Guidance on the Treatment of Qualified Improvement Property Under Sections 250(b) and 951A(d) and Guidance Related to the Foreign Tax Credit, 52971-52973 [2021-20615]
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Federal Register / Vol. 86, No. 183 / Friday, September 24, 2021 / Rules and Regulations
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9956]
RIN 1545–BP91; RIN 1545–BP70
Guidance on the Treatment of
Qualified Improvement Property Under
Sections 250(b) and 951A(d) and
Guidance Related to the Foreign Tax
Credit
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations.
AGENCY:
This document contains final
regulations under sections 250 and
951A addressing the calculation of
qualified business asset investment
(‘‘QBAI’’) for qualified improvement
property (‘‘QIP’’) under the alternative
depreciation system (‘‘ADS’’). This
document also contains final regulations
with transition rules relating to the
impact on loss accounts of net operating
loss (NOL) carrybacks allowed by reason
of the Coronavirus Aid, Relief, and
Economic Security Act (the ‘‘CARES
Act’’). The final regulations affect
United States shareholders of controlled
foreign corporations, domestic
corporations eligible for the section 250
deduction, and taxpayers that claim
credits or deductions for foreign income
taxes.
DATES:
Effective date: These regulations are
effective on September 24, 2021.
Applicability dates: For dates of
applicability, see §§ 1.250–1(b),
1.904(f)–12(j)(7), and 1.951A–7(a).
FOR FURTHER INFORMATION CONTACT:
Concerning §§ 1.250(b)–1(b)(2) and
1.250(b)–2(e)(2), Lorraine Rodriguez at
(202) 317–6726; concerning § 1.904(f)–
12, Jeffrey L. Parry at (202) 317–4916;
concerning § 1.951A–3(e)(2), Jorge M.
Oben at (202) 317–6934 (not toll-free
numbers).
SUMMARY:
SUPPLEMENTARY INFORMATION:
Background
I. Treatment of QIP Under Sections 250
and 951A
On January 15, 2021, the Department
of the Treasury (‘‘Treasury
Department’’) and the IRS published
proposed regulations (REG–111950–20)
under sections 250, 951A, 1297, and
1298 in the Federal Register (86 FR
4582, as corrected at 86 FR 12886) (the
‘‘2021 proposed regulations’’). The
provisions in the 2021 proposed
regulations under sections 250 and
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951A, which were added to the Code in
the Tax Cuts and Jobs Act, Public Law
115–97, 131 Stat. 2234 (2017),
addressed the treatment of QIP under
the ADS for purposes of calculating
QBAI.
The Treasury Department and the IRS
received no written comments with
respect to the proposed rules under
sections 250 and 951A. A public hearing
on the 2021 proposed regulations was
not held because there were no requests
to speak.
This rulemaking finalizes the portion
of the 2021 proposed regulations under
sections 250 and 951A, but does not
finalize the portions of the 2021
proposed regulations under sections
1297 and 1298 (determining whether a
foreign corporation is treated as a
passive foreign investment company
and the treatment of income and assets
of a qualifying insurance corporation
that is engaged in the active conduct of
an insurance business). The Treasury
Department and the IRS intend to
finalize those portions of the 2021
proposed regulations separately.
II. Treatment of Net Operating Losses
Incurred in Post-2017 Taxable Years
That Are Carried Back to Pre-2018
Taxable Years
On November 12, 2020, the Treasury
Department and the IRS published
proposed regulations (REG–101657–20)
in the Federal Register (85 FR 72078)
(the ‘‘2020 FTC proposed regulations’’),
which included revisions to the
transition rules for post-2017 NOL
carrybacks to pre-2018 taxable years.
The Treasury Department and the IRS
received no written comments with
respect to the proposed revisions to the
transition rules that address post-2017
NOL carrybacks to pre-2018 taxable
years. A public hearing on the 2020 FTC
proposed regulations was held on April
7, 2021.
This rulemaking finalizes the portion
of the 2020 FTC proposed regulations
that addresses the transition rules for
post-2017 NOL carrybacks to pre-2018
taxable years. This rulemaking does not
finalize any other portions of the 2020
FTC proposed regulations. The Treasury
Department and the IRS intend to
finalize those portions of the 2020 FTC
proposed regulations separately.
Summary of Comments and
Explanation of Revisions
The Treasury Department and the IRS
received no written comments with
respect to the proposed rules under
sections 250 and 951A or the transition
rules that address post-2017 NOL
carrybacks to pre-2018 taxable years.
Therefore, those portions of the
PO 00000
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52971
proposed regulations are being finalized
without substantive change.
Special Analyses
I. Regulatory Planning and Review—
Economic Analysis
These regulations are not subject to
review under section 6(b) of Executive
Order 12866 pursuant to the
Memorandum of Agreement (April 11,
2018) between the Treasury Department
and the Office of Management and
Budget regarding review of tax
regulations.
II. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501–3520) generally
requires that a federal agency obtain the
approval of the OMB before collecting
information from the public, whether
such collection of information is
mandatory, voluntary, or required to
obtain or retain a benefit.
There are no information collection
requirements associated with these final
regulations.
III. Regulatory Flexibility Act
It is hereby certified that these final
regulations will not have a significant
economic impact on a substantial
number of small entities within the
meaning of section 601(6) of the
Regulatory Flexibility Act (5 U.S.C.
chapter 6).
A. Regulations Regarding the Treatment
of QIP Under Sections 250 and 951A
The economic impact of the
regulations regarding the treatment of
QIP under sections 250 and 951A is not
likely to be significant because these
regulations merely clarify that the
technical amendment to section 168
enacted in section 2307(a) of the CARES
Act applies to determine the adjusted
basis of property under section
951A(d)(3) as if it had originally been
part of section 13204 of the Act. The
clarification resolves an ambiguity and
adopts the interpretation that does not
require duplicative recordkeeping for
the basis in this property. Therefore,
this rule should reduce recordkeeping
and compliance burdens that might
otherwise apply. In addition, the
regulations do not impose a collection
of information burden on any person,
including small entities. Accordingly, it
is hereby certified that the regulations
regarding the treatment of QIP under
sections 250 and 951A will not have a
significant economic impact on a
substantial number of small entities.
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52972
Federal Register / Vol. 86, No. 183 / Friday, September 24, 2021 / Rules and Regulations
B. Foreign Tax Credit Transition Rules
Addressing Post-2017 NOL Carrybacks
to Pre-2018 Taxable Years
The foreign tax credit transition rules
addressing post-2017 NOL carrybacks to
pre-2018 taxable years provide guidance
needed to comply with statutory
changes and affect individuals and
Size
(by business receipts)
Under
$500,000
(%)
FTC/Total Receipts ...........
FTC/(Total Receipts-Total
Deductions) ....................
FTC/Business Receipts .....
corporations claiming foreign tax
credits. Adequate data are not available
at this time to certify that a substantial
number of small entities would be
unaffected. However, the Treasury
Department and the IRS have
determined that the regulations will not
have a significant economic impact on
domestic small business entities. Based
$500,000
under
$1,000,000
(%)
$1,000,000
under
$5,000,000
(%)
$5,000,000
under
$10,000,000
(%)
on information from the Statistics of
Income 2017 Corporate File, foreign tax
credits as a percentage of three different
tax-related measures of annual receipts
(see Table for variables) by corporations
are substantially less than the 3 to 5
percent threshold for significant
economic impact.
$10,000,000
under
$50,000,000
(%)
$50,000,000
under
$100,000,000
(%)
$100,000,000
under
$250,000,000
(%)
$250,000,000
or more
(%)
0.12
0.00
0.00
0.00
0.01
0.01
0.02
0.28
0.61
0.84
0.03
0.00
0.09
0.00
0.05
0.00
0.35
0.01
0.71
0.01
1.38
0.02
9.89
0.05
Source: Statistics of Income (2017) Form 1120.
In addition, these final regulations do
not impose a collection of information
burden on any person, including small
entities. Accordingly, it is hereby
certified that the foreign tax credit
transition rules addressing post-2017
NOL carrybacks to pre-2018 taxable
years will not have a significant
economic impact on a substantial
number of small entities.
Pursuant to section 7805(f) of the
Internal Revenue Code, the notices of
proposed rulemaking preceding these
final regulations were submitted to the
Chief Counsel for Advocacy of the Small
Business Administration for comments
on their impact on small business, and
no comments were received.
federalism implications and do not
impose substantial direct compliance
costs on state and local governments or
preempt state law within the meaning of
the Executive Order.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded
Mandates Reform Act of 1995 requires
that agencies assess anticipated costs
and benefits and take certain other
actions before issuing a final rule that
includes any Federal mandate that may
result in expenditures in any one year
by a state, local, or tribal government, in
the aggregate, or by the private sector, of
$100 million in 1995 dollars, updated
annually for inflation. These regulations
do not include any Federal mandate that
may result in expenditures by state,
local, or tribal governments, or by the
private sector in excess of that
threshold.
IRS Revenue Procedures, Revenue
Rulings, Notices, and other guidance
cited in this document are published in
the Internal Revenue Bulletin and are
available from the Superintendent of
Documents, U.S. Government
Publishing Office, Washington, DC
20402, or by visiting the IRS website at
https://www.irs.gov.
V. Executive Order 13132: Federalism
Executive Order 13132 (entitled
‘‘Federalism’’) prohibits an agency from
publishing any rule that has federalism
implications if the rule either imposes
substantial, direct compliance costs on
state and local governments, and is not
required by statute, or preempts state
law, unless the agency meets the
consultation and funding requirements
of section 6 of the Executive Order.
These regulations do not have
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Drafting Information
The principal authors of these
regulations are Jorge M. Oben, Jeffrey L.
Parry, and Larry R. Pounders of the
Office of Associate Chief Counsel
(International). However, other
personnel from the Treasury
Department and the IRS participated in
their development.
Statement of Availability of IRS
Documents
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
§ 1.250–1
*
*
*
*
(b) * * * Except as otherwise
provided in this paragraph (b),
§§ 1.250(a)–1 and 1.250(b)–1 through
1.250(b)–6 apply to taxable years
beginning on or after January 1, 2021.
* * * The last sentence in § 1.250(b)–
2(e)(2) applies to taxable years
beginning after December 31, 2017.
■ Par. 3. Section 1.250(b)–2 is amended
by adding a sentence at the end of
paragraph (e)(2) to read as follows:
§ 1.250 (b)–2 Qualified business asset
investment (QBAI).
*
*
*
*
*
(e) * * *
(2) * * * For purposes of applying
section 250(b)(2)(B) and this paragraph
(e), the technical amendment to section
168(g) (to provide a recovery period of
20 years for qualified improvement
property for purposes of the alternative
depreciation system) enacted in section
2307(a) of the Coronavirus Aid, Relief,
and Economic Security Act, Public Law
116–136 (2020) is treated as enacted on
December 22, 2017.
*
*
*
*
*
§ 1.904–2
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is
amended as follows:
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 1.250–1 is amended by
revising the first sentence of paragraph
(b) and adding a sentence at the end of
the paragraph to read as follows:
Introduction.
*
[Amended]
Par. 4. Section 1.904–2(j)(1)(iii)(D) is
amended by removing the language
‘‘§ 1.904(f)–12(j)(5)’’ and adding in its
place the language ‘‘§ 1.904(f)–12(j)(6)’’.
■ Par. 5. Section 1.904(f)–12 is amended
by:
■ 1. Removing paragraph (j)(6);
■ 2. Redesignating paragraph (j)(5) as
paragraph (j)(6); and
■ 3. Adding new paragraphs (j)(5) and
(j)(7);
The additions read as follows:
■
■
PO 00000
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Fmt 4700
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§ 1.904(f)–12
*
*
*
(j) * * *
E:\FR\FM\24SER1.SGM
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Transition rules.
*
*
Federal Register / Vol. 86, No. 183 / Friday, September 24, 2021 / Rules and Regulations
(5) Treatment of net operating losses
incurred in post-2017 taxable years that
are carried back to pre-2018 taxable
years—(i) In general. Except as provided
in paragraph (j)(5)(ii) of this section, a
net operating loss incurred in a taxable
year beginning after December 31, 2017
(a ‘‘post-2017 taxable year’’), which is
carried back, pursuant to section 172, to
a taxable year beginning before January
1, 2018 (a ‘‘pre-2018 carryback year’’),
will be carried back under the rules of
§ 1.904(g)–3(b). For purposes of
applying the rules of § 1.904(g)–3(b),
income in a pre-2018 separate category
in the taxable year to which the net
operating loss is carried back is treated
as if it included only income that would
be assigned to the post-2017 general
category. Therefore, any separate
limitation loss created by reason of a
passive category component of a net
operating loss from a post-2017 taxable
year that is carried back to offset general
category income in a pre-2018 carryback
year will be recaptured in post-2017
taxable years as general category
income, and not as a combination of
general, foreign branch, and section
951A category income.
(ii) Foreign source losses in the post2017 separate categories for foreign
branch category income and section
951A category income. Net operating
losses attributable to a foreign source
loss in the post-2017 separate categories
for foreign branch category income and
section 951A category income are
treated as first offsetting general
category income in a pre-2018 carryback
year to the extent available to be offset
by the net operating loss carryback. If
the sum of foreign source losses in the
taxpayer’s separate categories for foreign
branch category income and section
951A category income in the year the
net operating loss is incurred exceeds
the amount of general category income
that is available to be offset in the
carryback year, then the amount of
foreign source loss in each of the foreign
branch and section 951A categories that
is treated as offsetting general category
income under this paragraph (j)(5)(ii), is
determined on a proportionate basis.
General category income in the pre-2018
carryback year is first offset by foreign
source loss in the taxpayer’s post-2017
separate category for general category
income in the year the net operating loss
is incurred before any foreign source
loss in that year in the separate
categories for foreign branch category
income and section 951A category
income is carried back to reduce general
category income. To the extent a foreign
source loss in a post-2017 separate
category for foreign branch category
VerDate Sep<11>2014
16:01 Sep 23, 2021
Jkt 253001
income or section 951A category income
offsets general category income in a pre2018 taxable year under the rules of this
paragraph (j)(5)(ii), no separate
limitation loss account is created.
*
*
*
*
*
(7) Applicability date. Except as
otherwise provided in this paragraph
(j)(7), this paragraph (j) applies to
taxable years ending on or after
December 31, 2017. Paragraph (j)(5) of
this section applies to carrybacks of net
operating losses incurred in taxable
years beginning on or after January 1,
2018.
■ Par. 6. Section 1.951A–3 is amended
by adding a sentence at the end of
paragraph (e)(2) to read as follows:
§ 1.951A–3 Qualified business asset
investment.
*
*
*
*
*
(e) * * *
(2) * * * For purposes of applying
section 951A(d)(3) and this paragraph
(e), the technical amendment to section
168(g) (to provide a recovery period of
20 years for qualified improvement
property for purposes of the alternative
depreciation system) enacted in section
2307(a) of the Coronavirus Aid, Relief,
and Economic Security Act, Public Law
116–136 (2020) is treated as enacted on
December 22, 2017.
*
*
*
*
*
Douglas W. O’Donnell,
Deputy Commissioner for Services and
Enforcement.
Approved: September 10, 2021.
Mark J. Mazur,
Acting Assistant Secretary of the Treasury
(Tax Policy).
[FR Doc. 2021–20615 Filed 9–21–21; 4:15 pm]
BILLING CODE 4830–01–P
DEPARTMENT OF LABOR
Wage and Hour Division
29 CFR Parts 531, 578, 579 and 580
RIN 1235–AA21
Tip Regulations Under the Fair Labor
Standards Act (FLSA); Partial
Withdrawal
Department of Labor, Wage and
Hour Division.
ACTION: Final rule.
AGENCY:
In December 2020, the
Department promulgated a final rule
(2020 Tip final rule) to amend its tip
regulations to address the Consolidated
Appropriations Act of 2018 (CAA)
amendments to section 3(m) of the Fair
SUMMARY:
PO 00000
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52973
Labor Standards Act (FLSA), among
other things. In this final rule, the
Department withdraws two portions of
the 2020 Tip final rule that have not yet
gone into effect addressing civil money
penalties (CMPs) and finalizes proposed
changes to those portions of the 2020
Tip final rule. The Department also
modifies regulatory provisions adopted
by the 2020 Tip final rule addressing
managers and supervisors.
DATES: As of November 23, 2021 Wage
& Hour is withdrawing the revisions to
§§ 578.3, 578.4, 579.1, 579.2, 580.2,
580.3, 580.12, and 580.18, published
December 30, 2020, at 85 FR 86756,
delayed until April 30, 2021, on
February 26, 2021, at 86 FR 11632, and
delayed until December 31, 2021, on
April 29, 2021 at 86 FR 22597.
This final rule is effective November
23, 2021.
FOR FURTHER INFORMATION CONTACT:
Amy DeBisschop, Director of the
Division of Regulations, Legislation, and
Interpretation, Wage and Hour Division,
U.S. Department of Labor, Room S–
3502, 200 Constitution Avenue NW,
Washington, DC 20210, telephone: (202)
693–0406 (this is not a toll-free
number). Copies of this final rule may
be obtained in alternative formats (Large
Print, Braille, Audio Tape, or Disc),
upon request, by calling (202) 693–0675
(this is not a toll-free number). TTY/
TDD callers may dial toll-free (877) 889–
5627 to obtain information or request
materials in alternative formats.
Questions of interpretation or
enforcement of the agency’s existing
regulations may be directed to the
nearest WHD district office. Locate the
nearest office by calling the WHD’s tollfree help line at (866) 4US–WAGE ((866)
487–9243) between 8 a.m. and 5 p.m. in
your local time zone, or log onto WHD’s
website at https://www.dol.gov//whd/
contact/local-offices for a nationwide
listing of WHD district and area offices.
SUPPLEMENTARY INFORMATION:
I. Executive Summary
Section 3(m) of the FLSA allows an
employer that satisfies certain
requirements to count a limited amount
of the tips received by its ‘‘tipped
employees’’ as a credit toward the
employer’s Federal minimum wage
obligation (known as a ‘‘tip credit’’). See
29 U.S.C. 203(m)(2)(A). In 2018,
Congress passed the Consolidated
Appropriations Act (CAA), Public Law
115–141, Div. S., Tit. XII, sec. 1201, 132
Stat. 348, 1148–49 (2018), which
amended section 3(m). The CAA added
a new statutory provision at section
3(m)(2)(B) which expressly prohibits
employers from keeping employees’ tips
E:\FR\FM\24SER1.SGM
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]]>Agencies
[Federal Register Volume 86, Number 183 (Friday, September 24, 2021)]
[Rules and Regulations]
[Pages 52971-52973]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-20615]
[[Page 52971]]
=======================================================================
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9956]
RIN 1545-BP91; RIN 1545-BP70
Guidance on the Treatment of Qualified Improvement Property Under
Sections 250(b) and 951A(d) and Guidance Related to the Foreign Tax
Credit
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations under sections 250
and 951A addressing the calculation of qualified business asset
investment (``QBAI'') for qualified improvement property (``QIP'')
under the alternative depreciation system (``ADS''). This document also
contains final regulations with transition rules relating to the impact
on loss accounts of net operating loss (NOL) carrybacks allowed by
reason of the Coronavirus Aid, Relief, and Economic Security Act (the
``CARES Act''). The final regulations affect United States shareholders
of controlled foreign corporations, domestic corporations eligible for
the section 250 deduction, and taxpayers that claim credits or
deductions for foreign income taxes.
DATES:
Effective date: These regulations are effective on September 24,
2021.
Applicability dates: For dates of applicability, see Sec. Sec.
1.250-1(b), 1.904(f)-12(j)(7), and 1.951A-7(a).
FOR FURTHER INFORMATION CONTACT: Concerning Sec. Sec. 1.250(b)-1(b)(2)
and 1.250(b)-2(e)(2), Lorraine Rodriguez at (202) 317-6726; concerning
Sec. 1.904(f)-12, Jeffrey L. Parry at (202) 317-4916; concerning Sec.
1.951A-3(e)(2), Jorge M. Oben at (202) 317-6934 (not toll-free
numbers).
SUPPLEMENTARY INFORMATION:
Background
I. Treatment of QIP Under Sections 250 and 951A
On January 15, 2021, the Department of the Treasury (``Treasury
Department'') and the IRS published proposed regulations (REG-111950-
20) under sections 250, 951A, 1297, and 1298 in the Federal Register
(86 FR 4582, as corrected at 86 FR 12886) (the ``2021 proposed
regulations''). The provisions in the 2021 proposed regulations under
sections 250 and 951A, which were added to the Code in the Tax Cuts and
Jobs Act, Public Law 115-97, 131 Stat. 2234 (2017), addressed the
treatment of QIP under the ADS for purposes of calculating QBAI.
The Treasury Department and the IRS received no written comments
with respect to the proposed rules under sections 250 and 951A. A
public hearing on the 2021 proposed regulations was not held because
there were no requests to speak.
This rulemaking finalizes the portion of the 2021 proposed
regulations under sections 250 and 951A, but does not finalize the
portions of the 2021 proposed regulations under sections 1297 and 1298
(determining whether a foreign corporation is treated as a passive
foreign investment company and the treatment of income and assets of a
qualifying insurance corporation that is engaged in the active conduct
of an insurance business). The Treasury Department and the IRS intend
to finalize those portions of the 2021 proposed regulations separately.
II. Treatment of Net Operating Losses Incurred in Post-2017 Taxable
Years That Are Carried Back to Pre-2018 Taxable Years
On November 12, 2020, the Treasury Department and the IRS published
proposed regulations (REG-101657-20) in the Federal Register (85 FR
72078) (the ``2020 FTC proposed regulations''), which included
revisions to the transition rules for post-2017 NOL carrybacks to pre-
2018 taxable years.
The Treasury Department and the IRS received no written comments
with respect to the proposed revisions to the transition rules that
address post-2017 NOL carrybacks to pre-2018 taxable years. A public
hearing on the 2020 FTC proposed regulations was held on April 7, 2021.
This rulemaking finalizes the portion of the 2020 FTC proposed
regulations that addresses the transition rules for post-2017 NOL
carrybacks to pre-2018 taxable years. This rulemaking does not finalize
any other portions of the 2020 FTC proposed regulations. The Treasury
Department and the IRS intend to finalize those portions of the 2020
FTC proposed regulations separately.
Summary of Comments and Explanation of Revisions
The Treasury Department and the IRS received no written comments
with respect to the proposed rules under sections 250 and 951A or the
transition rules that address post-2017 NOL carrybacks to pre-2018
taxable years. Therefore, those portions of the proposed regulations
are being finalized without substantive change.
Special Analyses
I. Regulatory Planning and Review--Economic Analysis
These regulations are not subject to review under section 6(b) of
Executive Order 12866 pursuant to the Memorandum of Agreement (April
11, 2018) between the Treasury Department and the Office of Management
and Budget regarding review of tax regulations.
II. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) generally
requires that a federal agency obtain the approval of the OMB before
collecting information from the public, whether such collection of
information is mandatory, voluntary, or required to obtain or retain a
benefit.
There are no information collection requirements associated with
these final regulations.
III. Regulatory Flexibility Act
It is hereby certified that these final regulations will not have a
significant economic impact on a substantial number of small entities
within the meaning of section 601(6) of the Regulatory Flexibility Act
(5 U.S.C. chapter 6).
A. Regulations Regarding the Treatment of QIP Under Sections 250 and
951A
The economic impact of the regulations regarding the treatment of
QIP under sections 250 and 951A is not likely to be significant because
these regulations merely clarify that the technical amendment to
section 168 enacted in section 2307(a) of the CARES Act applies to
determine the adjusted basis of property under section 951A(d)(3) as if
it had originally been part of section 13204 of the Act. The
clarification resolves an ambiguity and adopts the interpretation that
does not require duplicative recordkeeping for the basis in this
property. Therefore, this rule should reduce recordkeeping and
compliance burdens that might otherwise apply. In addition, the
regulations do not impose a collection of information burden on any
person, including small entities. Accordingly, it is hereby certified
that the regulations regarding the treatment of QIP under sections 250
and 951A will not have a significant economic impact on a substantial
number of small entities.
[[Page 52972]]
B. Foreign Tax Credit Transition Rules Addressing Post-2017 NOL
Carrybacks to Pre-2018 Taxable Years
The foreign tax credit transition rules addressing post-2017 NOL
carrybacks to pre-2018 taxable years provide guidance needed to comply
with statutory changes and affect individuals and corporations claiming
foreign tax credits. Adequate data are not available at this time to
certify that a substantial number of small entities would be
unaffected. However, the Treasury Department and the IRS have
determined that the regulations will not have a significant economic
impact on domestic small business entities. Based on information from
the Statistics of Income 2017 Corporate File, foreign tax credits as a
percentage of three different tax-related measures of annual receipts
(see Table for variables) by corporations are substantially less than
the 3 to 5 percent threshold for significant economic impact.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
$5,000,000 $10,000,000 $50,000,000 $100,000,000
Under $500,000 $500,000 under $1,000,000 under under under under $250,000,000
Size (by business receipts) (%) $1,000,000 (%) under $10,000,000 $50,000,000 $100,000,000 $250,000,000 or more (%)
$5,000,000 (%) (%) (%) (%) (%)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
FTC/Total Receipts.............................................. 0.12 0.00 0.00 0.00 0.01 0.01 0.02 0.28
FTC/(Total Receipts-Total Deductions)........................... 0.61 0.03 0.09 0.05 0.35 0.71 1.38 9.89
FTC/Business Receipts........................................... 0.84 0.00 0.00 0.00 0.01 0.01 0.02 0.05
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Statistics of Income (2017) Form 1120.
In addition, these final regulations do not impose a collection of
information burden on any person, including small entities.
Accordingly, it is hereby certified that the foreign tax credit
transition rules addressing post-2017 NOL carrybacks to pre-2018
taxable years will not have a significant economic impact on a
substantial number of small entities.
Pursuant to section 7805(f) of the Internal Revenue Code, the
notices of proposed rulemaking preceding these final regulations were
submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comments on their impact on small business, and no
comments were received.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 requires
that agencies assess anticipated costs and benefits and take certain
other actions before issuing a final rule that includes any Federal
mandate that may result in expenditures in any one year by a state,
local, or tribal government, in the aggregate, or by the private
sector, of $100 million in 1995 dollars, updated annually for
inflation. These regulations do not include any Federal mandate that
may result in expenditures by state, local, or tribal governments, or
by the private sector in excess of that threshold.
V. Executive Order 13132: Federalism
Executive Order 13132 (entitled ``Federalism'') prohibits an agency
from publishing any rule that has federalism implications if the rule
either imposes substantial, direct compliance costs on state and local
governments, and is not required by statute, or preempts state law,
unless the agency meets the consultation and funding requirements of
section 6 of the Executive Order. These regulations do not have
federalism implications and do not impose substantial direct compliance
costs on state and local governments or preempt state law within the
meaning of the Executive Order.
Drafting Information
The principal authors of these regulations are Jorge M. Oben,
Jeffrey L. Parry, and Larry R. Pounders of the Office of Associate
Chief Counsel (International). However, other personnel from the
Treasury Department and the IRS participated in their development.
Statement of Availability of IRS Documents
IRS Revenue Procedures, Revenue Rulings, Notices, and other
guidance cited in this document are published in the Internal Revenue
Bulletin and are available from the Superintendent of Documents, U.S.
Government Publishing Office, Washington, DC 20402, or by visiting the
IRS website at https://www.irs.gov.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR part 1 is amended as follows:
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 1.250-1 is amended by revising the first sentence of
paragraph (b) and adding a sentence at the end of the paragraph to read
as follows:
Sec. 1.250-1 Introduction.
* * * * *
(b) * * * Except as otherwise provided in this paragraph (b),
Sec. Sec. 1.250(a)-1 and 1.250(b)-1 through 1.250(b)-6 apply to
taxable years beginning on or after January 1, 2021. * * * The last
sentence in Sec. 1.250(b)-2(e)(2) applies to taxable years beginning
after December 31, 2017.
0
Par. 3. Section 1.250(b)-2 is amended by adding a sentence at the end
of paragraph (e)(2) to read as follows:
Sec. 1.250 (b)-2 Qualified business asset investment (QBAI).
* * * * *
(e) * * *
(2) * * * For purposes of applying section 250(b)(2)(B) and this
paragraph (e), the technical amendment to section 168(g) (to provide a
recovery period of 20 years for qualified improvement property for
purposes of the alternative depreciation system) enacted in section
2307(a) of the Coronavirus Aid, Relief, and Economic Security Act,
Public Law 116-136 (2020) is treated as enacted on December 22, 2017.
* * * * *
Sec. 1.904-2 [Amended]
0
Par. 4. Section 1.904-2(j)(1)(iii)(D) is amended by removing the
language ``Sec. 1.904(f)-12(j)(5)'' and adding in its place the
language ``Sec. 1.904(f)-12(j)(6)''.
0
Par. 5. Section 1.904(f)-12 is amended by:
0
1. Removing paragraph (j)(6);
0
2. Redesignating paragraph (j)(5) as paragraph (j)(6); and
0
3. Adding new paragraphs (j)(5) and (j)(7);
The additions read as follows:
Sec. 1.904(f)-12 Transition rules.
* * * * *
(j) * * *
[[Page 52973]]
(5) Treatment of net operating losses incurred in post-2017 taxable
years that are carried back to pre-2018 taxable years--(i) In general.
Except as provided in paragraph (j)(5)(ii) of this section, a net
operating loss incurred in a taxable year beginning after December 31,
2017 (a ``post-2017 taxable year''), which is carried back, pursuant to
section 172, to a taxable year beginning before January 1, 2018 (a
``pre-2018 carryback year''), will be carried back under the rules of
Sec. 1.904(g)-3(b). For purposes of applying the rules of Sec.
1.904(g)-3(b), income in a pre-2018 separate category in the taxable
year to which the net operating loss is carried back is treated as if
it included only income that would be assigned to the post-2017 general
category. Therefore, any separate limitation loss created by reason of
a passive category component of a net operating loss from a post-2017
taxable year that is carried back to offset general category income in
a pre-2018 carryback year will be recaptured in post-2017 taxable years
as general category income, and not as a combination of general,
foreign branch, and section 951A category income.
(ii) Foreign source losses in the post-2017 separate categories for
foreign branch category income and section 951A category income. Net
operating losses attributable to a foreign source loss in the post-2017
separate categories for foreign branch category income and section 951A
category income are treated as first offsetting general category income
in a pre-2018 carryback year to the extent available to be offset by
the net operating loss carryback. If the sum of foreign source losses
in the taxpayer's separate categories for foreign branch category
income and section 951A category income in the year the net operating
loss is incurred exceeds the amount of general category income that is
available to be offset in the carryback year, then the amount of
foreign source loss in each of the foreign branch and section 951A
categories that is treated as offsetting general category income under
this paragraph (j)(5)(ii), is determined on a proportionate basis.
General category income in the pre-2018 carryback year is first offset
by foreign source loss in the taxpayer's post-2017 separate category
for general category income in the year the net operating loss is
incurred before any foreign source loss in that year in the separate
categories for foreign branch category income and section 951A category
income is carried back to reduce general category income. To the extent
a foreign source loss in a post-2017 separate category for foreign
branch category income or section 951A category income offsets general
category income in a pre-2018 taxable year under the rules of this
paragraph (j)(5)(ii), no separate limitation loss account is created.
* * * * *
(7) Applicability date. Except as otherwise provided in this
paragraph (j)(7), this paragraph (j) applies to taxable years ending on
or after December 31, 2017. Paragraph (j)(5) of this section applies to
carrybacks of net operating losses incurred in taxable years beginning
on or after January 1, 2018.
0
Par. 6. Section 1.951A-3 is amended by adding a sentence at the end of
paragraph (e)(2) to read as follows:
Sec. 1.951A-3 Qualified business asset investment.
* * * * *
(e) * * *
(2) * * * For purposes of applying section 951A(d)(3) and this
paragraph (e), the technical amendment to section 168(g) (to provide a
recovery period of 20 years for qualified improvement property for
purposes of the alternative depreciation system) enacted in section
2307(a) of the Coronavirus Aid, Relief, and Economic Security Act,
Public Law 116-136 (2020) is treated as enacted on December 22, 2017.
* * * * *
Douglas W. O'Donnell,
Deputy Commissioner for Services and Enforcement.
Approved: September 10, 2021.
Mark J. Mazur,
Acting Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2021-20615 Filed 9-21-21; 4:15 pm]
BILLING CODE 4830-01-P
