Rule2022-00066
Guidance Under Section 958 on Determining Stock Ownership
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
January 25, 2022
Effective
January 25, 2022
Issuing agencies
Treasury DepartmentInternal Revenue Service
Abstract
This document contains final regulations regarding the treatment of domestic partnerships for purposes of determining amounts included in the gross income of their partners with respect to foreign corporations. The final regulations affect United States persons that own stock of foreign corporations through domestic partnerships and domestic partnerships that are United States shareholders of foreign corporations.
Full Text
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<title>Federal Register, Volume 87 Issue 16 (Tuesday, January 25, 2022)</title>
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[Federal Register Volume 87, Number 16 (Tuesday, January 25, 2022)]
[Rules and Regulations]
[Pages 3648-3656]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-00066]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9960]
RIN 1545-BP79
Guidance Under Section 958 on Determining Stock Ownership
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
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SUMMARY: This document contains final regulations regarding the
treatment of domestic partnerships for purposes of determining amounts
included in the gross income of their partners with respect to foreign
corporations. The final regulations affect United States persons that
own stock of foreign corporations through domestic partnerships and
domestic partnerships that are United States shareholders of foreign
corporations.
DATES:
Effective date: These regulations are effective on January 25,
2022.
Applicability dates: For dates of applicability, see Sec. Sec.
1.956-1(g)(4) and 1.958-1(d)(4).
FOR FURTHER INFORMATION CONTACT: Edward J. Tracy at (202) 317-6934 (not
a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
On October 10, 2018, the Department of the Treasury (``Treasury
Department'') and the IRS published proposed regulations (REG-104390-
18) under sections 951, 951A, 1502, and 6038 in the Federal Register
(83 FR 51072) that included guidance with respect to the treatment of
domestic partnerships that own stock in controlled foreign
corporations, as defined in section 957 (``CFCs''), for purposes of
section 951A (the ``2018 proposed regulations''). The 2018 proposed
regulations set forth a ``hybrid approach'' that generally treated a
domestic partnership that is a United States shareholder, as defined in
section 951(b) (``U.S. shareholder''), with respect to a CFC (``U.S.
shareholder partnership'') as an entity with respect to its partners
that are not U.S. shareholders (``non-U.S. shareholder partners'') but
as an aggregate of its partners with respect to its partners that are
U.S. shareholders (``U.S. shareholder partners'').
On June 21, 2019, the Treasury Department and the IRS published
final regulations (TD 9866) in the Federal Register (84 FR 29288, as
corrected at 84 FR 44223, 84 FR 44693, and 84 FR 53052) under sections
951, 951A, 1502, and 6038 that include guidance with respect to the
treatment of domestic partnerships that own stock in CFCs for purposes
of section 951A (the ``final section 951A regulations''). Instead of
the ``hybrid approach'' described in the 2018 proposed regulations, the
final section 951A regulations generally treat a domestic partnership
as an aggregate of all of its partners for purposes of computing income
inclusions under section 951A (and other provisions that apply by
reference to section 951A). Sec. 1.951A-1(e)(1). That is, under the
final section 951A regulations, partners do not take into account a
distributive share of the partnership's section 951A inclusion with
respect to the partnership-owned CFCs but instead are treated as
proportionately owning the stock of the partnership-owned CFCs. See id.
Thus, as in the case of foreign partnerships, income inclusions under
section 951A are determined directly by U.S. shareholder partners of a
domestic partnership that owns CFCs. The final section 951A regulations
apply to taxable years of foreign corporations beginning after December
31, 2017, and to taxable years of U.S. shareholders in which or with
which those taxable years of foreign corporations end. Sec. 1.951A-7.
Concurrent with the issuance of the final section 951A regulations,
the Treasury Department and the IRS published proposed regulations
(REG-101828-19) under sections 951, 951A, 954, 956, 958, and 1502 in
the Federal Register (84 FR 29114, as corrected at 84 FR 37807) (the
``2019 proposed regulations''). Consistent with the approach adopted in
the final section 951A regulations, the 2019 proposed regulations
generally extended the treatment of domestic partnerships as aggregates
of their partners for purposes of determining income inclusions under
section 951 and for purposes of provisions that apply by reference to
section 951. Proposed Sec. 1.958-1(d).
On August 22, 2019, the Treasury Department and the IRS published
Notice 2019-46, 2019-37 I.R.B. 695, which announced the intent to issue
regulations that would permit, in certain cases, the ``hybrid
approach'' described
[[Page 3649]]
in the 2018 proposed regulations to be applied to domestic partnerships
or S corporations for taxable years ending before June 22, 2019.
On July 23, 2020, the Treasury Department and the IRS published
final regulations (TD 9902) in the Federal Register (85 FR 44620, as
corrected at 85 FR 64040 and 85 FR 79853) related to the portion of the
2019 proposed regulations under sections 951A and 954 addressing the
treatment of income subject to a high rate of foreign tax.
A notice of proposed rulemaking published in the Proposed Rules
section of this issue of the Federal Register (REG-118250-20) provides
guidance on the treatment of domestic partnerships and S corporations
that own passive foreign investment companies (as defined in section
1297(a)) (``PFICs'') and their domestic partners and shareholders, as
well as on other PFIC and CFC-related issues (the ``2022 proposed PFIC
regulations'').
This rulemaking finalizes the portion of the 2019 proposed
regulations that generally treat domestic partnerships as aggregates of
their partners for purposes of determining income inclusions under
section 951 and for purposes of provisions that apply specifically by
reference to section 951 (the ``final regulations'').
In the 2019 proposed regulations, the Treasury Department and the
IRS requested comments on the other provisions in the Internal Revenue
Code (``Code'') that apply by reference to ownership within the meaning
of section 958(a) for which aggregate treatment for domestic
partnerships would be appropriate. The 2019 proposed regulations also
requested comments on the aggregate treatment of domestic partnerships
in specific areas, including for purposes of determining the
controlling domestic shareholders of a CFC and for purposes of applying
the PFIC regime. The Treasury Department and the IRS received three
comments in response to the 2019 proposed regulations, each of which
were considered in these final regulations. No public hearing on the
2019 proposed regulations was held because there were no requests to
speak.
Summary of Comments and Explanation of Revisions
Comments outside the scope of this rulemaking are generally not
addressed but may be considered in connection with future guidance
projects. All written comments received in response to the proposed
regulations that are being finalized in this rulemaking are available
at <a href="http://www.regulations.gov">www.regulations.gov</a> or upon request.
I. Application of Section 956
Subject to certain exceptions, the 2019 proposed regulations
treated domestic partnerships as aggregates of their partners for
purposes of sections 951 and 951A and for purposes of any other
provision that applies by reference to section 951 or section 951A.
Proposed Sec. 1.958-1(d)(1) and (2). Although section 951(a)(1)(B)
requires a U.S. shareholder of a CFC to include in gross income the
amount determined under section 956 with respect to the U.S.
shareholder (to the extent not excluded from gross income under section
959(a)(2)), section 956 itself does not specifically apply by reference
to section 951 (or section 951A). Accordingly, the final regulations
clarify that aggregate treatment of domestic partnerships applies for
purposes of section 956(a) and any provisions that specifically apply
by reference to section 956(a) (such as Sec. 1.956-1(a)(2)) to ensure
that a U.S shareholder partner determines a section 956 amount with
respect to CFCs owned through a domestic partnership as part of the
U.S. shareholder partner's section 951(a) inclusion. Sec. 1.958-
1(d)(1) and (d)(3)(iii). Aggregate treatment does not apply, however,
for purposes of section 956(c) or (d) (or provisions that apply by
reference to these sections) because treating a domestic partnership as
an entity separate from its partners is more appropriate to carry out
the purposes of these provisions. See, e.g., Sec. 1.956-4(e)
(providing rules concerning the application of section 956 to, for
example, obligations of partnerships). As discussed in the preamble to
the 2019 proposed regulations, the treatment of a partnership as an
entity or an aggregate is determined in part based on the policies
underlying the specific provision at issue. See 84 FR 29115-29116.
To avoid similar confusion regarding the scope of Sec. 1.958-1(d),
the final regulations replace the language ``any other provision that
applies by reference'' to section 951 or section 951A in proposed Sec.
1.958-1(d)(1) with ``any provision that specifically applies by
reference'' to section 951, section 951A, or section 956(a). The
addition of the word ``specifically'' is intended to clarify that the
rule in Sec. 1.958-1(d) applies only to the particular provision
within a Code section or regulation that applies specifically by
reference to section 951, section 951A, or section 956(a) rather than
the section or regulation in its entirety. Additionally, the final
regulations clarify that the rule in Sec. 1.958-1(d)(1) applies for
purposes of any provision that specifically applies by reference to
regulations issued under or relating to the sections identified in
Sec. 1.958-1(d)(1). Corresponding revisions are made to the cross
references to Sec. 1.958-1(d) provided in Sec. Sec. 1.951-1(a)(4) and
1.951A-1(e).
Certain existing final regulations treat domestic partnerships as
entities separate from their partners for purposes of section 956.
Sec. 1.956-1(a)(2)(i) and (iii) and (a)(3)(iv). Because this treatment
is inconsistent with the aggregate approach, the 2019 proposed
regulations modified the applicability date of these provisions so they
would cease to apply once the 2019 proposed regulations were finalized.
Proposed Sec. 1.956-1(g)(4). Rather than modifying the applicability
dates as was done in the 2019 proposed regulations, however, the final
regulations simply remove these provisions. Accordingly, because those
provisions are being removed as part of the final regulations, the
proposed applicability date provisions under section 956 are no longer
relevant and are not being finalized.
II. Passive Foreign Investment Companies
The preamble to the 2019 proposed regulations requested comments
with respect to the application of the PFIC regime to domestic
partnerships that directly or indirectly own PFIC stock, particularly
with respect to whether elections and income inclusions are more
appropriate at the level of the domestic partnership or at the level of
its partners. 84 FR 29120. Comments were received regarding PFIC
elections and inclusions, the CFC overlap rule in section 1297(d), and
other PFIC-related issues involving domestic partnerships. These
comments are addressed in the 2022 proposed PFIC regulations in order
to provide taxpayers additional opportunity to comment.
III. Related Person Insurance Income
Section 952(a) provides that subpart F income includes insurance
income, as defined in section 953. Under section 953(c)(2), related
person insurance income (``RPII'') is any insurance income (as defined
in section 953(a)) attributable to a policy of insurance or reinsurance
that directly or indirectly insures a United States shareholder (as
defined in section 953(c)(1)(A)) of the controlled foreign corporation
(as defined in section 953(c)(1)(B)), or a person related to the United
States shareholder.
A comment requested that aggregate treatment be applied for
purposes of determining RPII such that there would only be RPII to the
extent of the
[[Page 3650]]
domestic partnership's domestic partners, which is the same result as
for foreign partnerships. The Treasury Department and the IRS agree
that aggregate principles should apply for purposes of section 953(c).
However, in order to provide taxpayers an additional opportunity to
comment, this comment is addressed in the 2022 proposed PFIC
regulations.
IV. Controlling Domestic Shareholders
The ``controlling domestic shareholders'' of a CFC make certain
elections with respect to the CFC, such as electing the method of
calculating the CFC's earnings and profits under section 964(a) and
electing to exclude tentative gross tested income items from gross
tested income under section 951A(c)(2)(A)(i)(III). See Sec. Sec.
1.964-1(c)(3) and 1.951A-2(c)(7)(viii). Under Sec. 1.964-1(c)(5)(i),
the controlling domestic shareholders of a CFC are the U.S.
shareholders that, in the aggregate, own (within the meaning of section
958(a)) more than 50 percent of the total combined voting power of all
classes of stock of the CFC entitled to vote and that undertake to act
on the CFC's behalf. If the ownership requirement is not satisfied, the
controlling domestic shareholders of the CFC are all of the U.S.
shareholders that own (within the meaning of section 958(a)) stock of
the CFC. Id.
With respect to U.S. shareholder partnerships, the 2019 proposed
regulations did not apply aggregate treatment for purposes of
determining a CFC's controlling domestic shareholders, and a domestic
partnership could qualify as a controlling domestic shareholder of the
CFC. Proposed Sec. 1.958-1(d)(2). The preamble to the 2019 proposed
regulations requested comments on whether aggregate treatment should
apply in this context so that some or all of the U.S. shareholder
partners, rather than the partnership, would make elections applicable
to the CFC for purposes of sections 951 and 951A. 84 FR 29119. One
comment was received that recommended, on balance, that aggregate
treatment should not apply for purposes of determining the controlling
domestic shareholders of CFCs under Sec. 1.964-1(c)(5)(i).
The final regulations do not extend aggregate treatment for
determining the controlling domestic shareholders of a CFC under Sec.
1.964-1(c)(5)(i). However, the Treasury Department and the IRS believe
that aggregate treatment should apply to domestic partnerships for
purposes of determining the controlling domestic shareholders of a CFC
under Sec. 1.964-1(c)(5). Thus, the 2022 proposed PFIC regulations
revise Sec. 1.958-1(d)(2) to provide that aggregate treatment applies
for purposes of determining the controlling domestic shareholders of a
CFC. This change is included in the 2022 proposed PFIC regulations to
give taxpayers an additional opportunity to comment.
V. Previously Taxed Earnings and Profits and Basis Adjustments
The preamble to the 2019 proposed regulations noted that,
historically, domestic partnerships had been treated as owning stock
within the meaning of section 958(a) for purposes of determining their
section 951 inclusions, and, thus, previously taxed earnings and
profits (``PTEP'') accounts under section 959 were maintained, and
related basis adjustments under section 961 were made, at the
partnership level. 84 FR 29119. As a result, comments were requested on
appropriate rules, such as necessary adjustments to PTEP and related
basis amounts, for the transition to the aggregate approach to domestic
partnerships described in the 2019 proposed regulations once those
regulations were finalized. 84 FR 29119-20. These issues, and the
comments received, are beyond the scope of this rulemaking and
therefore are not addressed herein; however, the Treasury Department
and the IRS intend to address these comments in a separate guidance
project involving PTEP (the ``proposed PTEP regulations''). The
proposed PTEP regulations will provide guidance on a broad range of
issues, such as the maintenance of PTEP accounts under section 959, the
treatment of PTEP distributions, and basis adjustments under section
961, including with respect to CFCs held by partnerships.
VI. Application of Section 1248
The preamble to the 2019 proposed regulations stated that, subject
to certain exceptions, aggregate treatment of domestic partnerships
applied only with respect to sections 951 and 951A, and any provision
that applies by reference to sections 951 and 951A, and, therefore, did
not apply for any other purpose of the Code, including section 1248. 84
FR 29119. Comments were received regarding section 1248, including with
respect to dispositions by domestic partnerships of CFC stock,
dispositions of interests in domestic partnerships that own CFC stock,
and the interaction between section 1248 and section 751.
The final regulations do not address these comments, which are
beyond the scope of this rulemaking. The Treasury Department and the
IRS recognize, however, that section 1248 applies in part by reference
to section 951 and section 951A (in the latter case, as a result of
section 951A(f)(1)(A)). See section 1248(b)(1)(A) and (d)(1).
Therefore, the final regulations clarify that the aggregate approach
set forth in Sec. 1.958-1(d)(1) does not apply for purposes of section
1248, which is consistent with the intended scope of the rules as
described in the preamble to the 2019 proposed regulations. Sec.
1.958-1(d)(2)(iv). The final regulations do not affect the application
of Sec. 1.1248-1(a)(4). Future guidance, including the proposed PTEP
regulations, may address the application of section 1248(b)(1)(A) and
(d)(1) to transactions involving a domestic partnership's sale of a
CFC, such as the transaction described in Rev. Rul. 69-124, 1969-1 C.B.
203.
VII. Non-Grantor Trusts and Estates
The preamble to the 2019 proposed regulations requested comments on
whether aggregate treatment should be extended to other pass-through
entities such as certain trusts or estates. In response to this
request, one comment recommended that aggregate treatment not be
extended to domestic non-grantor trusts and domestic estates, noting
that there is no corollary authority to section 7701(a)(4) (authorizing
the treatment of domestic partnerships as not domestic when the context
requires) which would permit the Treasury Department and the IRS to
treat domestic non-grantor trusts and domestic estates as not domestic.
The comment further noted that if the domestic non-grantor trust or
domestic estate had a section 951(a) or section 951A inclusion but did
not distribute the income to its beneficiaries, the trust or estate
itself would be liable for tax on that income (unlike a partnership);
thus, two separate taxing regimes could be necessary if an aggregate
approach were limited to distributed income. Finally, the comment
suggested that identifying U.S. shareholders of a CFC the stock of
which is owned by a domestic non-grantor trust or a domestic estate
would be complex if the trust or estate had discretionary
beneficiaries.
Although aggregate treatment of domestic partnerships for purposes
of sections 951 and 951A (and provisions that specifically apply by
reference to those sections) is not based on the grant of authority
under section 7701(a)(4), the Treasury Department and the IRS
nevertheless agree, for the other reasons stated in the comment, that
aggregate treatment should not be extended to domestic non-grantor
trusts and domestic estates.
[[Page 3651]]
VIII. Other Changes
The final section 951A regulations generally adopted aggregate
treatment of domestic partnerships for purposes of section 951A. Sec.
1.951A-1(e). The preamble to the 2019 proposed regulations noted that
once those regulations were finalized, Sec. 1.951A-1(e) would be
unnecessary because that rule would be subsumed by Sec. 1.958-1(d). 84
FR 29119. The preamble to the 2019 proposed regulations further noted
that Sec. 1.951-1(h), which treated certain controlled domestic
partnerships as foreign partnerships for purposes of determining the
stock of a CFC owned (within the meaning of section 958(a)) by a U.S.
person, would similarly be unnecessary. Id. No comments addressed those
proposed regulations. As a result, Sec. 1.951A-1(e) is amended to
remove paragraphs (e)(1) through (3) and include a general cross-
reference to Sec. 1.958-1(d) in Sec. 1.951A-1(e) for the treatment of
domestic partnerships for purposes of section 951A. The final
regulations also remove paragraph (h) of Sec. 1.951-1.
IX. Applicability Dates
A. Application Before Finalization Date
Proposed Sec. 1.958-1(d)(4) provided that the regulations under
section 958 would apply to taxable years of foreign corporations
beginning on or after the date the final regulations are published in
the Federal Register (the ``finalization date'') and to taxable years
of U.S. persons in which or with which such taxable years of the
foreign corporations end (the ``general applicability rule''). However,
domestic partnerships could apply the regulations, when finalized, to
taxable years of a foreign corporation beginning after December 31,
2017, and to taxable years of the domestic partnership in which or with
which such taxable years of the foreign corporation end, subject to the
requirement that the partnership, its U.S. shareholder partners, and
other related domestic partnerships and their U.S. shareholder partners
consistently apply the regulations with respect to all foreign
corporations the partnerships own (within the meaning of section
958(a), determined without regard to proposed Sec. 1.958-1(d)(1)) (the
``pre-finalization applicability option''). Proposed Sec. 1.958-
1(d)(4). The 2019 proposed regulations also permitted domestic
partnerships, their U.S. shareholder partners, and related domestic
partnerships and their U.S. shareholder partners to rely on proposed
Sec. 1.958-1(d)(4), subject to the same consistency requirement (the
``reliance option''). See 84 FR 29119.
One comment made several recommendations with respect to the
applicability date of proposed Sec. 1.958-1(d). First, the comment
suggested that the reference to a ``domestic partnership'' in the pre-
finalization applicability option was inconsistent with the reference
to ``U.S. persons'' in the general applicability rule and recommended
that the final regulations be revised to reference ``U.S. person'' in
both places. With respect to the consistency requirements (including
consistency between years), the comment suggested that U.S. persons
owning stock of a foreign corporation through a domestic partnership be
allowed to take individual positions as to whether to apply the pre-
finalization applicability option, subject to all related partners
taking the same position. The comment noted that an individualized
approach would allow non-U.S. shareholder partners to decide whether to
be subject to section 951 inclusions or potentially to be subject to
the PFIC regime during the period before the finalization date and
would not materially impact U.S. shareholder partners.
The reference to ``domestic partnerships'' and their U.S.
shareholder partners in the pre-finalization applicability option was
intentional. Although the general applicability rule applies to all
affected U.S. persons, certain persons may choose to apply the
regulations before the finalization date. By limiting this group of
persons to domestic partnerships and their U.S. shareholder partners
(and related domestic partnerships), the rule aims to strike a balance
between identifying a small group of persons who may be able to
coordinate with respect to the decision to apply the pre-finalization
applicability option versus all persons that may be affected by that
decision. Accordingly, the suggested revision to reference ``U.S.
persons'' in the pre-finalization applicability option is not adopted.
In addition, the suggested revision would allow partners to take
individualized positions with respect to the pre-finalization
applicability option and could cause significant administrative,
partnership accounting, and reporting difficulties. For example, if
each partner were allowed to take an individual position on the
applicability date of the regulations, partners following the general
applicability rule (regardless of the extent of their ownership) might
receive a distributive share of the partnership's section 951
inclusions while U.S. shareholder partners applying the pre-
finalization applicability option have direct section 951 inclusions.
The Treasury Department and the IRS believe that consistency among all
affected parties in applying the pre-finalization applicability option
is important for proper administration of the regulations. As a result,
the Treasury Department and the IRS have determined that the difficulty
posed by an individualized approach outweighs the potential benefit the
approach would provide to a partner, and this comment is not adopted.
The Treasury Department and the IRS are aware that, given the potential
scope of the consistency requirement, it may be difficult to meet in
more widely held partnership structures, and thus application of the
pre-finalization applicability option may be limited.
The comment recommended that if the individualized approach is not
adopted, the final regulations should require a formal election in
order to apply the pre-finalization applicability option instead of the
consistency requirement. The election would be made only by a domestic
partnership and all related domestic partnerships and would be binding
on all domestic partners. The comment asserted that this approach would
clarify the application of the pre-finalization applicability option by
avoiding potential uncertainty as to whether all U.S. shareholder
partners took a consistent position. The comment further suggested that
a partnership-only election to apply the pre-finalization applicability
option would prevent U.S. shareholder partners from refusing, without
justification, to act in accordance with the partnership's election.
The Treasury Department and the IRS have determined that, although
the consistency requirement among all related domestic partnerships and
their U.S. shareholder partners may be difficult to meet in certain
cases, requiring consistency among all persons required to apply the
pre-finalization applicability option is important for proper
administration of the rules. Absent this requirement, U.S. shareholder
partners could choose not to amend their returns, and therefore
continue to report under the entity approach, even though the
partnership and other partners amended their returns and reported under
the aggregate approach pursuant to the pre-finalization applicability
option.\1\ In
[[Page 3652]]
addition, maintaining the U.S. shareholder consistency requirement
minimizes administrative, partnership accounting, and reporting
difficulties (for example, in connection with PTEP accounts) that could
arise if a partnership-only election were adopted and one or more U.S.
shareholder partners chose not to amend their returns in accordance
with the partnership's election. The consistency requirement is also
expected to enhance compliance and administration at the U.S.
shareholder partner-level with respect to amended returns (or
administrative adjustment requests) because it requires more
coordination between the partnership and its partners than a
partnership-only election would require. Under either approach, if a
partnership chooses the pre-finalization applicability option on an
amended return (or by initiating an administrative adjustment request),
any U.S. shareholder partner would receive updated information that it
no longer has a distributive share of the partnership's section 951
inclusions but would still need to take into account section 951
inclusions directly under the aggregate approach. Further, the Treasury
Department and the IRS are concerned that the lack of coordination
involved in a partnership-only election, as opposed to the consistency
requirement, may create uncertainty at the U.S. shareholder partner
level as to whether the partner merely accounts for the reduction in
the distributive share from the partnership or must also directly take
into account income inclusions. Accordingly, this comment is not
adopted.
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\1\ A U.S. shareholder partner's liability could differ under an
aggregate or entity approach if, for example, the partner is a U.S.
shareholder partner with respect to some, but not all, of the CFCs
that are owned by the domestic partnership.
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The comment also requested that the final regulations clarify
whether the pre-finalization applicability option is available if all
required parties file amended returns. The Treasury Department and the
IRS confirm that, subject to the consistency requirement, a domestic
partnership may apply the regulations on an amended return or through
initiating an administrative adjustment request under section 6227. In
instances where a domestic partnership files an amended return (that
is, in the case of partnerships not subject to sections 6221 through
6241), its partners (both U.S. shareholder partners and non-U.S.
shareholder partners) will likely need to also file amended returns in
order to satisfy the consistency requirement.
Finally, the comment expressed concern for cases in which a
domestic partnership filed its income tax return for calendar year 2018
before the issuance of the 2019 proposed regulations reporting section
951 inclusions by the partnership in accordance with then current law
(including issuing Schedules K-1 to its partners) but subsequently
filed a superseding original or amended return for such taxable year
relying on the 2019 proposed regulations. In that case, the comment
recommended that the ability to rely on the 2019 proposed regulations
should not be contingent upon all U.S. shareholder partners filing
superseding or amended returns on the same basis and that all partners
should be permitted to decide separately whether to file a superseding
or amended return to rely on the proposed regulations. The comment
further recommended that, if a non-U.S. shareholder partner decides to
rely on the proposed regulations and the foreign corporation is also a
PFIC, the mechanism for the non-U.S. shareholder partner to make a QEF
or mark-to-market election under section 1295 or section 1296,
respectively, should be simplified and that purging elections should
not be required solely due to the status of the CFC/PFIC during the
period before the general applicability rule applies. The comment
analogized these recommendations to relief provided in Notice 2019-46,
which permitted domestic partnerships and partners to file returns for
2018 applying the hybrid approach in the 2018 proposed regulations
rather than the aggregate approach adopted by the final section 951A
regulations.
The Treasury Department and the IRS believe that, in all cases,
proper administration of the regulations before the general
applicability rule requires the satisfaction of the consistency
requirement in Sec. 1.958-1(d)(4)(i) and precludes the ability of non-
U.S. shareholder partners to unilaterally apply the regulations.
Therefore, the final regulations do not adopt more permissive rules
because a domestic partnership filed a tax return and issued Schedule
K-1s to its partners before the issuance of the 2019 proposed
regulations. Furthermore, the Treasury Department and the IRS find this
situation sufficiently different from the relief provided in Notice
2019-46 for domestic partnerships that had already reported a different
position on a Schedule K-1 based on the 2018 proposed regulations.
Although the final section 951A regulations applied retroactively and
superseded the 2018 proposed regulations, the notice provided
flexibility to apply the 2018 proposed regulations due to the
compliance burdens associated with the change from the hybrid approach
in the 2018 proposed regulations to the aggregate approach in the final
section 951A regulations and the relatively short period until the
extended filing deadline for calendar-year partnerships. This same
concern does not exist here because, before the prospective application
of the regulations under the general applicability rule, taxpayers were
permitted to rely on the 2019 proposed regulations (in accordance with
proposed Sec. 1.958-1(d)(4)) or to continue to apply prior law.
Accordingly, the final regulations do not adopt these comments.
B. Different Taxable Years of the Partnership, Partners, and CFC
Proposed Sec. 1.958-1(d)(4) provided that Sec. 1.958-1(d), when
finalized, would apply to taxable years of foreign corporations
beginning on or after the finalization date and to taxable years of
U.S. persons in which or with which the taxable years of the foreign
corporations end. A comment noted that, under this rule, in certain
circumstances where a fiscal year U.S. shareholder partnership with
U.S. shareholder partners has a different taxable year than its CFC and
U.S. shareholder partners, the applicability date could cause the U.S.
shareholder partners to have two years of section 951 inclusions in the
same taxable year with respect to the same CFC--that is, a distributive
share of the partnership's section 951 inclusion from the CFC's last
taxable year before the application of the final regulations, and a
direct section 951 inclusion with respect to the first taxable tax year
of the CFC subject to the final regulations. For example, if a U.S.
shareholder partnership has a June 30 taxable year and both the CFC it
owns and its U.S. shareholder partners have a calendar taxable year,
the final regulations would, under the general applicability rule,
first apply to the CFC's taxable year ending December 31, 2022.
Accordingly, for its taxable year ending December 31, 2022, the U.S.
shareholder partners would have a distributive share of the
partnership's section 951 inclusion for the CFC's taxable year ending
December 31, 2021 (for the U.S. shareholder partnership's taxable year
ending June 30, 2022) and would also have a direct section 951
inclusion for the CFC's taxable year ending December 31, 2022. The
comment suggested that if the result in the example is intended, the
Treasury Department and the IRS should consider treating the transition
to aggregate treatment as a change in method of accounting with an
accompanying spread in reporting the second inclusion under section
481.
[[Page 3653]]
The result described by the comment (the possibility of a U.S.
shareholder partner having, in one of its taxable years, a distributive
share of a partnership's section 951(a) inclusion with respect to a CFC
for one taxable year of the CFC as well as the U.S. shareholder
partner's own section 951(a) inclusion with respect to the CFC for the
CFC's subsequent taxable year) is intended. In situations where a
partnership and a partner have different taxable years, the partner can
generally achieve deferral on its share of the partnership's income to
the extent of the difference between its taxable year and the
partnership's required taxable year. However, under the final
regulations, because a domestic partnership is not treated as owning
stock of a CFC within the meaning of section 958(a) for purposes of
computing income inclusions with respect to a CFC under section 951 and
section 951A, the applicable taxable year for income inclusions arising
as a result of a domestic partnership's ownership of the CFC is the
U.S. shareholder partner's taxable year, not the partnership's taxable
year. As a result, the final regulations eliminate any deferral of
income inclusions under section 951 and section 951A for a U.S.
shareholder partner with respect to any CFC owned by the U.S.
shareholder partnership. This elimination of a U.S. shareholder
partner's deferral with respect to income of any CFC owned by the U.S.
shareholder partnership, combined with the partner's existing deferral
of section 951 income inclusions before the application of the final
regulations, causes the U.S. shareholder partner to recognize two years
of section 951 income inclusions with respect to any CFC owned by the
U.S. shareholder partnership in this transition taxable year.
The Treasury Department and the IRS considered whether the adoption
of the aggregate approach should be viewed as a change in method of
accounting under section 446 and, if so, whether an adjustment should
be imposed under section 481. The Treasury Department and the IRS
determined that the adoption of the aggregate approach is not a change
in method of accounting. Accordingly, no adjustment under section 481
should be imposed.
Further, even if the adoption of the aggregate approach were
considered to be a change in accounting method, the Treasury Department
and the IRS do not believe imposing an adjustment under section 481
would be appropriate as part of such change. Section 481(a) adjustments
are intended to prevent the permanent duplication or omission of income
or expense that would otherwise arise as a result of a change in
accounting method. However, the change to the aggregate approach under
section 958 does not give rise to an omission or duplication of any
item of income or expense. Under the prior entity approach, the
domestic partnership would be treated as the foreign corporation's
owner under section 958(a) and would take into account its applicable
section 951 inclusion in its taxable year in which or with which such
foreign corporation's taxable year ends. The partnership's section 951
inclusion would, in turn, be included in each partner's distributive
share and would be recognized by each partner in the partner's taxable
year in which or with which the partnership's taxable year ends.
By contrast, under the new aggregate approach, each U.S.
shareholder partner of the partnership will be treated as an owner of
the foreign corporation under section 958(a). As a result, each partner
will have its own section 951 inclusion for the foreign corporation's
taxable years beginning on or after January 25, 2022 and will recognize
the section 951 inclusion in its taxable year in which or with which
the foreign corporation's taxable year ends.\2\ Therefore, the partners
would not have a permanent duplication or omission of income or expense
that would otherwise arise as a result of a change in accounting method
and require a section 481(a) adjustment.
---------------------------------------------------------------------------
\2\ In the first taxable year to which the aggregate approach
applies, the U.S. shareholder partner could in certain cases have
two section 951 inclusions: (1) Its distributive share of the
partnership's section 951 inclusion for the CFC's last taxable year
that begins before January 25, 2022, and (2) its own section 951
inclusion for the CFC's first taxable year beginning on or after
January 25, 2022. However, these inclusions represent subpart F
income with respect to two different taxable years of the CFC.
Therefore, there is no duplication or omission of the CFC's subpart
F income to the U.S. shareholder partner.
---------------------------------------------------------------------------
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) (``PRA'')
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).
The final regulations may affect a substantial number of small
entities, but the economic impact is not likely to be significant.
These regulations treat domestic partnerships as an aggregate of their
partners for purposes of section 951, which reduces the burden on
taxpayer partners that are not U.S. shareholders of a CFC owned by a
partnership because these partners are no longer subject to section 951
inclusions with respect to CFCs held by the partnership. The
regulations may also reduce burden on domestic partnerships that hold
CFCs because these partnerships are no longer required to calculate
their partners' distributive share of the partnerships' section 951
inclusions, which will likely lower their compliance costs. In
addition, the regulations do not impose a collection of information
burden on any person, including small entities.
The Treasury Department and the IRS estimate that approximately
7,500 U.S. partnerships that own CFCs e-filed at least one Form 5471 as
Category 4 or 5 filers in 2018.\3\ These partnerships had approximately
1.75 million domestic and foreign partners. To estimate the impact of
the final regulations related to domestic partnerships on small
entities, the Treasury Department and the IRS reviewed the percentage
of filers that own CFCs by class size based on gross receipts. For
2018, the smaller size classes constituted a relatively small fraction
of filers that own CFCs, suggesting that many domestic small business
entities would be unaffected by these regulations. Further, domestic
partnerships should only constitute a
[[Page 3654]]
portion of the smaller size classes of filers that own CFCs.
---------------------------------------------------------------------------
\3\ Data are from IRS's Research, Applied Analytics, and
Statistics division based on data available in the Compliance Data
Warehouse. Category 4 filer includes a U.S. person who had control
of a foreign corporation during the annual accounting period of the
foreign corporation. Category 5 includes a U.S. shareholder who owns
stock in a foreign corporation that is a CFC and who owned that
stock on the last day in the tax year of the foreign corporation in
that year in which it was a CFC. For full definitions, see <a href="https://www.irs.gov/pub/irs-pdf/i5471.pdf">https://www.irs.gov/pub/irs-pdf/i5471.pdf</a>.
---------------------------------------------------------------------------
Consequently, the Treasury Department and the IRS have determined
that the final regulations will not have a significant economic impact
on a substantial number of small entities. Accordingly, it is hereby
certified that these regulations will not have a significant economic
impact on a substantial number of small entities.
IV. Section 7805(f)
Pursuant to section 7805(f), the proposed regulations preceding the
final regulations (the 2019 proposed regulations) were submitted to the
Chief Counsel for Advocacy of the Small Business Administration for
comment on their impact on small business. No comments were received.
V. 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.
VI. 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 author of these regulations is Edward J. Tracy 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 <a href="https://www.irs.gov">https://www.irs.gov</a>.
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 1.951-1 is amended by:
0
1. Adding paragraph (a)(4);
0
2. Removing paragraph (h);
0
3. Redesignating paragraph (i) as paragraph (h); and
0
4. Removing the last sentence of newly redesignated paragraph (h).
The addition reads as follows:
Sec. 1.951-1 Amounts included in gross income of United States
shareholders.
(a) * * *
(4) See Sec. 1.958-1(d) for rules regarding the ownership of stock
of a foreign corporation through a domestic partnership for purposes of
section 951 and for purposes of any provision that specifically applies
by reference to section 951 or the regulations in this part under
section 951.
* * * * *
0
Par. 3. Section 1.951A-1 is amended by revising paragraph (e) to read
as follows:
Sec. 1.951A-1 General provisions.
* * * * *
(e) Stock owned through domestic partnerships. See Sec. 1.958-1(d)
for rules regarding the ownership of stock of a foreign corporation
through a domestic partnership for purposes of section 951A and for
purposes of any provision that specifically applies by reference to
section 951A or the section 951A regulations.
* * * * *
0
Par. 4. Section 1.956-1 is amended by:
0
1. Adding a sentence at the end of paragraph (a)(1);
0
2. Removing the last sentence of paragraph (a)(2)(i);
0
3. Removing paragraphs (a)(2)(iii) and (a)(3)(iv);
0
4. Redesignating paragraph (a)(3)(v) as paragraph (a)(3)(iv);
0
5. Revising the newly redesignated paragraph (a)(3)(iv) heading; and
0
6. Adding a sentence at the end of paragraph (g)(4).
The additions and revision read as follows:
Sec. 1.956-1 Shareholder's pro rata share of the average of the
amounts of United States property held by a controlled foreign
corporation.
(a) * * * (1) * * * See Sec. 1.958-1(d) for rules regarding the
ownership of stock of a foreign corporation through a domestic
partnership for purposes of section 956(a) and for purposes of any
provision that specifically applies by reference to section 956(a) or
the regulations in this part under section 956 that relate to section
956(a).
* * * * *
(3) * * *
(iv) Example 4. * * *
* * * * *
(g) * * *
(4) * * * For taxable years of controlled foreign corporations
beginning before January 25, 2022, and taxable years of United States
shareholders in which or with which such taxable years of foreign
corporations end, see Sec. 1.956-1(a)(2)(i) and (iii) and (a)(3)(iv)
as in effect and contained in 26 CFR part 1, as revised April 1, 2021.
* * * * *
0
Par. 5. Section 1.958-1 is amended by:
0
1. Redesignating paragraph (d) as paragraph (f); and
0
2. Adding a new paragraph (d) and reserved paragraph (e).
The additions read as follows:
Sec. 1.958-1 Direct and indirect ownership of stock.
* * * * *
(d) Stock of foreign corporations owned through domestic
partnerships--(1) In general. Except as otherwise provided in paragraph
(d)(2) of this section, for purposes of sections 951, 951A, and 956(a),
and for purposes of any provision that specifically applies by
reference to any of such sections or the regulations in this part under
section 951, 951A, or 956 (but only as the regulations in this part
under section 956 relate to section 956(a)), a domestic partnership is
not treated as owning stock of a foreign corporation
[[Page 3655]]
within the meaning of section 958(a). For purposes of determining the
persons that own stock of the foreign corporation within the meaning of
section 958(a) when the preceding sentence applies, stock of a foreign
corporation owned by a domestic partnership is treated in the same
manner as stock of a foreign corporation owned by a foreign partnership
under section 958(a)(2) and paragraph (b) of this section.
(2) Non-application for certain purposes. Paragraph (d)(1) of this
section does not apply for purposes of--
(i) Determining whether any United States person is a United States
shareholder (as defined in section 951(b));
(ii) Determining whether any foreign corporation is a controlled
foreign corporation (CFC) (as defined in section 957(a));
(iii) Applying section 956(c) and (d);
(iv) Applying section 1248; or
(v) Determining whether any United States shareholder is a
controlling domestic shareholder (as defined in Sec. 1.964-1(c)(5)).
(3) Examples. The following examples illustrate the application of
this paragraph (d).
(i) Example 1--(A) Facts. USP, a domestic corporation, and
Individual A, a United States citizen unrelated to USP, own 95% and 5%,
respectively, of PRS, a domestic partnership. PRS owns 100% of the
single class of stock of FC, a foreign corporation.
(B) Analysis--(1) United States shareholder and CFC determinations.
Under paragraphs (d)(2)(i) and (ii) of this section, respectively, the
determination of whether PRS, USP, and Individual A (each a United
States person) are United States shareholders of FC, and whether FC is
a controlled foreign corporation, is made without regard to paragraph
(d)(1) of this section. PRS, a United States person, owns 100% of the
total combined voting power or value of the FC stock within the meaning
of section 958(a). Accordingly, PRS is a United States shareholder
under section 951(b), and FC is a controlled foreign corporation under
section 957(a). USP is also a United States shareholder of FC because
it owns 95% of the total combined voting power or value of the FC stock
under sections 958(b) and 318(a)(2)(A). Individual A, however, is not a
United States shareholder of FC because Individual A owns only 5% of
the total combined voting power or value of the FC stock under sections
958(b) and 318(a)(2)(A).
(2) Application of sections 951 and 951A. Under paragraph (d)(1) of
this section, for purposes of sections 951 and 951A, PRS is not treated
as owning (within the meaning of section 958(a)) the FC stock; instead,
for purposes of determining the persons that own the FC stock within
the meaning of section 958(a), the FC stock is treated as if it were
owned by a foreign partnership under paragraph (b) of this section.
Therefore, for purposes of sections 951 and 951A, USP is treated as
owning 95% of the FC stock under section 958(a), and Individual A is
treated as owning 5% of the FC stock under section 958(a). USP is a
United States shareholder of FC, and therefore USP determines its
income inclusions under sections 951 and 951A directly with respect to
FC based on its ownership of FC stock under section 958(a). However,
because Individual A is not a United States shareholder of FC,
Individual A does not have an income inclusion under section 951 with
respect to FC or a pro rata share of any amount of FC for purposes of
section 951A. This is the case even though PRS is a United States
shareholder of FC.
(ii) Example 2--(A) Facts. USP, a domestic corporation, and
Individual A, a United States citizen, own 90% and 10%, respectively,
of PRS1, a domestic partnership. PRS1 and Individual B, a nonresident
alien individual, own 90% and 10%, respectively, of PRS2, a domestic
partnership. PRS2 owns 100% of the single class of stock of FC, a
foreign corporation. USP, Individual A, and Individual B are unrelated
to each other.
(B) Analysis--(1) United States shareholder and CFC determinations.
Under paragraphs (d)(2)(i) and (ii) of this section, the determination
of whether PRS1, PRS2, USP, and Individual A (each a United States
person) are United States shareholders of FC, and whether FC is a
controlled foreign corporation, is made without regard to paragraph
(d)(1) of this section. PRS2 owns 100% of the total combined voting
power or value of the FC stock within the meaning of section 958(a).
Accordingly, PRS2 is a United States shareholder under section 951(b),
and FC is a controlled foreign corporation under section 957(a). Under
sections 958(b) and 318(a)(2)(A), PRS1 is treated as owning 90% of the
FC stock owned by PRS2. Accordingly, PRS1 is also a United States
shareholder under section 951(b). Further, under section 958(b)(2),
PRS1 is treated as owning 100% of the FC stock for purposes of
determining the FC stock treated as owned by USP and Individual A under
section 318(a)(2)(A). Therefore, USP is treated as owning 90% of the FC
stock under section 958(b) (100% x 100% x 90%), and Individual A is
treated as owning 10% of the FC stock under section 958(b) (100% x 100%
x 10%). Accordingly, both USP and Individual A are also United States
shareholders of FC under section 951(b).
(2) Application of sections 951 and 951A. Under paragraph (d)(1) of
this section, for purposes of sections 951 and 951A, PRS1 and PRS2 are
not treated as owning (within the meaning of section 958(a)) the FC
stock; instead, for purposes of determining the persons that own the FC
stock within the meaning of section 958(a), as the FC stock is treated
as if it were owned by foreign partnerships under paragraph (b) of this
section. Therefore, for purposes of determining the amount included in
gross income under sections 951 and 951A, under section 958(a) USP is
treated as owning 81% (100% x 90% x 90%) of the FC stock, and
Individual A is treated as owning 9% (100% x 90% x 10%) of the FC
stock. Because USP and Individual A are both United States shareholders
of FC, USP and Individual A determine their respective inclusions under
sections 951 and 951A directly with respect to FC based on their
ownership of FC stock under section 958(a). This is the case even
though PRS2 is a United States shareholder of FC.
(iii) Example 3--(A) Facts. Individual A, a United States citizen,
Individual B, a United States citizen unrelated to Individual A, and
Individual C, a foreign person unrelated to both Individuals A and B,
own 10%, 5%, and 85%, respectively, of PRS, a domestic partnership. PRS
owns 100% of the single class of stock of FC, a foreign corporation. FC
holds an account receivable from PRS that constitutes an obligation of
a United States person within the meaning of section 956(c)(1)(C) and
Sec. 1.956-2(a)(1)(iii).
(B) Analysis--(1) United States shareholder and CFC determinations.
Under paragraphs (d)(2)(i) and (ii) of this section, respectively, the
determination of whether PRS, Individual A, and Individual B (each a
United States person) are United States shareholders of FC, and whether
FC is a controlled foreign corporation, is made without regard to
paragraph (d)(1) of this section. PRS, a United States person, owns
100% of the total combined voting power or value of the FC stock within
the meaning of section 958(a). Accordingly, PRS is a United States
shareholder under section 951(b), and FC is a controlled foreign
corporation under section 957(a). Individual A is also a United States
shareholder of FC because it owns 10% of the total combined voting
power or
[[Page 3656]]
value of the FC stock under sections 958(b) and 318(a)(2)(A).
Individual B, however, is not a United States shareholder of FC because
Individual B owns only 5% of the total combined voting power or value
of the FC stock under sections 958(b) and 318(a)(2)(A).
(2) Application of section 956(a). Under paragraph (d)(1) of this
section, for purposes of section 956(a), PRS is not treated as owning
(within the meaning of section 958(a)) the FC stock; instead, for
purposes of determining the persons that own the FC stock within the
meaning of section 958(a), as the FC stock is treated as if it were
owned by a foreign partnership under paragraph (b) of this section.
Therefore, for purposes of section 956(a), under section 958(a)
Individual A is treated as owning 10% of the FC stock, and Individual B
is treated as owning 5% of the FC stock. Individual A is a United
States shareholder of FC, and therefore Individual A determines the
amount it must include in gross income under section 951(a)(1)(B) by
reason of the PRS obligation held by FC based on its ownership of FC
stock under section 958(a) as determined under paragraph (d)(1) of this
section. However, because Individual B is not a United States
shareholder of FC, Individual B does not have an amount to include in
income under sections 956(a) and 951(a)(1)(B).
(3) Application of section 956(c) and (d). Under paragraph
(d)(2)(iii) of this section, for purposes of section 956(c) and (d),
the determination of whether FC holds United States property is made
without regard to paragraph (d)(1) of this section. Therefore, PRS is
treated as owning stock of FC within the meaning of section 958(a) for
purposes of determining the amount of United States property held by FC
arising from its note receivable from PRS.
(4) Applicability dates--(i) Paragraphs (d)(1) through (3) of this
section. Paragraphs (d)(1) through (3) of this section apply to taxable
years of foreign corporations beginning on or after January 25, 2022,
and to taxable years of United States persons in which or with which
such taxable years of foreign corporations end. For taxable years of a
foreign corporation that precede the taxable years described in the
preceding sentence, a domestic partnership may apply paragraphs (d)(1)
through (3) of this section in their entirety to taxable years of a
foreign corporation beginning after December 31, 2017, and to taxable
years of the domestic partnership in which or with which such taxable
years of the foreign corporation end, provided that the partnership,
its partners that are United States shareholders of the foreign
corporation, and other domestic partnerships that bear relationships
described in section 267(b) or 707(b) to the partnership (and their
United States shareholder partners) consistently apply paragraphs
(d)(1) through (3) of this section with respect to all foreign
corporations whose stock the domestic partnerships own within the
meaning of section 958(a) (determined without regard to paragraph
(d)(1) of this section).
(ii) Rules applicable before January 25, 2022. For taxable years of
foreign corporations beginning before January 25, 2022, and to taxable
years of United States persons in which or with which such taxable
years of foreign corporations end, see Sec. Sec. 1.951-1(h) and
1.951A-1(e) as in effect and contained in 26 CFR part 1, as revised
April 1, 2021.
(e) [Reserved]
* * * * *
0
Par. 6. Section 1.1502-51 is amended by revising the last sentence in
paragraph (b) to read as follows:
Sec. 1.1502-51 Consolidated section 951A.
* * * * *
(b) * * * In addition, see Sec. 1.951A-1(e) (cross-referencing
Sec. 1.958-1(d)).
* * * * *
Douglas W. O'Donnell,
Deputy Commissioner for Services and Enforcement.
Approved: December 8, 2021.
Lily Batchelder,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2022-00066 Filed 1-24-22; 8:45 am]
BILLING CODE 4830-01-P
</pre></body>
</html>Indexed from Federal Register on January 25, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.