Rule2021-21175
Guidance Related to the Allocation and Apportionment of Deductions and Foreign Taxes, Foreign Tax Redeterminations, Foreign Tax Credit Disallowance Under Section 965(g), Consolidated Groups, Hybrid Arrangements and Certain Payments Under Section 951A; Correction
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 1, 2021
Effective
October 1, 2021
Issuing agencies
Treasury DepartmentInternal Revenue Service
Abstract
This document contains corrections to the final regulations (Treasury Decision 9922) that were published in the Federal Register on Thursday, November 12, 2020. Treasury Decision 9922 provided guidance relating to the allocation and apportionment of deductions and creditable foreign taxes, the definition of financial services income, foreign tax redeterminations, availability of foreign tax credits under the transition tax, the application of the foreign tax credit limitation to consolidated groups, adjustments to hybrid deduction accounts to take into account certain inclusions in income by a United States shareholder, conduit financing arrangements involving hybrid instruments, and the treatment of certain payments under the global intangible low-taxed income provisions.
Full Text
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<title>Federal Register, Volume 86 Issue 188 (Friday, October 1, 2021)</title>
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[Federal Register Volume 86, Number 188 (Friday, October 1, 2021)]
[Rules and Regulations]
[Pages 54367-54368]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-21175]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9922]
RIN 1545-BP21; 1545-BP22
Guidance Related to the Allocation and Apportionment of
Deductions and Foreign Taxes, Foreign Tax Redeterminations, Foreign Tax
Credit Disallowance Under Section 965(g), Consolidated Groups, Hybrid
Arrangements and Certain Payments Under Section 951A; Correction
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Correcting amendments.
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SUMMARY: This document contains corrections to the final regulations
(Treasury Decision 9922) that were published in the Federal Register on
Thursday, November 12, 2020. Treasury Decision 9922 provided guidance
relating to the allocation and apportionment of deductions and
creditable foreign taxes, the definition of financial services income,
foreign tax redeterminations, availability of foreign tax credits under
the transition tax, the application of the foreign tax credit
limitation to consolidated groups, adjustments to hybrid deduction
accounts to take into account certain inclusions in income by a United
States shareholder, conduit financing arrangements involving hybrid
instruments, and the treatment of certain payments under the global
intangible low-taxed income provisions.
DATES: Effective on October 1, 2021, and applicable as of November 12,
2020.
FOR FURTHER INFORMATION CONTACT: Concerning Sec. Sec. 1.861-8 and
1.861-17, Jeffrey P. Cowan, (202) 317-4924; concerning Sec. Sec.
1.861-20, 1.904-4, and 1.904-6, Suzanne M. Walsh, (202) 317-4908;
concerning Sec. 1.881-3, Richard F. Owens, (202) 317-6501; concerning
Sec. 1.904(g)-3, Jeffrey L. Parry, (202) 317 4916; concerning Sec.
1.905-4T, Corina Braun, (202) 317-5004 (not toll-free numbers).
Background
The final regulations (TD 9922) that are the subject of this
correction are issued under sections 861, 881, 904, and 905 of the
Internal Revenue Code.
Need for Correction
As published on Thursday, November 12, 2020 (85 FR 71998), the
final regulations (TD 9922) 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 1.861-8 is amended by revising the last sentence of
paragraph (e)(5)(ii) and the first and second sentences of paragraph
(e)(8)(ii) to read as follows:
Sec. 1.861-8 Computation of taxable income from sources within the
United States and from other sources and activities.
* * * * *
(e) * * *
(5) * * *
(ii) * * * The deductions are apportioned among the statutory and
residual groupings on the basis of the relative values (as determined
under the asset method in Sec. 1.861-9 for purposes of allocating and
apportioning the taxpayer's interest expense) of the assets that were
involved in the event or (if the taxpayer no longer owns the assets
involved in the event) the assets that are used to produce or sell
products or services in the relevant class in each grouping; such
values are determined in the year the deductions are allowed.
* * * * *
(8) * * *
(ii) * * * A net operating loss taken as a deduction in computing
taxable income for a particular taxable year as allowed under section
172 is allocated and apportioned to statutory and residual groupings by
reference to the statutory and residual groupings of the components of
the net operating loss (as determined under paragraph (e)(8)(i) of this
section) that is deducted in the taxable year. Except as provided under
the rules for an operative section, if the full net operating loss
carryover is not taken as a deduction in a taxable year, the partial
net operating loss deduction is treated as ratably comprising the
components of a net operating loss. * * *
* * * * *
0
Par. 3. Section 1.861-17 is amended in paragraph (d)(4)(iv), by
revising the first sentence and adding a sentence at the end of the
paragraph to read as follows:
Sec. 1.861-17 Allocation and apportionment of research and
experimental expenditures.
* * * * *
(d) * * *
(4) * * *
(iv) * * * If the controlled party has entered into a cost sharing
arrangement, in accordance with the provisions of Sec. 1.482-7, with
the taxpayer for the purpose of developing intangible property, then
ordinarily the controlled party is not reasonably expected to acquire
rights in intangible property that would arise from the taxpayer's
share of the R&E expenditures with respect to the cost shared
intangibles as defined in Sec. 1.482-7(j)(1)(i); acquire products in
which such intangible property is embedded or used in connection with
the manufacture or sale of such products; or receive services that
incorporate or directly or indirectly benefit from such intangible
property. * * * However, the rule in this paragraph (d)(4)(iv) does not
apply, and the controlled party's sales are taken into account, to the
extent the taxpayer licenses, or has licensed, to the controlled party
intangible property resulting from a cost sharing arrangement with the
controlled party.
* * * * *
0
Par. 4. Section 1.861-20 is amended by revising the first sentence of
paragraph (d)(3)(i)(B)(2) to read as follows:
Sec. 1.861-20 Allocation and apportionment of foreign income taxes.
* * * * *
(d) * * *
(3) * * *
(i) * * *
(B) * * *
(2) * * * The foreign dividend amount is, to the extent of the U.S.
dividend amount, assigned to the same statutory and residual grouping
(or ratably to the groupings) to which a distribution of the U.S.
dividend amount is assigned under Federal income tax law. * * *
* * * * *
Sec. 1.881-3 [Amended]
0
Par. 5. For each entry in Sec. 1.881-3 in the ``Paragraph Heading''
column, remove the language in ``Remove'' column and add in its place
the
[[Page 54368]]
language in the ``Add'' column as set forth below:
------------------------------------------------------------------------
Paragraph heading Remove Add
------------------------------------------------------------------------
Paragraph (e)(5)................. Example 4......... Example 5
Paragraph (e)(6)................. Example 5......... Example 6
Paragraph (e)(7)................. Example 6......... Example 7
Paragraph (e)(8)................. Example 7......... Example 8
Paragraph (e)(9)................. Example 8......... Example 9
Paragraph (e)(10)................ Example 9......... Example 10
Paragraph (e)(11)................ Example 10........ Example 11
Paragraph (e)(12)................ Example 11........ Example 12
Paragraph (e)(13)................ Example 12........ Example 13
Paragraph (e)(14)................ Example 13........ Example 14
Paragraph (e)(15)................ Example 14........ Example 15
Paragraph (e)(16)................ Example 15........ Example 16
Paragraph (e)(17)................ Example 16........ Example 17
Paragraph (e)(18)................ Example 17........ Example 18
Paragraph (e)(19)................ Example 18........ Example 19
Paragraph (e)(20)................ Example 19........ Example 20
Paragraph (e)(21)................ Example 20........ Example 21
Paragraph (e)(22)................ Example 21........ Example 22
Paragraph (e)(23)................ Example 22........ Example 23
Paragraph (e)(24)................ Example 23........ Example 24
Paragraph (e)(25)................ Example 24........ Example 25
Paragraph (e)(26)................ Example 25........ Example 26
Paragraph (e)(27)................ Example 26........ Example 27
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Sec. 1.904-4 [Amended]
0
Par. 6. Section 1.904-4 is amended by removing the language ``and (3)''
from paragraph (q)(1).
0
Par. 7. Section 1.904-6 is amended by revising the first and second
sentences of paragraph (f) to read as follows:
Sec. 1.904-6 Allocation and apportionment of foreign income taxes.
* * * * *
(f) * * * Some or all of the foreign gross income of a United
States shareholder of a controlled foreign corporation, or of a U.S.
person that owns the United States shareholder (the ``U.S. owner''),
that is attributable to foreign law inclusion regime income with
respect to a foreign law CFC described in Sec. 1.861-20(d)(3)(iii) or
foreign law pass-through income from a reverse hybrid described in
Sec. 1.861-20(d)(3)(i)(C) is assigned to the section 951A category if,
were the controlled foreign corporation the taxpayer that recognizes
the foreign gross income, the foreign gross income would be assigned to
the controlled foreign corporation's tested income group (as defined in
Sec. 1.960-1(b)(33)) within the general category to which an inclusion
under section 951A is attributable. The amount of the United States
shareholder's, or the U.S. owner's, foreign gross income that is
assigned to the section 951A category (or a specified separate category
associated with the section 951A category) is based on the inclusion
percentage (as defined in Sec. 1.960-2(c)(2)) of the United States
shareholder. * * *
* * * * *
0
Par. 8. Section 1.904(g)-3 is amended by revising paragraphs (b)(2) and
(3) to read as follows:
Sec. 1.904 (g)-3 Ordering rules for the allocation of net operating
losses, net capital losses, U.S. source losses, and separate limitation
losses, and for the recapture of separate limitation losses, overall
foreign losses, and overall domestic losses.
* * * * *
(b) * * *
(2) Full net operating loss deduction. If the full net operating
loss (that remains after carryovers to other taxable years) is deducted
in computing the taxable income in a particular year (carryover year),
so that there is no remaining net operating loss that can be carried to
other taxable years, U.S. source losses and foreign source losses in
separate categories that comprise the net operating loss shall be
combined with the U.S. source income or loss and the foreign source
income or loss in the same separate categories in the carryover year.
(3) Partial net operating loss deduction. If the full net operating
loss (that remains after carryovers to other taxable years) is not
deducted in computing the taxable income in a carryover year, so that
there is remaining loss that can be carried to other taxable years, the
following rules apply:
(i) Any U.S. source loss (not to exceed the amount of the net
operating loss carryover deducted in computing the taxable income in
the carryover year (the net operating loss deduction)) shall be carried
over to the extent of any U.S. source income in the carryover year.
(ii) If the net operating loss deduction exceeds the U.S. source
loss carryover determined under paragraph (b)(3)(i) of this section,
then separate limitation losses that are part of the net operating loss
shall be tentatively carried over to the extent of separate limitation
income in the same separate category in the carryover year. If the sum
of the potential separate limitation loss carryovers determined under
the preceding sentence exceeds the amount of the net operating loss
deduction reduced by any U.S. source loss carried over under paragraph
(b)(3)(i) of this section, then the potential separate limitation loss
carryovers shall be reduced pro rata so that their sum equals such
amount.
(iii) If the net operating loss deduction exceeds the sum of the
U.S. and separate limitation loss carryovers determined under
paragraphs (b)(3)(i) and (ii) of this section, then a proportionate
part of the remaining loss from each separate category shall be carried
over to the extent of such excess and combined with the foreign source
loss, if any, in the same separate categories in the carryover year.
(iv) If the net operating loss deduction exceeds the sum of all the
loss carryovers determined under paragraphs (b)(3)(i), (ii), and (iii)
of this section, then any U.S. source loss not carried over under
paragraph (b)(3)(i) of this section shall be carried over to the extent
of such excess and combined with the U.S. source loss, if any, in the
carryover year.
* * * * *
Sec. 1.905-4T [Removed]
0
Par. 9. Section 1.905-4T is removed.
Oluwafunmilayo A. Taylor,
Chief, Publications and Regulations Branch, Legal Processing Division,
Associate Chief Counsel, (Procedure and Administration).
[FR Doc. 2021-21175 Filed 9-30-21; 8:45 am]
BILLING CODE 4830-01-P
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</html>Indexed from Federal Register on October 1, 2021.
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