number). SUPPLEMENTARY INFORMATION: § 381.304 Background SUMMARY: Authority: 15 U.S.C. 717–717w; 16 U.S.C. 791–828c, 2601–2645; 31 U.S.C. 9701; 42 U.S.C. 7101–7352; 49 U.S.C. 60502; 49 App. U.S.C. 1–85. § 381.302 [Amended] 2. In § 381.302, paragraph (a) is amended by removing ‘‘$27,130’’ and adding ‘‘$28,990’’ in its place. ■ § 381.303 [Amended] ■ [Amended] 4. In § 381.304, paragraph (a) is amended by removing ‘‘$20,770’’ and adding ‘‘$22,180’’ in its place. ■ § 381.305 Need for Correction [Amended] 5. In § 381.305, paragraph (a) is amended by removing ‘‘$7,780’’ and adding ‘‘$8,310’’ in its place. ■ § 381.403 [Amended] 6. In § 381.403 is amended by removing ‘‘$13,500’’ and adding ‘‘$14,430’’ in its place. ■ § 381.505 The final regulations (TD 9846) that are the subject of this correction are issued under section 965 of the Code. [Amended] 7. In § 381.505, paragraph (a) is amended by removing ‘‘$23,330’’ and adding ‘‘$24,920’’ in its place and by removing ‘‘$26,410’’ and adding ‘‘$28,210’’ in its place. As published, the final regulations (TD 9846) contain errors that need to be corrected. List of Subjects in 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. Correction of Publication Accordingly, 26 CFR part 1 is corrected by making the following correcting amendments: ■ PART 1—INCOME TAXES Paragraph 1. The authority citation for part 1 continues to read in part as follows: ■ [FR Doc. 2019–07075 Filed 4–9–19; 8:45 am] BILLING CODE 6717–01–P Authority: 26 U.S.C. 7805 * * * Par. 2. Section 1.965–0 is amended by adding the entries for § 1.965–2(j)(5)(i), the introductory language of § 1.965– 2(j)(5)(ii), and § 1.965–4(b)(2)(i) to read as follows: jbell on DSK30RV082PROD with RULES ■ § 1.965–0 Outline of section 965 regulations. * VerDate Sep<11>2014 16:10 Apr 09, 2019 Jkt 247001 PO 00000 * * Frm 00002 * Fmt 4700 * Sfmt 4700 * * § 1.965–4 Disregard of certain transactions. * * * * * (b) * * * (2) * * * (i) Overview. * * * * * ■ Par. 3. Section 1.965–1 is amended by revising paragraph (f)(13)(ii) to read as follows: § 1.965–1 Overview, general rules, and definitions. * * * * * (f) * * * (13) * * * (ii) Specified commodity. The term specified commodity means a commodity held, or, for purposes of paragraph (f)(18) of this section, to be held, by a specified foreign corporation that, in the hands of the specified foreign corporation, is property described in section 1221(a)(1) or 1221(a)(8). This paragraph (f)(13)(ii) does not apply with respect to commodities held by a specified foreign corporation in its capacity as a dealer or trader in commodities. * * * * * ■ Par. 4. Section 1.965–2 is amended by revising paragraphs (b)(2) and (4) to read as follows: § 1.965–2 Adjustments to earnings and profits and basis. * * * * * (b) * * * (2) The treatment of a distribution by the specified foreign corporation to another specified foreign corporation that is made before January 1, 2018, and, in the case of a taxable year of a specified foreign corporation before its last taxable year that begins before January 1, 2018, any other distribution from the specified foreign corporation made before the relevant E&P measurement date, is determined under section 959. * * * * * (4) The treatment of distributions described in paragraph (b)(2) of this section that are disregarded under § 1.965–4 is redetermined (if necessary) and the treatment of all distributions from the specified foreign corporation other than those described in paragraph E:\FR\FM\10APR1.SGM 10APR1 Federal Register / Vol. 84, No. 69 / Wednesday, April 10, 2019 / Rules and Regulations (b)(2) of this section is determined under section 959. * * * * * ■ Par. 5. Section 1.965–7 is amended by revising paragraphs (c)(3)(iv)(A)(2) and (c)(3)(iv)(B)(4)(viii) to read as follows: § 1.965–7 Elections, payment, and other special rules. * * * * * (c) * * * (3) * * * (iv) * * * (A) * * * (2) Requirement to enter into a transfer agreement. The shareholder with respect to which a triggering event occurs and an eligible section 965(i) transferee (as defined in paragraph (c)(3)(iv)(B)(1) of this section) must enter into an agreement with the Commissioner that satisfies the requirements of paragraph (c)(3)(iv)(B) of this section. (B) * * * (4) * * * (viii) An acknowledgement that the eligible section 965(i) transferor and any successor to the eligible section 965(i) transferor will remain jointly and severally liable for the section 965(i) net tax liability being assumed by the eligible section 965(i) transferee; * * * * * ■ Par. 6. Section 1.965–8 is amended by revising the heading of paragraph (e) and paragraphs (e)(1) and (g)(1)(ii)(B)(2) to read as follows: § 1.965–8 Affiliated groups (including consolidated groups). jbell on DSK30RV082PROD with RULES * * * * * (e) Treatment of a consolidated group or other affiliated group as a single section 958(a) U.S. shareholder or a single person—(1) In general. All members of a consolidated group that are section 958(a) U.S. shareholders of a specified foreign corporation are treated as a single section 958(a) U.S. shareholder for purposes of section 965(b), § 1.965–1(b)(2), and § 1.965–3. Furthermore, all members of a consolidated group are treated as a single person for purposes of paragraphs (h), (k), and (n) of section 965 and § 1.965–7. In addition, all members of an affiliated group that are section 958(a) U.S. shareholders of a specified foreign corporation are treated as a single section 958(a) U.S. shareholder for purposes of § 1.965–2(f). Thus, for example, any election governed by section 965(h) and § 1.965–7(b) must be made by the agent (within the meaning of § 1.1502–77) of the group as a single election on behalf of all members of the consolidated group. Similarly, the VerDate Sep<11>2014 16:10 Apr 09, 2019 Jkt 247001 determination of whether the transfer of assets by one member to a non-member of the consolidated group would constitute an acceleration event under § 1.965–7(b)(3)(ii)(B) takes into account all of the assets of the consolidated group, which for purposes of this determination, includes all of the assets of each consolidated group member. In analyzing issues relating to the transfer of assets of a consolidated group, appropriate adjustments are made to prevent the duplication of assets or asset value. * * * * * (g) * * * (1) * * * (ii) * * * (B) * * * (2) Determining section 965(a) inclusion amounts under section 965(b)(5). Under section 965(b) and paragraph (b) of this section, for purposes of determining the section 965(a) inclusion amount of a section 958(a) U.S. shareholder with respect to a deferred foreign income corporation, if, after applying § 1.965–1(b)(2), the section 958(a) U.S. shareholder is an E&P net surplus shareholder, then the U.S. dollar amount of the section 958(a) U.S. shareholder’s pro rata share of the section 965(a) earnings amount of the deferred foreign income corporation is further reduced (but not below zero) by the deferred foreign income corporation’s allocable share of the section 958(a) U.S. shareholder’s applicable share of the affiliated group’s aggregate unused E&P deficit. USS3 is the only E&P net deficit shareholder in the USP Group, and, therefore, the aggregate unused E&P deficit of the USP Group is equal to USS3’s excess aggregate foreign E&P deficit ($100x). The applicable share of the USP Group’s aggregate unused E&P deficit of each of USS1 and USS2, respectively, is an amount that bears the same proportion to the USP Group’s aggregate unused E&P deficit as the product of the group ownership percentage of USS1 and USS2, respectively, multiplied by the amount that would (but for section 965(b)(5) and paragraph (b) of this section) constitute the aggregate section 965(a) inclusion amount of USS1 and USS2, respectively, bears to the aggregate of such amounts with respect to both USS1 and USS2. Therefore, USS1’s applicable share of the USP Group’s aggregate unused E&P deficit is $40 ($100x × ($200x/($200x + $300x))) and USS2’s applicable share of the USP Group’s aggregate unused E&P deficit is $60x ($100x × ($300x/($200x + $300x))). Because USS1 is a section 958(a) U.S. shareholder with respect to only one PO 00000 Frm 00003 Fmt 4700 Sfmt 4700 14261 deferred foreign income corporation, the entire $40x of USS1’s applicable share of the USP Group’s aggregate unused E&P deficit is treated as CFC1’s allocable share of USS1’s applicable share of the USP Group’s aggregate unused E&P deficit, and thus USS1’s section 965(a) inclusion amount with respect to CFC1 is reduced to $160x ($200x¥$40x). Because USS2 is a section 958(a) U.S. shareholder with respect to only one deferred foreign income corporation, the entire $60x of USS2’s applicable share of the USP Group’s aggregate unused E&P deficit is treated as CFC3’s allocable share of USS2’s applicable share of the USP Group’s aggregate unused E&P deficit, and thus USS2’s section 965(a) inclusion amount with respect to CFC3 is reduced to $240x ($300x¥$60x). Martin V. Franks, Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration). [FR Doc. 2019–07012 Filed 4–9–19; 8:45 am] BILLING CODE 4830–01–P DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [TD 9846] RIN 1545–BO51 Regulations Regarding the Transition Tax Under Section 965 and Related Provisions; Correction Internal Revenue Service (IRS), Treasury. ACTION: Final regulations; correction. AGENCY: This document contains a correction to final regulations (TD 9846) that were published in the Federal Register on Tuesday, February 5, 2019 (84 FR 1838). The final regulations implement section 965 of the Internal Revenue Code (the ‘‘Code’’). Section 965 was amended by the Tax Cuts and Job Act, which was enacted on December 22, 2017. DATES: This correction is effective on April 10, 2019. FOR FURTHER INFORMATION CONTACT: Natalie Punchak at (202) 317–6934 (not a toll-free number). SUPPLEMENTARY INFORMATION: SUMMARY: Background The final regulations (TD 9846) that are the subject of this correction are issued under section 965 of the Code. E:\FR\FM\10APR1.SGM 10APR1

Agencies

[Federal Register Volume 84, Number 69 (Wednesday, April 10, 2019)]
[Rules and Regulations]
[Pages 14260-14261]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-07012]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9846]
RIN 1545-BO51


Regulations Regarding the Transition Tax Under Section 965 and 
Related Provisions; Correction

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correcting amendments.

-----------------------------------------------------------------------

SUMMARY: This document contains corrections to final regulations (TD 
9846) that were published in the Federal Register on Tuesday, February 
5, 2019 (84 FR 1838). The final regulations implement section 965 of 
the Internal Revenue Code (the ``Code''). Section 965 was amended by 
the Tax Cuts and Job Act, which was enacted on December 22, 2017.

DATES: This correction is effective on April 10, 2019.

FOR FURTHER INFORMATION CONTACT: Natalie Punchak at (202) 317-6934 (not 
a toll-free number).

SUPPLEMENTARY INFORMATION: 

Background

    The final regulations (TD 9846) that are the subject of this 
correction are issued under section 965 of the Code.

Need for Correction

    As published, the final regulations (TD 9846) contain errors that 
need to be corrected.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Correction of Publication

    Accordingly, 26 CFR part 1 is corrected by making the following 
correcting amendments:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority:  26 U.S.C. 7805 * * *


0
Par. 2. Section 1.965-0 is amended by adding the entries for Sec.  
1.965-2(j)(5)(i), the introductory language of Sec.  1.965-2(j)(5)(ii), 
and Sec.  1.965-4(b)(2)(i) to read as follows:


Sec.  1.965-0   Outline of section 965 regulations.

* * * * *


Sec.  1.965-2   Adjustments to earnings and profits and basis.

* * * * *
    (j) * * *
    (5) * * *
    (i) Facts.
    (ii) Analysis.
* * * * *


Sec.  1.965-4   Disregard of certain transactions.

* * * * *
    (b) * * *
    (2) * * *
    (i) Overview.
* * * * *

0
Par. 3. Section 1.965-1 is amended by revising paragraph (f)(13)(ii) to 
read as follows:


Sec.  1.965-1   Overview, general rules, and definitions.

* * * * *
    (f) * * *
    (13) * * *
    (ii) Specified commodity. The term specified commodity means a 
commodity held, or, for purposes of paragraph (f)(18) of this section, 
to be held, by a specified foreign corporation that, in the hands of 
the specified foreign corporation, is property described in section 
1221(a)(1) or 1221(a)(8). This paragraph (f)(13)(ii) does not apply 
with respect to commodities held by a specified foreign corporation in 
its capacity as a dealer or trader in commodities.
* * * * *

0
Par. 4. Section 1.965-2 is amended by revising paragraphs (b)(2) and 
(4) to read as follows:


Sec.  1.965-2   Adjustments to earnings and profits and basis.

* * * * *
    (b) * * *
    (2) The treatment of a distribution by the specified foreign 
corporation to another specified foreign corporation that is made 
before January 1, 2018, and, in the case of a taxable year of a 
specified foreign corporation before its last taxable year that begins 
before January 1, 2018, any other distribution from the specified 
foreign corporation made before the relevant E&P measurement date, is 
determined under section 959.
* * * * *
    (4) The treatment of distributions described in paragraph (b)(2) of 
this section that are disregarded under Sec.  1.965-4 is redetermined 
(if necessary) and the treatment of all distributions from the 
specified foreign corporation other than those described in paragraph

[[Page 14261]]

(b)(2) of this section is determined under section 959.
* * * * *

0
Par. 5. Section 1.965-7 is amended by revising paragraphs 
(c)(3)(iv)(A)(2) and (c)(3)(iv)(B)(4)(viii) to read as follows:


Sec.  1.965-7   Elections, payment, and other special rules.

* * * * *
    (c) * * *
    (3) * * *
    (iv) * * *
    (A) * * *
    (2) Requirement to enter into a transfer agreement. The shareholder 
with respect to which a triggering event occurs and an eligible section 
965(i) transferee (as defined in paragraph (c)(3)(iv)(B)(1) of this 
section) must enter into an agreement with the Commissioner that 
satisfies the requirements of paragraph (c)(3)(iv)(B) of this section.
    (B) * * *
    (4) * * *
    (viii) An acknowledgement that the eligible section 965(i) 
transferor and any successor to the eligible section 965(i) transferor 
will remain jointly and severally liable for the section 965(i) net tax 
liability being assumed by the eligible section 965(i) transferee;
* * * * *

0
Par. 6. Section 1.965-8 is amended by revising the heading of paragraph 
(e) and paragraphs (e)(1) and (g)(1)(ii)(B)(2) to read as follows:


Sec.  1.965-8   Affiliated groups (including consolidated groups).

* * * * *
    (e) Treatment of a consolidated group or other affiliated group as 
a single section 958(a) U.S. shareholder or a single person--(1) In 
general. All members of a consolidated group that are section 958(a) 
U.S. shareholders of a specified foreign corporation are treated as a 
single section 958(a) U.S. shareholder for purposes of section 965(b), 
Sec.  1.965-1(b)(2), and Sec.  1.965-3. Furthermore, all members of a 
consolidated group are treated as a single person for purposes of 
paragraphs (h), (k), and (n) of section 965 and Sec.  1.965-7. In 
addition, all members of an affiliated group that are section 958(a) 
U.S. shareholders of a specified foreign corporation are treated as a 
single section 958(a) U.S. shareholder for purposes of Sec.  1.965-
2(f). Thus, for example, any election governed by section 965(h) and 
Sec.  1.965-7(b) must be made by the agent (within the meaning of Sec.  
1.1502-77) of the group as a single election on behalf of all members 
of the consolidated group. Similarly, the determination of whether the 
transfer of assets by one member to a non-member of the consolidated 
group would constitute an acceleration event under Sec.  1.965-
7(b)(3)(ii)(B) takes into account all of the assets of the consolidated 
group, which for purposes of this determination, includes all of the 
assets of each consolidated group member. In analyzing issues relating 
to the transfer of assets of a consolidated group, appropriate 
adjustments are made to prevent the duplication of assets or asset 
value.
* * * * *
    (g) * * *
    (1) * * *
    (ii) * * *
    (B) * * *
    (2) Determining section 965(a) inclusion amounts under section 
965(b)(5). Under section 965(b) and paragraph (b) of this section, for 
purposes of determining the section 965(a) inclusion amount of a 
section 958(a) U.S. shareholder with respect to a deferred foreign 
income corporation, if, after applying Sec.  1.965-1(b)(2), the section 
958(a) U.S. shareholder is an E&P net surplus shareholder, then the 
U.S. dollar amount of the section 958(a) U.S. shareholder's pro rata 
share of the section 965(a) earnings amount of the deferred foreign 
income corporation is further reduced (but not below zero) by the 
deferred foreign income corporation's allocable share of the section 
958(a) U.S. shareholder's applicable share of the affiliated group's 
aggregate unused E&P deficit. USS3 is the only E&P net deficit 
shareholder in the USP Group, and, therefore, the aggregate unused E&P 
deficit of the USP Group is equal to USS3's excess aggregate foreign 
E&P deficit ($100x). The applicable share of the USP Group's aggregate 
unused E&P deficit of each of USS1 and USS2, respectively, is an amount 
that bears the same proportion to the USP Group's aggregate unused E&P 
deficit as the product of the group ownership percentage of USS1 and 
USS2, respectively, multiplied by the amount that would (but for 
section 965(b)(5) and paragraph (b) of this section) constitute the 
aggregate section 965(a) inclusion amount of USS1 and USS2, 
respectively, bears to the aggregate of such amounts with respect to 
both USS1 and USS2. Therefore, USS1's applicable share of the USP 
Group's aggregate unused E&P deficit is $40 ($100x x ($200x/($200x + 
$300x))) and USS2's applicable share of the USP Group's aggregate 
unused E&P deficit is $60x ($100x x ($300x/($200x + $300x))). Because 
USS1 is a section 958(a) U.S. shareholder with respect to only one 
deferred foreign income corporation, the entire $40x of USS1's 
applicable share of the USP Group's aggregate unused E&P deficit is 
treated as CFC1's allocable share of USS1's applicable share of the USP 
Group's aggregate unused E&P deficit, and thus USS1's section 965(a) 
inclusion amount with respect to CFC1 is reduced to $160x ($200x-$40x). 
Because USS2 is a section 958(a) U.S. shareholder with respect to only 
one deferred foreign income corporation, the entire $60x of USS2's 
applicable share of the USP Group's aggregate unused E&P deficit is 
treated as CFC3's allocable share of USS2's applicable share of the USP 
Group's aggregate unused E&P deficit, and thus USS2's section 965(a) 
inclusion amount with respect to CFC3 is reduced to $240x ($300x-$60x).

Martin V. Franks,
Chief, Publications and Regulations Branch, Legal Processing Division, 
Associate Chief Counsel (Procedure and Administration).
[FR Doc. 2019-07012 Filed 4-9-19; 8:45 am]
 BILLING CODE 4830-01-P