Guidance Under Sections 951A and 954 Regarding Income Subject to a High Rate of Foreign Tax; Correcting Amendment, 79853-79854 [2020-25371]
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Federal Register / Vol. 85, No. 239 / Friday, December 11, 2020 / Rules and Regulations
§ 1.937–2
[Amended]
Par. 11. In § 1.937–2 amend paragraph
(d) by removing ‘‘§ 1.863–3(f)’’ and
adding in its place ‘‘§ 1.863–3(e)’’.
■
§ 1.937–3
[Amended]
Par. 12. In § 1.937–3 amend paragraph
(d) by removing ‘‘§ 1.863–3(f)’’ and
adding in its place ‘‘§ 1.863–3(e)’’.
■ Par. 13. Section 1.1502–13 is
amended by revising paragraph
(c)(7)(ii)(N) to read as follows:
■
§ 1.1502–13
Intercompany transactions.
jbell on DSKJLSW7X2PROD with RULES
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(c) * * *
(7) * * *
(ii) * * *
(N) Example (14): Source of income
under section 863—(1) Intercompany
sale—(i) Facts. S manufactures
inventory property solely in the United
States and recognizes $75x of income on
sales to B in Year 1. B conducts further
production activity on the inventory
property solely in Country Y and then
sells the inventory property to X in
Country Y and recognizes $25x of
income on the sale to X, also in Year 1.
Title passes from S to B, and from B to
X, in Country Y. Assume that applying
§ 1.863–3 on a single entity basis,
including the formula for
apportionment of multi-country
production activities by reference to the
basis of production assets, $10x would
be treated as foreign source income and
$90x would be treated as U.S. source
income (that is, 10 percent of the
production occurred outside the United
States and 90 percent occurred within
the United States, as measured by the
basis of assets used in production
activities with respect to the property).
Assume further that, on a separate entity
basis, S would have $0x of foreign
source income and $75x of U.S. source
income and all of B’s $25x of income
would be foreign source income.
(ii) Analysis. Under the matching rule,
both S’s $75x intercompany item and
B’s $25x corresponding item are taken
into account in Year 1. In determining
the source of S and B’s income from the
inventory property sales, the attributes
of S’s intercompany item and B’s
corresponding item are redetermined to
the extent necessary to produce the
same effect on consolidated taxable
income (and consolidated tax liability)
as if S and B were divisions of a single
corporation. See paragraph (c)(1)(i) of
this section. On a single entity basis, S
and B would have $10x that would be
treated as foreign source income and
$90x that would be treated as U.S.
source income, but without application
of this section (that is, on a separate
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22:08 Dec 10, 2020
Jkt 253001
entity basis), S would have $75x of U.S.
source income and B would have $25x
of foreign source income. Under
paragraph (c)(4)(ii) of this section, a
redetermined attribute must be allocated
between S and B using a reasonable
method. On a separate entity basis B
would have only foreign source income
and S would have only U.S. source
income. Accordingly, under paragraph
(c)(1)(i) of this section, $15x of B’s $25x
sales income that would be treated as
foreign source income on a separate
entity basis is redetermined to be U.S.
source income.
(2) Sale of property reflecting
intercompany services or intangibles—
(i) Facts. S earns $10x of income
performing services in the United States
for B. B capitalizes S’s fees into the basis
of inventory property that it
manufactures in the United States and
sells to an unrelated person in Year 1 at
a $90x profit, with title passing in
Country Y. Assume that on a single
entity basis, $100x is treated as U.S.
source income and $0x is treated as
foreign source income. Further assume
that on a separate entity basis, S would
have $10x of U.S. source income, and B
would have $90x of U.S. source income,
with neither having any foreign source
income.
(ii) Analysis. Under the matching rule,
S’s $10x income and B’s $90x income
are taken into account in Year 1. In
determining the source of S and B’s
income, the attributes of S’s
intercompany item and B’s
corresponding item are redetermined to
the extent necessary to produce the
same effect on consolidated taxable
income (and consolidated tax liability)
as if S and B were divisions of a single
corporation. Because the results are the
same on a single entity basis and a
separate entity basis ($100x of U.S.
source income and $0x of foreign source
income), the attributes are not
redetermined under paragraph (c)(1)(i)
of this section.
Sunita Lough,
Deputy Commissioner for Services and
Enforcement.
Approved: September 21, 2020.
David J. Kautter,
Assistant Secretary of the Treasury (Tax
Policy).
[FR Doc. 2020–21817 Filed 12–10–20; 8:45 am]
BILLING CODE 4830–01–P
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79853
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9902]
RIN 1545–BP15
Guidance Under Sections 951A and
954 Regarding Income Subject to a
High Rate of Foreign Tax; Correcting
Amendment
Internal Revenue Service (IRS),
Treasury.
ACTION: Correcting amendments.
AGENCY:
This document contains
corrections to Treasury Decision 9902,
which was published in the Federal
Register on Thursday, July 23, 2020.
Treasury Decision 9902 contained final
regulations under the global intangible
low-taxed income and subpart F income
provisions of the Internal Revenue Code
regarding the treatment of income that
is subject to a high rate of foreign tax.
DATES: This correction is effective on
December 11, 2020.
FOR FURTHER INFORMATION CONTACT:
Jorge M. Oben or Larry R. Pounders at
(202) 317–6934 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
SUMMARY:
Background
The final regulations (TD 9902) that
are the subject of this correction are
issued under section 951A of the Code.
Need for Correction
As published on July 23, 2020 (85 FR
44620) the final regulations (TD 9902)
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:
■
Authority: 26 U.S.C. 7805.
*
*
*
*
*
Par. 2. Section 1.951A–2 is amended
by:
■ a. Revising the third sentence of
paragraph (c)(3)(ii)(B).
■ b. Revising paragraphs (c)(7)(iii)(B)(2)
and (c)(7)(viii)(A)(2)(ii).
■ c. Revising the first sentence of
paragraph (c)(7)(viii)(A)(4) introductory
text.
■
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79854
Federal Register / Vol. 85, No. 239 / Friday, December 11, 2020 / Rules and Regulations
d. Revising paragraph
(c)(7)(viii)(A)(4)(i).
■ e. Redesignating paragraph
(c)(8)(iii)(C)(2)(vii) as paragraph
(c)(8)(iii)(C)(2)(vii).
■ f. Removing ‘‘DE1Y’’ in paragraph
(c)(8)(iii)(D)(6)(i) and adding in its place
‘‘FDE1Y’’.
■ g. Removing ‘‘CFC1X’’ in paragraph
(c)(8)(iii)(D)(6)(iii) and adding in its
place ‘‘CFC2X’’.
The revisions read as follows:
■
§ 1.951A–2
Tested income and tested loss.
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*
*
*
*
*
(c) * * *
(3) * * *
(ii) * * *
(B) * * * Therefore, for example,
interest expense that is apportioned
under the modified gross income
method to a tentative gross tested
income item of a lower-tier corporation
under paragraph (c)(7)(iii)(A) of this
section may be allocated and
apportioned to the tested income of the
upper-tier corporation or to the residual
grouping, depending on whether the
lower-tier corporation’s tentative gross
tested income item is an item of gross
tested income or is excluded from gross
tested income under the high-tax
exclusion. * * *
*
*
*
*
*
(7) * * *
(iii) * * *
(B) * * *
(2) In the case of payments to a tested
unit that is treated as a foreign branch
under paragraph (c)(7)(iii)(B)(1) of this
section, applying the principles of
§ 1.904–6(a)(2)(ii) and (iii) as if the
tested unit receiving the payment were
a foreign branch owner (and as if the
tested unit making the payment were a
foreign branch); and
*
*
*
*
*
(viii) * * *
(A) * * *
(2) * * *
(ii) Each United States shareholder
that owns within the meaning of section
958(a) (including both domestic
partnerships that are United States
shareholders that own stock within the
meaning of section 958(a) without
regard to § 1.951A–1(e)(1) and partners
of a domestic partnership that are
United States shareholders that are
treated as owning stock withing the
meaning of section 958(a) by reason of
§ 1.951A–1(e)(1)) stock of the controlled
foreign corporation as of the end of the
CFC’s taxable year to which the election
relates must file amended Federal
income tax returns (or timely original
federal income tax returns if a return
has not yet been filed) reflecting the
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22:08 Dec 10, 2020
Jkt 253001
effect of such election (or revocation) for
the U.S. shareholder inclusion year with
or within which the CFC inclusion year
ends as well as for any other taxable
year in which the U.S. tax liability of
the United States shareholder would be
increased by reason of the election (or
revocation) (or in the case of a
partnership if any item reported by the
partnership or any partnership-related
item would change as a result of the
election (or revocation)) within a single
period no greater than six months
within the 24-month period described
in paragraph (c)(7)(viii)(A)(2)(i) of this
section; and
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*
(4) A United States shareholder that is
a partner in a partnership that is also a
United States shareholder in the
controlled foreign corporation must
generally file an amended return, as
required under paragraph
(c)(7)(viii)(A)(2)(ii) of this section, and
must generally pay any additional tax
owed as required under paragraph
(c)(7)(viii)(A)(2)(iii) of this section.
* * *
(i) The partnership timely files an
administrative adjustment request
described in paragraph
(c)(7)(viii)(A)(2)(i) or (ii) of this section,
as applicable; and,
*
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*
Crystal Pemberton,
Senior Federal Register Liaison, Publications
and Regulations Branch, Legal Processing
Division, Associate Chief Counsel, (Procedure
and Administration).
[FR Doc. 2020–25371 Filed 12–10–20; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF HOMELAND
SECURITY
Coast Guard
33 CFR Part 165
[Docket Number USCG–2020–0641]
RIN 1625–AA08
Safety Zone; Lower Mississippi River,
Natchez, MS
Coast Guard, DHS.
Temporary final rule.
AGENCY:
ACTION:
The Coast Guard is
establishing a temporary safety zone for
all navigable waters of the Lower
Mississippi River between Mile Marker
(MM) 364.5 and MM 365.5. This action
is necessary to provide for the safety of
persons, vessels, and the marine
environment during a fireworks display.
Entry of persons or vessels into this
SUMMARY:
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zone is prohibited unless authorized by
the Captain of the Port Sector Lower
Mississippi River or a designated
representative.
This rule is effective from 4 p.m.
through 7 p.m. on December 31, 2020.
ADDRESSES: To view documents
mentioned in this preamble as being
available in the docket, go to https://
www.regulations.gov, type USCG–2020–
0641 in the ‘‘SEARCH’’ box and click
‘‘SEARCH.’’ Click on Open Docket
Folder on the line associated with this
rule.
FOR FURTHER INFORMATION CONTACT: If
you have questions on this rule, call or
email MSTC Lindsey Swindle, Sector
Lower Mississippi River, U.S. Coast
Guard; telephone 901–521–4813, email
Lindsey.M.Swindle@uscg.mil.
SUPPLEMENTARY INFORMATION:
DATES:
I. Table of Abbreviations
CFR Code of Federal Regulations
COTP Captain of the Port
DHS Department of Homeland Security
FR Federal Register
NPRM Notice of proposed rulemaking
§ Section
U.S.C. United States Code
II. Background Information and
Regulatory History
The Coast Guard is issuing this
temporary rule without prior notice and
opportunity to comment pursuant to
authority under section 4(a) of the
Administrative Procedure Act (APA) (5
U.S.C. 553(b)). This provision
authorizes an agency to issue a rule
without prior notice and opportunity to
comment when the agency for good
cause finds that those procedures are
‘‘impracticable, unnecessary, or contrary
to the public interest.’’ Under 5 U.S.C.
553(b)(B), the Coast Guard finds that
good cause exists for not publishing a
notice of proposed rulemaking (NPRM)
with respect to this rule because it is
impracticable. We must establish this
safety zone by December 31, 2020, and
lack sufficient time to provide a
reasonable comment period and then
consider those comments before issuing
this rule. The NPRM process would
delay the establishment of the safety
zone until after the date of the event and
compromise public safety
Under 5 U.S.C. 553(d)(3), the Coast
Guard finds that good cause exists for
making this rule effective less than 30
days after publication in the Federal
Register. Delaying the effective date of
this rule would be impracticable
because immediate action is necessary
to protect persons and property from the
potential hazards associated with the
fireworks display.
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[Federal Register Volume 85, Number 239 (Friday, December 11, 2020)]
[Rules and Regulations]
[Pages 79853-79854]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-25371]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9902]
RIN 1545-BP15
Guidance Under Sections 951A and 954 Regarding Income Subject to
a High Rate of Foreign Tax; Correcting Amendment
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Correcting amendments.
-----------------------------------------------------------------------
SUMMARY: This document contains corrections to Treasury Decision 9902,
which was published in the Federal Register on Thursday, July 23, 2020.
Treasury Decision 9902 contained final regulations under the global
intangible low-taxed income and subpart F income provisions of the
Internal Revenue Code regarding the treatment of income that is subject
to a high rate of foreign tax.
DATES: This correction is effective on December 11, 2020.
FOR FURTHER INFORMATION CONTACT: Jorge M. Oben or Larry R. Pounders at
(202) 317-6934 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
The final regulations (TD 9902) that are the subject of this
correction are issued under section 951A of the Code.
Need for Correction
As published on July 23, 2020 (85 FR 44620) the final regulations
(TD 9902) 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 1.951A-2 is amended by:
0
a. Revising the third sentence of paragraph (c)(3)(ii)(B).
0
b. Revising paragraphs (c)(7)(iii)(B)(2) and (c)(7)(viii)(A)(2)(ii).
0
c. Revising the first sentence of paragraph (c)(7)(viii)(A)(4)
introductory text.
[[Page 79854]]
0
d. Revising paragraph (c)(7)(viii)(A)(4)(i).
0
e. Redesignating paragraph (c)(8)(iii)(C)(2)(vii) as paragraph
(c)(8)(iii)(C)(2)(vii).
0
f. Removing ``DE1Y'' in paragraph (c)(8)(iii)(D)(6)(i) and adding in
its place ``FDE1Y''.
0
g. Removing ``CFC1X'' in paragraph (c)(8)(iii)(D)(6)(iii) and adding in
its place ``CFC2X''.
The revisions read as follows:
Sec. 1.951A-2 Tested income and tested loss.
* * * * *
(c) * * *
(3) * * *
(ii) * * *
(B) * * * Therefore, for example, interest expense that is
apportioned under the modified gross income method to a tentative gross
tested income item of a lower-tier corporation under paragraph
(c)(7)(iii)(A) of this section may be allocated and apportioned to the
tested income of the upper-tier corporation or to the residual
grouping, depending on whether the lower-tier corporation's tentative
gross tested income item is an item of gross tested income or is
excluded from gross tested income under the high-tax exclusion. * * *
* * * * *
(7) * * *
(iii) * * *
(B) * * *
(2) In the case of payments to a tested unit that is treated as a
foreign branch under paragraph (c)(7)(iii)(B)(1) of this section,
applying the principles of Sec. 1.904-6(a)(2)(ii) and (iii) as if the
tested unit receiving the payment were a foreign branch owner (and as
if the tested unit making the payment were a foreign branch); and
* * * * *
(viii) * * *
(A) * * *
(2) * * *
(ii) Each United States shareholder that owns within the meaning of
section 958(a) (including both domestic partnerships that are United
States shareholders that own stock within the meaning of section 958(a)
without regard to Sec. 1.951A-1(e)(1) and partners of a domestic
partnership that are United States shareholders that are treated as
owning stock withing the meaning of section 958(a) by reason of Sec.
1.951A-1(e)(1)) stock of the controlled foreign corporation as of the
end of the CFC's taxable year to which the election relates must file
amended Federal income tax returns (or timely original federal income
tax returns if a return has not yet been filed) reflecting the effect
of such election (or revocation) for the U.S. shareholder inclusion
year with or within which the CFC inclusion year ends as well as for
any other taxable year in which the U.S. tax liability of the United
States shareholder would be increased by reason of the election (or
revocation) (or in the case of a partnership if any item reported by
the partnership or any partnership-related item would change as a
result of the election (or revocation)) within a single period no
greater than six months within the 24-month period described in
paragraph (c)(7)(viii)(A)(2)(i) of this section; and
* * * * *
(4) A United States shareholder that is a partner in a partnership
that is also a United States shareholder in the controlled foreign
corporation must generally file an amended return, as required under
paragraph (c)(7)(viii)(A)(2)(ii) of this section, and must generally
pay any additional tax owed as required under paragraph
(c)(7)(viii)(A)(2)(iii) of this section. * * *
(i) The partnership timely files an administrative adjustment
request described in paragraph (c)(7)(viii)(A)(2)(i) or (ii) of this
section, as applicable; and,
* * * * *
Crystal Pemberton,
Senior Federal Register Liaison, Publications and Regulations Branch,
Legal Processing Division, Associate Chief Counsel, (Procedure and
Administration).
[FR Doc. 2020-25371 Filed 12-10-20; 8:45 am]
BILLING CODE 4830-01-P
