Code of Federal Regulations · Section
§ 1.59A-0 — a-0 Table Of Contents
26 C.F.R. § 1.59A-0
This section contains a listing of the headings for §§ 1.59A-1, 1.59A-2, 1.59A-3, 1.59A-4, 1.59A-5, 1.59A-6, 1.59A-7, 1.59A-8, 1.59A-9, and 1.59A-10.
§ 1.59A-1 Base erosion and anti-abuse tax.
(a) Purpose.
(b) Definitions.
(1) Aggregate group.
(2) Applicable section 38 credits.
(3) Applicable taxpayer.
(4) Bank.
(5) Base erosion and anti-abuse tax rate.
(6) Business interest expense.
(7) Deduction.
(8) Disallowed business interest expense carryforward.
(9) Domestic related business interest expense.
(10) Foreign person.
(11) Foreign related business interest expense.
(12) Foreign related party.
(13) Gross receipts.
(14) Member of an aggregate group.
(15) Registered securities dealer.
(16) Regular tax liability.
(17) Related party.
(i) In general.
(ii) 25-percent owner.
(iii) Application of section 318.
(18) TLAC long-term debt required amount.
(19) TLAC securities amount.
(20) TLAC security.
(21) Unrelated business interest expense.
§ 1.59A-2 Applicable taxpayer.
(a) Scope.
(b) Applicable taxpayer.
(c) Aggregation rules.
(1) In general.
(2) Aggregate group determined with respect to each taxpayer.
(i) In general.
(ii) Change in the composition of an aggregate group.
(3) Taxable year of members of an aggregate group.
(4) Periods before and after a corporation is a member of an aggregate group.
(i) In general.
(ii) Deemed taxable year-end.
(iii) Items allocable to deemed taxable years before and after deemed taxable year-end.
(5) Short taxable year.
(i) Short period of the taxpayer.
(A) In general.
(B) Determining the gross receipts and base erosion percentage of the aggregate group of a taxpayer for a short period.
(ii) Short period of a member of the taxpayer's aggregate group.
(A) Multiple taxable years of a member of the taxpayer's aggregate group comprised of more than 12 months.
(B) Short period or periods of a member of the taxpayer's aggregate group comprised of fewer than 12 months from change in taxable year.
(iii) Anti-abuse rule.
(6) Treatment of predecessors.
(i) In general.
(ii) No duplication.
(7) Partnerships.
(8) Transition rule for aggregate group members with different taxable years.
(9) Consolidated groups.
(d) Gross receipts test.
(1) Amount of gross receipts.
(2) Taxpayer not in existence for entire three-year period.
(3) Gross receipts of foreign corporations.
(4) Gross receipts of an insurance company.
(5) Reductions in gross receipts.
(e) Base erosion percentage test.
(1) In general.
(2) Base erosion percentage test for banks and registered securities dealers.
(i) In general.
(ii) Aggregate groups.
(iii) De minimis exception for banking and registered securities dealer activities.
(3) Computation of base erosion percentage.
(i) In general.
(ii) Certain items not taken into account in denominator.
(iii) Effect of treaties on base erosion percentage determination.
(iv) Amounts paid or accrued between members of a consolidated group.
(v) Deductions and base erosion tax benefits from partnerships.
(vi) Mark-to-market positions.
(vii) Reinsurance losses incurred and claims payments.
(viii) Certain payments that qualify for the effectively connected income exception and another base erosion payment exception.
(f) Examples.
(1) Example 1: Mark-to-market.
(i) Facts.
(ii) Analysis.
(2) Example 2: Member leaving an aggregate group.
(i) Facts.
(ii) Analysis.
§ 1.59A-3 Base erosion payments and base erosion tax benefits.
(a) Scope.
(b) Base erosion payments.
(1) In general.
(2) Operating rules.
(i) In general.
(ii) Amounts paid or accrued in cash and other consideration.
(iii) Transactions providing for net payments.
(iv) Amounts paid or accrued with respect to mark-to-market position.
(v) Coordination among categories of base erosion payments.
(vi) Certain domestic passthrough entities.
(A) In general.
(B) Amount of base erosion payment.
(C) Specified domestic passthrough.
(D) Specified foreign related party.
(vii) Transfers of property to related taxpayers.
(viii) Reductions to determine gross income.
(ix) Losses recognized on the sale or transfer of property.
(3) Exceptions to base erosion payment.
(i) Certain services cost method amounts.
(A) In general.
(B) Eligibility for the services cost method exception.
(C) Adequate books and records.
(D) Total services cost.
(ii) Qualified derivative payments.
(iii) Effectively connected income.
(A) In general.
(B) Application to certain treaty residents.
(C) Application to partnerships.
(iv) Exchange loss on a section 988 transaction.
(v) Amounts paid or accrued with respect to TLAC securities and foreign TLAC securities.
(A) In general.
(B) Limitation on exclusion for TLAC securities.
(C) Scaling ratio.
(D) Average domestic TLAC securities amount.
(E) Average TLAC long-term debt required amount.
(F) Limitation on exclusion for foreign TLAC securities.
(1) In general.
(2) Foreign TLAC long-term debt required amount.
(3) No specified minimum provided by local law.
(4) Foreign TLAC security.
(vi) Amounts paid or accrued in taxable years beginning before January 1, 2018.
(vii) Business interest carried forward from taxable years beginning before January 1, 2018.
(viii) Specified nonrecognition transactions.
(A) In general.
(B) Other property transferred to a foreign related party in a specified nonrecognition transaction.
(C) Other property received from a foreign related party in certain specified nonrecognition transactions.
(D) Definition of other property.
(E) Allocation of other property.
(ix) Reinsurance losses incurred and claims payments.
(A) In general.
(B) Regulated foreign insurance company.
(4) Rules for determining the amount of certain base erosion payments.
(i) Interest expense allocable to a foreign corporation's effectively connected income.
(A) Methods described in § 1.882-5.
(B) U.S.-booked liabilities determination.
(C) U.S.-booked liabilities in excess of U.S.-connected liabilities.
(D) Election to use financial statements.
(E) Coordination with certain tax treaties.
(1) In general.
(2) Hypothetical § 1.882-5 interest expense defined.
(3) Consistency requirement.
(F) Coordination with exception for foreign TLAC securities.
(ii) Other deductions allowed with respect to effectively connected income.
(iii) Depreciable property.
(iv) Coordination with ECI exception.
(v) Coordination with certain tax treaties.
(A) Allocable expenses.
(B) Internal dealings under certain income tax treaties.
(vi) Business interest expense arising in taxable years beginning after December 31, 2017.
(c) Base erosion tax benefit.
(1) In general.
(2) Exception to base erosion tax benefit.
(i) In general.
(ii) Branch-level interest tax.
(3) Effect of treaty on base erosion tax benefit.
(4) Application of section 163(j) to base erosion payments.
(i) Classification of payments or accruals of business interest expense based on the payee.
(A) Classification of payments or accruals of business interest expense of a corporation.
(B) Classification of payments or accruals of business interest expense by a partnership.
(C) Classification of payments or accruals of business interest expense paid or accrued to a foreign related party that is subject to an exception.
(1) ECI exception.
(2) TLAC interest and interest subject to withholding tax.
(ii) Ordering rules for business interest expense that is limited under section 163(j)(1) to determine which classifications of business interest expense are deducted and which classifications of business interest expense are carried forward.
(A) In general.
(B) Ordering rules for treating business interest expense deduction and disallowed business interest expense carryforwards as foreign related business interest expense, domestic related business interest expense, and unrelated business interest expense.
(1) General ordering rule for allocating business interest expense deduction between classifications.
(2) Ordering of business interest expense incurred by a corporation.
(3) Ordering of business interest expense incurred by a partnership and allocated to a corporate partner.
(5) Allowed deduction.
(6) Election to waive allowed deductions.
(i) In general.
(ii) Time and manner for election to waive deduction.
(A) In general.
(B) Information required to make the election to waive allowed deductions.
(iii) Effect of election to waive deduction.
(A) In general.
(1) Consistent treatment.
(2) No allocation and apportionment of waived deductions.
(3) Effect of waiver of deductions described in §§ 1.861-10 and 1.861-10T.
(4) Effect of the election to waive deductions on the stock basis of a consolidated group member.
(B) Effect of the election to waive deductions disregarded for certain purposes.
(C) Not a method of accounting.
(D) Effect of the election in determining section 481(a) adjustments.
(iv) Rules applicable to partners and partnerships.
(A) In general.
(B) Rule for determining the adjusted basis of a partner's interest in a partnership.
(C) Rule for applying section 163(j).
(D) Limited application of election to waive deductions with respect to adjustments made pursuant to audit procedures under sections 6221 through 6241.
(v) Rule applicable to premium and other consideration paid or accrued by the taxpayer for any reinsurance payments that are taken into account under section 803(a)(1)(B) or 832(b)(4)(A).
(d) Examples.
(1) Example 1: Determining a base erosion payment.
(i) Facts.
(ii) Analysis.
(2) Example 2: Interest allocable under § 1.882-5.
(i) Facts.
(ii) Analysis.
(3) Example 3: Interaction with section 163(j).
(i) Facts.
(ii) Analysis.
(A) Classification of business interest.
(B) Ordering rules for disallowed business interest expense carryforward.
(4) Example 4: Interaction with section 163(j); carryforward.
(i) Facts.
(ii) Analysis.
(A) Classification of business interest.
(B) Ordering rules for disallowed business interest expense carryforward.
(5) Example 5: Interaction with section 163(j); carryforward.
(i) Facts.
(ii) Analysis.
(6) Example 6: Interaction with section 163(j); partnership.
(i) Facts.
(ii) Partnership level analysis.
(iii) Partner level allocations analysis.
(iv) Partner level allocations for determining base erosion tax benefits.
(v) Computation of modified taxable income.
(7) Example 7: Transfers of property to related taxpayers.
(i) Facts.
(ii) Analysis.
(A) Year 1.
(B) Year 2.
(8) Example 8: Effect of election to waive deduction on method of accounting.
(i) Facts.
(ii) Analysis.
(9) Example 9: Change of accounting method when taxpayer has waived a deduction.
(i) Facts.
(ii) Analysis.
(A) Computation of the section 481(a) adjustment.
(B) Computation of basis adjustments.
§ 1.59A-4 Modified taxable income.
(a) Scope.
(b) Computation of modified taxable income.
(1) In general.
(2) Modifications to taxable income.
(i) Base erosion tax benefits.
(ii) Certain net operating loss deductions.
(3) Rule for holders of a residual interest in a REMIC.
(c) Examples.
(1) Example 1: Current year loss.
(i) Facts.
(ii) Analysis.
(2) Example 2: Net operating loss deduction.
(i) Facts.
(ii) Analysis.
§ 1.59A-5 Base erosion minimum tax amount.
(a) Scope.
(b) Base erosion minimum tax amount.
(1) In general.
(2) Calculation of base erosion minimum tax amount.
(3) Credits that do not reduce regular tax liability.
(i) Taxable years beginning on or before December 31, 2025.
(ii) Taxable years beginning after December 31, 2025.
(c) Base erosion and anti-abuse tax rate.
(1) In general.
(i) Calendar year 2018.
(ii) Calendar years 2019 through 2025.
(iii) Calendar years after 2025.
(2) Increased rate for banks and registered securities dealers.
(i) In general.
(ii) De minimis exception to increased rate for banks and registered securities dealers.
(3) Application of section 15 to tax rates in section 59A.
(i) New tax.
(ii) Change in tax rate pursuant to section 59A(b)(1)(A).
(iii) Change in rate pursuant to section 59A(b)(2).
§ 1.59A-6 Qualified derivative payment.
(a) Scope.
(b) Qualified derivative payment.
(1) In general.
(2) Reporting requirements.
(i) In general.
(ii) Failure to satisfy the reporting requirement.
(iii) Reporting of aggregate amount of qualified derivative payments.
(iv) Transition period for qualified derivative payment reporting.
(3) Amount of any qualified derivative payment.
(i) In general.
(ii) Net qualified derivative payment that includes a payment that is a base erosion payment.
(c) Exceptions for payments otherwise treated as base erosion payments.
(d) Derivative defined.
(1) In general.
(2) Exceptions.
(i) Direct interest.
(ii) Insurance contracts.
(iii) Securities lending and sale-repurchase transactions.
(A) Multi-step transactions treated as financing.
(B) Special rule for payments associated with the cash collateral provided in a securities lending transaction or substantially similar transaction.
(C) Anti-abuse exception for certain transactions that are the economic equivalent of substantially unsecured cash borrowing.
(3) American depository receipts.
(e) Examples.
(1) Example 1: Notional principal contract as QDP.
(i) Facts.
(ii) Analysis.
(2) Example 2: Securities lending anti-abuse rule.
(i) Facts.
(ii) Analysis.
§ 1.59A-7 Application of base erosion and anti-abuse tax to partnerships.
(a) Scope.
(b) Application of section 59A to partnerships.
(c) Base erosion payment.
(1) Payments made by or to a partnership.
(2) Transfers of certain property.
(3) Transfers of a partnership interest.
(i) In general.
(ii) Transfers of a partnership interest by a partner.
(iii) Certain issuances of a partnership interest by a partnership.
(iv) Partnership interest transfers defined.
(4) Increased basis from a distribution.
(5) Operating rules applicable to base erosion payments.
(i) Single payment characterized as separate transactions.
(ii) Ordering rule with respect to transfers of a partnership interest.
(iii) Consideration for base erosion payment or property resulting in base erosion tax benefits.
(iv) Non-cash consideration.
(v) Allocations of income in lieu of deductions.
(d) Base erosion tax benefit for partners.
(1) In general.
(2) Exception for base erosion tax benefits of certain small partners.
(i) In general.
(ii) Attribution.
(e) Other rules for applying section 59A to partnerships.
(1) Partner's distributive share.
(2) Gross receipts.
(i) In general.
(ii) Foreign corporation.
(3) Registered securities dealers.
(4) Application of sections 163(j) and 59A(c)(3) to partners.
(5) Tiered partnerships.
(f) Foreign related party.
(g) Examples.
(1) Facts.
(2) Examples.
(i) Example 1: Contributions to a partnership on partnership formation.
(A) Facts.
(B) Analysis.
(ii) Example 2: Section 704(c) and remedial allocations.
(A) Facts.
(B) Analysis.
(iii) Example 3: Sale of a partnership interest without a section 754 election.
(A) Facts.
(B) Analysis.
(iv) Example 4: Sale of a partnership interest with section 754 election.
(A) Facts.
(B) Analysis.
(v) Example 5: Purchase of depreciable property from a partnership.
(A) Facts.
(B) Analysis.
(vi) Example 6: Sale of a partnership interest to a second partnership.
(A) Facts.
(B) Analysis.
(vii) Example 7: Distribution of cash by a partnership to a foreign related party.
(A) Facts.
(B) Analysis.
(viii) Example 8: Distribution of property by a partnership to a taxpayer.
(A) Facts.
(B) Analysis.
(ix) Example 9: Distribution of property by a partnership in liquidation of a foreign related party's interest.
(A) Facts.
(B) Analysis.
(x) Example 10: Section 704(c) and curative allocations.
(A) Facts.
(B) Analysis.
§ 1.59A-8 [Reserved].
§ 1.59A-9 Anti-abuse and recharacterization rules.
(a) Scope.
(b) Anti-abuse rules.
(1) Transactions involving unrelated persons, conduits, or intermediaries.
(2) Transactions to increase the amount of deductions taken into account in the denominator of the base erosion percentage computation.
(3) Transactions to avoid the application of rules applicable to banks and registered securities dealers.
(4) Nonrecognition transactions.
(5) Transactions involving derivatives on a partnership interest.
(6) Allocations to eliminate or reduce a base erosion payment.
(c) Examples.
(1) Facts.
(2) Example 1: Substitution of payments that are not base erosion payments for payments that otherwise would be base erosion payments through a conduit or intermediary.
(i) Facts.
(ii) Analysis.
(3) Example 2: Alternative transaction to base erosion payment.
(i) Facts.
(ii) Analysis.
(4) Example 3: Alternative financing source.
(i) Facts.
(ii) Analysis.
(5) Example 4: Alternative financing source that is a conduit.
(i) Facts.
(ii) Analysis.
(6) Example 5: Intermediary acquisition.
(i) Facts.
(ii) Analysis.
(7) Example 6: Offsetting transactions to increase the amount of deductions taken into account in the denominator of the base erosion percentage computation.
(i) Facts.
(ii) Analysis.
(8) Example 7: Ordinary course transactions that increase the amount of deductions taken into account in the denominator of the base erosion percentage computation.
(i) Facts.
(ii) Analysis.
(9) Example 8: Transactions to avoid the application of rules applicable to banks and registered securities dealers.
(i) Facts.
(ii) Analysis.
(10) Example 9: Transactions that do not avoid the application of rules applicable to banks and registered securities dealers.
(i) Facts.
(ii) Analysis.
(11) Example 10: Acquisition of depreciable property in a nonrecognition transaction.
(i) Facts.
(ii) Analysis.
(12) Example 11: Transactions between related parties with a principal purpose of increasing the adjusted basis of property.
(i) Facts.
(ii) Analysis.
§ 1.59A-10 Applicability date.
(a) General applicability date.
(b) Exception.
This section contains a listing of the headings for §§ 1.59A-1, 1.59A-2, 1.59A-3, 1.59A-4, 1.59A-5, 1.59A-6, 1.59A-7, 1.59A-8, 1.59A-9, and 1.59A-10.
§ 1.59A-1 Base erosion and anti-abuse tax.
(a) Purpose.
(b) Definitions.
(1) Aggregate group.
(2) Applicable section 38 credits.
(3) Applicable taxpayer.
(4) Bank.
(5) Base erosion and anti-abuse tax rate.
(6) Business interest expense.
(7) Deduction.
(8) Disallowed business interest expense carryforward.
(9) Domestic related business interest expense.
(10) Foreign person.
(11) Foreign related business interest expense.
(12) Foreign related party.
(13) Gross receipts.
(14) Member of an aggregate group.
(15) Registered securities dealer.
(16) Regular tax liability.
(17) Related party.
(i) In general.
(ii) 25-percent owner.
(iii) Application of section 318.
(18) TLAC long-term debt required amount.
(19) TLAC securities amount.
(20) TLAC security.
(21) Unrelated business interest expense.
§ 1.59A-2 Applicable taxpayer.
(a) Scope.
(b) Applicable taxpayer.
(c) Aggregation rules.
(1) In general.
(2) Aggregate group determined with respect to each taxpayer.
(i) In general.
(ii) Change in the composition of an aggregate group.
(3) Taxable year of members of an aggregate group.
(4) Periods before and after a corporation is a member of an aggregate group.
(i) In general.
(ii) Deemed taxable year-end.
(iii) Items allocable to deemed taxable years before and after deemed taxable year-end.
(5) Short taxable year.
(i) Short period of the taxpayer.
(A) In general.
(B) Determining the gross receipts and base erosion percentage of the aggregate group of a taxpayer for a short period.
(ii) Short period of a member of the taxpayer's aggregate group.
(A) Multiple taxable years of a member of the taxpayer's aggregate group comprised of more than 12 months.
(B) Short period or periods of a member of the taxpayer's aggregate group comprised of fewer than 12 months from change in taxable year.
(iii) Anti-abuse rule.
(6) Treatment of predecessors.
(i) In general.
(ii) No duplication.
(7) Partnerships.
(8) Transition rule for aggregate group members with different taxable years.
(9) Consolidated groups.
(d) Gross receipts test.
(1) Amount of gross receipts.
(2) Taxpayer not in existence for entire three-year period.
(3) Gross receipts of foreign corporations.
(4) Gross receipts of an insurance company.
(5) Reductions in gross receipts.
(e) Base erosion percentage test.
(1) In general.
(2) Base erosion percentage test for banks and registered securities dealers.
(i) In general.
(ii) Aggregate groups.
(iii) De minimis exception for banking and registered securities dealer activities.
(3) Computation of base erosion percentage.
(i) In general.
(ii) Certain items not taken into account in denominator.
(iii) Effect of treaties on base erosion percentage determination.
(iv) Amounts paid or accrued between members of a consolidated group.
(v) Deductions and base erosion tax benefits from partnerships.
(vi) Mark-to-market positions.
(vii) Reinsurance losses incurred and claims payments.
(viii) Certain payments that qualify for the effectively connected income exception and another base erosion payment exception.
(f) Examples.
(1) Example 1: Mark-to-market.
(i) Facts.
(ii) Analysis.
(2) Example 2: Member leaving an aggregate group.
(i) Facts.
(ii) Analysis.
§ 1.59A-3 Base erosion payments and base erosion tax benefits.
(a) Scope.
(b) Base erosion payments.
(1) In general.
(2) Operating rules.
(i) In general.
(ii) Amounts paid or accrued in cash and other consideration.
(iii) Transactions providing for net payments.
(iv) Amounts paid or accrued with respect to mark-to-market position.
(v) Coordination among categories of base erosion payments.
(vi) Certain domestic passthrough entities.
(A) In general.
(B) Amount of base erosion payment.
(C) Specified domestic passthrough.
(D) Specified foreign related party.
(vii) Transfers of property to related taxpayers.
(viii) Reductions to determine gross income.
(ix) Losses recognized on the sale or transfer of property.
(3) Exceptions to base erosion payment.
(i) Certain services cost method amounts.
(A) In general.
(B) Eligibility for the services cost method exception.
(C) Adequate books and records.
(D) Total services cost.
(ii) Qualified derivative payments.
(iii) Effectively connected income.
(A) In general.
(B) Application to certain treaty residents.
(C) Application to partnerships.
(iv) Exchange loss on a section 988 transaction.
(v) Amounts paid or accrued with respect to TLAC securities and foreign TLAC securities.
(A) In general.
(B) Limitation on exclusion for TLAC securities.
(C) Scaling ratio.
(D) Average domestic TLAC securities amount.
(E) Average TLAC long-term debt required amount.
(F) Limitation on exclusion for foreign TLAC securities.
(1) In general.
(2) Foreign TLAC long-term debt required amount.
(3) No specified minimum provided by local law.
(4) Foreign TLAC security.
(vi) Amounts paid or accrued in taxable years beginning before January 1, 2018.
(vii) Business interest carried forward from taxable years beginning before January 1, 2018.
(viii) Specified nonrecognition transactions.
(A) In general.
(B) Other property transferred to a foreign related party in a specified nonrecognition transaction.
(C) Other property received from a foreign related party in certain specified nonrecognition transactions.
(D) Definition of other property.
(E) Allocation of other property.
(ix) Reinsurance losses incurred and claims payments.
(A) In general.
(B) Regulated foreign insurance company.
(4) Rules for determining the amount of certain base erosion payments.
(i) Interest expense allocable to a foreign corporation's effectively connected income.
(A) Methods described in § 1.882-5.
(B) U.S.-booked liabilities determination.
(C) U.S.-booked liabilities in excess of U.S.-connected liabilities.
(D) Election to use financial statements.
(E) Coordination with certain tax treaties.
(1) In general.
(2) Hypothetical § 1.882-5 interest expense defined.
(3) Consistency requirement.
(F) Coordination with exception for foreign TLAC securities.
(ii) Other deductions allowed with respect to effectively connected income.
(iii) Depreciable property.
(iv) Coordination with ECI exception.
(v) Coordination with certain tax treaties.
(A) Allocable expenses.
(B) Internal dealings under certain income tax treaties.
(vi) Business interest expense arising in taxable years beginning after December 31, 2017.
(c) Base erosion tax benefit.
(1) In general.
(2) Exception to base erosion tax benefit.
(i) In general.
(ii) Branch-level interest tax.
(3) Effect of treaty on base erosion tax benefit.
(4) Application of section 163(j) to base erosion payments.
(i) Classification of payments or accruals of business interest expense based on the payee.
(A) Classification of payments or accruals of business interest expense of a corporation.
(B) Classification of payments or accruals of business interest expense by a partnership.
(C) Classification of payments or accruals of business interest expense paid or accrued to a foreign related party that is subject to an exception.
(1) ECI exception.
(2) TLAC interest and interest subject to withholding tax.
(ii) Ordering rules for business interest expense that is limited under section 163(j)(1) to determine which classifications of business interest expense are deducted and which classifications of business interest expense are carried forward.
(A) In general.
(B) Ordering rules for treating business interest expense deduction and disallowed business interest expense carryforwards as foreign related business interest expense, domestic related business interest expense, and unrelated business interest expense.
(1) General ordering rule for allocating business interest expense deduction between classifications.
(2) Ordering of business interest expense incurred by a corporation.
(3) Ordering of business interest expense incurred by a partnership and allocated to a corporate partner.
(5) Allowed deduction.
(6) Election to waive allowed deductions.
(i) In general.
(ii) Time and manner for election to waive deduction.
(A) In general.
(B) Information required to make the election to waive allowed deductions.
(iii) Effect of election to waive deduction.
(A) In general.
(1) Consistent treatment.
(2) No allocation and apportionment of waived deductions.
(3) Effect of waiver of deductions described in §§ 1.861-10 and 1.861-10T.
(4) Effect of the election to waive deductions on the stock basis of a consolidated group member.
(B) Effect of the election to waive deductions disregarded for certain purposes.
(C) Not a method of accounting.
(D) Effect of the election in determining section 481(a) adjustments.
(iv) Rules applicable to partners and partnerships.
(A) In general.
(B) Rule for determining the adjusted basis of a partner's interest in a partnership.
(C) Rule for applying section 163(j).
(D) Limited application of election to waive deductions with respect to adjustments made pursuant to audit procedures under sections 6221 through 6241.
(v) Rule applicable to premium and other consideration paid or accrued by the taxpayer for any reinsurance payments that are taken into account under section 803(a)(1)(B) or 832(b)(4)(A).
(d) Examples.
(1) Example 1: Determining a base erosion payment.
(i) Facts.
(ii) Analysis.
(2) Example 2: Interest allocable under § 1.882-5.
(i) Facts.
(ii) Analysis.
(3) Example 3: Interaction with section 163(j).
(i) Facts.
(ii) Analysis.
(A) Classification of business interest.
(B) Ordering rules for disallowed business interest expense carryforward.
(4) Example 4: Interaction with section 163(j); carryforward.
(i) Facts.
(ii) Analysis.
(A) Classification of business interest.
(B) Ordering rules for disallowed business interest expense carryforward.
(5) Example 5: Interaction with section 163(j); carryforward.
(i) Facts.
(ii) Analysis.
(6) Example 6: Interaction with section 163(j); partnership.
(i) Facts.
(ii) Partnership level analysis.
(iii) Partner level allocations analysis.
(iv) Partner level allocations for determining base erosion tax benefits.
(v) Computation of modified taxable income.
(7) Example 7: Transfers of property to related taxpayers.
(i) Facts.
(ii) Analysis.
(A) Year 1.
(B) Year 2.
(8) Example 8: Effect of election to waive deduction on method of accounting.
(i) Facts.
(ii) Analysis.
(9) Example 9: Change of accounting method when taxpayer has waived a deduction.
(i) Facts.
(ii) Analysis.
(A) Computation of the section 481(a) adjustment.
(B) Computation of basis adjustments.
§ 1.59A-4 Modified taxable income.
(a) Scope.
(b) Computation of modified taxable income.
(1) In general.
(2) Modifications to taxable income.
(i) Base erosion tax benefits.
(ii) Certain net operating loss deductions.
(3) Rule for holders of a residual interest in a REMIC.
(c) Examples.
(1) Example 1: Current year loss.
(i) Facts.
(ii) Analysis.
(2) Example 2: Net operating loss deduction.
(i) Facts.
(ii) Analysis.
§ 1.59A-5 Base erosion minimum tax amount.
(a) Scope.
(b) Base erosion minimum tax amount.
(1) In general.
(2) Calculation of base erosion minimum tax amount.
(3) Credits that do not reduce regular tax liability.
(i) Taxable years beginning on or before December 31, 2025.
(ii) Taxable years beginning after December 31, 2025.
(c) Base erosion and anti-abuse tax rate.
(1) In general.
(i) Calendar year 2018.
(ii) Calendar years 2019 through 2025.
(iii) Calendar years after 2025.
(2) Increased rate for banks and registered securities dealers.
(i) In general.
(ii) De minimis exception to increased rate for banks and registered securities dealers.
(3) Application of section 15 to tax rates in section 59A.
(i) New tax.
(ii) Change in tax rate pursuant to section 59A(b)(1)(A).
(iii) Change in rate pursuant to section 59A(b)(2).
§ 1.59A-6 Qualified derivative payment.
(a) Scope.
(b) Qualified derivative payment.
(1) In general.
(2) Reporting requirements.
(i) In general.
(ii) Failure to satisfy the reporting requirement.
(iii) Reporting of aggregate amount of qualified derivative payments.
(iv) Transition period for qualified derivative payment reporting.
(3) Amount of any qualified derivative payment.
(i) In general.
(ii) Net qualified derivative payment that includes a payment that is a base erosion payment.
(c) Exceptions for payments otherwise treated as base erosion payments.
(d) Derivative defined.
(1) In general.
(2) Exceptions.
(i) Direct interest.
(ii) Insurance contracts.
(iii) Securities lending and sale-repurchase transactions.
(A) Multi-step transactions treated as financing.
(B) Special rule for payments associated with the cash collateral provided in a securities lending transaction or substantially similar transaction.
(C) Anti-abuse exception for certain transactions that are the economic equivalent of substantially unsecured cash borrowing.
(3) American depository receipts.
(e) Examples.
(1) Example 1: Notional principal contract as QDP.
(i) Facts.
(ii) Analysis.
(2) Example 2: Securities lending anti-abuse rule.
(i) Facts.
(ii) Analysis.
§ 1.59A-7 Application of base erosion and anti-abuse tax to partnerships.
(a) Scope.
(b) Application of section 59A to partnerships.
(c) Base erosion payment.
(1) Payments made by or to a partnership.
(2) Transfers of certain property.
(3) Transfers of a partnership interest.
(i) In general.
(ii) Transfers of a partnership interest by a partner.
(iii) Certain issuances of a partnership interest by a partnership.
(iv) Partnership interest transfers defined.
(4) Increased basis from a distribution.
(5) Operating rules applicable to base erosion payments.
(i) Single payment characterized as separate transactions.
(ii) Ordering rule with respect to transfers of a partnership interest.
(iii) Consideration for base erosion payment or property resulting in base erosion tax benefits.
(iv) Non-cash consideration.
(v) Allocations of income in lieu of deductions.
(d) Base erosion tax benefit for partners.
(1) In general.
(2) Exception for base erosion tax benefits of certain small partners.
(i) In general.
(ii) Attribution.
(e) Other rules for applying section 59A to partnerships.
(1) Partner's distributive share.
(2) Gross receipts.
(i) In general.
(ii) Foreign corporation.
(3) Registered securities dealers.
(4) Application of sections 163(j) and 59A(c)(3) to partners.
(5) Tiered partnerships.
(f) Foreign related party.
(g) Examples.
(1) Facts.
(2) Examples.
(i) Example 1: Contributions to a partnership on partnership formation.
(A) Facts.
(B) Analysis.
(ii) Example 2: Section 704(c) and remedial allocations.
(A) Facts.
(B) Analysis.
(iii) Example 3: Sale of a partnership interest without a section 754 election.
(A) Facts.
(B) Analysis.
(iv) Example 4: Sale of a partnership interest with section 754 election.
(A) Facts.
(B) Analysis.
(v) Example 5: Purchase of depreciable property from a partnership.
(A) Facts.
(B) Analysis.
(vi) Example 6: Sale of a partnership interest to a second partnership.
(A) Facts.
(B) Analysis.
(vii) Example 7: Distribution of cash by a partnership to a foreign related party.
(A) Facts.
(B) Analysis.
(viii) Example 8: Distribution of property by a partnership to a taxpayer.
(A) Facts.
(B) Analysis.
(ix) Example 9: Distribution of property by a partnership in liquidation of a foreign related party's interest.
(A) Facts.
(B) Analysis.
(x) Example 10: Section 704(c) and curative allocations.
(A) Facts.
(B) Analysis.
§ 1.59A-8 [Reserved].
§ 1.59A-9 Anti-abuse and recharacterization rules.
(a) Scope.
(b) Anti-abuse rules.
(1) Transactions involving unrelated persons, conduits, or intermediaries.
(2) Transactions to increase the amount of deductions taken into account in the denominator of the base erosion percentage computation.
(3) Transactions to avoid the application of rules applicable to banks and registered securities dealers.
(4) Nonrecognition transactions.
(5) Transactions involving derivatives on a partnership interest.
(6) Allocations to eliminate or reduce a base erosion payment.
(c) Examples.
(1) Facts.
(2) Example 1: Substitution of payments that are not base erosion payments for payments that otherwise would be base erosion payments through a conduit or intermediary.
(i) Facts.
(ii) Analysis.
(3) Example 2: Alternative transaction to base erosion payment.
(i) Facts.
(ii) Analysis.
(4) Example 3: Alternative financing source.
(i) Facts.
(ii) Analysis.
(5) Example 4: Alternative financing source that is a conduit.
(i) Facts.
(ii) Analysis.
(6) Example 5: Intermediary acquisition.
(i) Facts.
(ii) Analysis.
(7) Example 6: Offsetting transactions to increase the amount of deductions taken into account in the denominator of the base erosion percentage computation.
(i) Facts.
(ii) Analysis.
(8) Example 7: Ordinary course transactions that increase the amount of deductions taken into account in the denominator of the base erosion percentage computation.
(i) Facts.
(ii) Analysis.
(9) Example 8: Transactions to avoid the application of rules applicable to banks and registered securities dealers.
(i) Facts.
(ii) Analysis.
(10) Example 9: Transactions that do not avoid the application of rules applicable to banks and registered securities dealers.
(i) Facts.
(ii) Analysis.
(11) Example 10: Acquisition of depreciable property in a nonrecognition transaction.
(i) Facts.
(ii) Analysis.
(12) Example 11: Transactions between related parties with a principal purpose of increasing the adjusted basis of property.
(i) Facts.
(ii) Analysis.
§ 1.59A-10 Applicability date.
(a) General applicability date.
(b) Exception.
Authorizing Statute
-
Rules and regulations26 U.S.C. § 7805
-
Advanced manufacturing production credit26 U.S.C. § 45X
-
Alcohol, etc., used as fuel26 U.S.C. § 40
-
Gross income defined26 U.S.C. § 61
-
Transfers of excess pension assets to retiree health accounts26 U.S.C. § 420
-
Partial exclusion for gain from certain small business stock26 U.S.C. § 1202
-
Tax treatment of stripped bonds26 U.S.C. § 1286
-
Current taxation of income from qualified electing funds26 U.S.C. § 1293
-
Imposition of tax on certain foreign procurement26 U.S.C. § 5000C
-
Returns regarding payments of interest26 U.S.C. § 6049
-
Signing of returns and other documents26 U.S.C. § 6061
-
General requirement of return, statement, or list26 U.S.C. § 6011
-
Income from discharge of indebtedness26 U.S.C. § 108
-
Indian general welfare benefits26 U.S.C. § 139E
-
Bonds must be registered to be tax exempt; other requirements26 U.S.C. § 149
-
Trade or business expenses26 U.S.C. § 162
-
Accelerated cost recovery system26 U.S.C. § 168
-
Amortizable bond premium26 U.S.C. § 171
-
Golden parachute payments26 U.S.C. § 280G
-
Distributions of stock and stock rights26 U.S.C. § 305
-
Transfer to corporation controlled by transferor26 U.S.C. § 351
-
Special rules for long-term contracts26 U.S.C. § 460
-
Determination of basis of partner’s interest26 U.S.C. § 705
-
Taxes of foreign countries and of possessions of United States26 U.S.C. § 901
-
Controlled foreign corporations; United States persons26 U.S.C. § 957
-
New energy efficient home credit26 U.S.C. § 45L
-
2-percent floor on miscellaneous itemized deductions26 U.S.C. § 67
-
Certain death benefits26 U.S.C. § 101
-
Qualified business income26 U.S.C. § 199A
-
Installment method26 U.S.C. § 453
-
Certain payments for the use of property or services26 U.S.C. § 467
-
Partners, not partnership, subject to tax26 U.S.C. § 701
-
Extent of recognition of gain or loss on distribution26 U.S.C. § 731
-
Capitalization of certain policy acquisition expenses26 U.S.C. § 848
-
Special rules for determining source26 U.S.C. § 863
-
Income of foreign governments and of international organizations26 U.S.C. § 892
-
Definitions and special rules26 U.S.C. § 6241
-
Computation and payment of tax26 U.S.C. § 1503
-
Adjusted gross income defined26 U.S.C. § 62
-
Treatment of loans with below-market interest rates26 U.S.C. § 7872
-
Basis to distributees26 U.S.C. § 358
-
Minimum participation standards26 U.S.C. § 410
-
Other definitions and special rules26 U.S.C. § 860G
-
Adjustments required by changes in method of accounting26 U.S.C. § 481
-
Definitions26 U.S.C. § 7701
-
Insurance income26 U.S.C. § 953
-
Returns relating to actions affecting basis of specified securities26 U.S.C. § 6045B
-
Information relating to certain trusts and annuity plans26 U.S.C. § 6047
-
Enhanced oil recovery credit26 U.S.C. § 43
-
Energy efficient commercial buildings deduction26 U.S.C. § 179D
-
Redemption through use of related corporations26 U.S.C. § 304
-
Certain stock purchases treated as asset acquisitions26 U.S.C. § 338
-
Special limitations on certain excess credits, etc.26 U.S.C. § 383
-
Optional treatment of elective deferrals as Roth contributions26 U.S.C. § 402A
-
General rule for taxable year of inclusion26 U.S.C. § 451
-
Qualified ABLE programs26 U.S.C. § 529A
-
Charitable remainder trusts26 U.S.C. § 664
-
Nonrecognition of gain or loss on contribution26 U.S.C. § 721
-
Investment of earnings in United States property26 U.S.C. § 956
-
Definitions and special rule26 U.S.C. § 1377
-
Relief from joint and several liability on joint return26 U.S.C. § 6015
-
Return of S corporation26 U.S.C. § 6037
-
Notice of certain transfers to foreign persons26 U.S.C. § 6038B
-
Information at source26 U.S.C. § 6041
-
Imposition of accuracy-related penalty on underpayments26 U.S.C. § 6662
-
Tax imposed26 U.S.C. § 1
-
Railroad track maintenance credit26 U.S.C. § 45G
-
Zero-emission nuclear power production credit26 U.S.C. § 45U
-
Rehabilitation credit26 U.S.C. § 47
-
Clean electricity investment credit26 U.S.C. § 48E
-
Special rules26 U.S.C. § 52
-
Election to expense certain depreciable business assets26 U.S.C. § 179
-
Individual retirement accounts26 U.S.C. § 408
-
Special rules for nondealers26 U.S.C. § 453A
-
Deductions limited to amount at risk26 U.S.C. § 465
-
Exemption from tax on corporations, certain trusts, etc.26 U.S.C. § 501
-
Definition of regulated investment company26 U.S.C. § 851
-
Source rules for personal property sales26 U.S.C. § 865
-
Tax on nonresident alien individuals26 U.S.C. § 871
-
Foreign base company income26 U.S.C. § 954
-
S corporation defined26 U.S.C. § 1361
-
Definitions26 U.S.C. § 1402
-
Distributions of property26 U.S.C. § 301
-
Life insurance contract defined26 U.S.C. § 7702
-
Previously-owned clean vehicles26 U.S.C. § 25E
-
Electricity produced from certain renewable resources, etc.26 U.S.C. § 45
-
Clean fuel production credit26 U.S.C. § 45Z
-
Taxation of employee annuities26 U.S.C. § 403
-
Last-in, first-out inventories26 U.S.C. § 472
-
Allocation of income and deductions among taxpayers26 U.S.C. § 482
-
Definitions applicable to subparts A, B, C, and D26 U.S.C. § 643
-
Taxable years of partner and partnership26 U.S.C. § 706
-
Disposition of investment in United States real property26 U.S.C. § 897
-
Administrative adjustment request by partnership26 U.S.C. § 6227
-
Citizens or residents of the United States living abroad26 U.S.C. § 911
-
Residence and source rules involving possessions26 U.S.C. § 937
-
Rules relating to expatriated entities and their foreign parents26 U.S.C. § 7874
-
Regulations26 U.S.C. § 1502
-
Capitalization and inclusion in inventory costs of certain expenses26 U.S.C. § 263A
-
Foreign corporations26 U.S.C. § 367
-
Roth IRAs26 U.S.C. § 408A
-
Minimum vesting standards26 U.S.C. § 411
-
Partner’s distributive share26 U.S.C. § 704
-
Unrealized receivables and inventory items26 U.S.C. § 751
-
Taxation of residual interests26 U.S.C. § 860C
-
Exclusions from gross income26 U.S.C. § 883
-
Income affected by treaty26 U.S.C. § 894
-
Other definitions and special rules26 U.S.C. § 989
-
Special rules26 U.S.C. § 1474
-
Returns of brokers26 U.S.C. § 6045
-
Information returns of tax return preparers26 U.S.C. § 6060
-
Authority to make credits or refunds26 U.S.C. § 6402
-
Failure by individual to pay estimated income tax26 U.S.C. § 6654
-
Interest on certain home mortgages26 U.S.C. § 25
-
Credit for qualified commercial clean vehicles26 U.S.C. § 45W
-
Interest on State and local bonds26 U.S.C. § 103
-
Qualified lessee construction allowances for short-term leases26 U.S.C. § 110
-
Losses26 U.S.C. § 165
-
Charitable, etc., contributions and gifts26 U.S.C. § 170
-
Incentive stock options26 U.S.C. § 422
-
Deemed paid credit for subpart F inclusions26 U.S.C. § 960
-
Election of mark to market for marketable stock26 U.S.C. § 1296
-
Returns relating to certain life insurance contract transactions26 U.S.C. § 6050Y
-
Clean vehicle credit26 U.S.C. § 30D
-
Credit for carbon oxide sequestration26 U.S.C. § 45Q
-
Amount of credit26 U.S.C. § 46
-
Advanced manufacturing investment credit26 U.S.C. § 48D
-
Arbitrage26 U.S.C. § 148
-
Amortization of goodwill and certain other intangibles26 U.S.C. § 197
-
Interest on education loans26 U.S.C. § 221
-
Disallowance of certain entertainment, etc., expenses26 U.S.C. § 274
-
Qualifications for tax credit employee stock ownership plans26 U.S.C. § 409
-
Unrelated debt-financed income26 U.S.C. § 514
-
Rules for allocation of basis26 U.S.C. § 755
-
Rules for certain reserves26 U.S.C. § 807
-
Special rules in case of foreign oil and gas income26 U.S.C. § 907
-
Basis of property acquired from a decedent26 U.S.C. § 1014
-
Special rules26 U.S.C. § 1298
-
Definitions26 U.S.C. § 3401
-
Extension of time for filing returns26 U.S.C. § 6081
-
Renumbered § 45C]26 U.S.C. § 28
-
Credit for production of clean hydrogen26 U.S.C. § 45V
-
Energy credit26 U.S.C. § 48
-
Limitation on credit26 U.S.C. § 904
-
Qualified pension, profit-sharing, and stock bonus plans26 U.S.C. § 401
-
Dependent care assistance programs26 U.S.C. § 129
-
Special rules for nuclear decommissioning costs26 U.S.C. § 468A
-
Mark to market accounting method for dealers in securities26 U.S.C. § 475
-
Basis of distributed property other than money26 U.S.C. § 732
-
Straddles26 U.S.C. § 1092
-
Qualified electing fund26 U.S.C. § 1295
-
Averaging of farm income26 U.S.C. § 1301
-
Withholdable payments to foreign financial institutions26 U.S.C. § 1471
-
Definitions26 U.S.C. § 1504
-
Basis information to persons acquiring property from decedent26 U.S.C. § 6035
-
Information with respect to certain foreign-owned corporations26 U.S.C. § 6038A
-
Returns relating to cash received in trade or business, etc.26 U.S.C. § 6050I
-
Credit for increasing research activities26 U.S.C. § 41
-
Definitions and special rules26 U.S.C. § 150
-
Passive activity losses and credits limited26 U.S.C. § 469
-
Certain expenses for which credits are allowable26 U.S.C. § 280C
-
Assumption of liability26 U.S.C. § 357
-
Complete liquidations of subsidiaries26 U.S.C. § 332
-
Distribution of stock and securities of a controlled corporation26 U.S.C. § 355
-
Period for computation of taxable income26 U.S.C. § 441
-
General rule for taxable year of deduction26 U.S.C. § 461
-
Special rules for modified guaranteed contracts26 U.S.C. § 817A
-
Treatment of variable contracts26 U.S.C. § 817
-
Certain reinsurance agreements26 U.S.C. § 845
-
Failure to file notice of redetermination of foreign tax26 U.S.C. § 6689
-
Branch transactions26 U.S.C. § 987
-
Qualified zone property defined26 U.S.C. § 1397D
-
Withholdable payments to other foreign entities26 U.S.C. § 1472
-
Liquidating, etc., transactions26 U.S.C. § 6043
-
Verification of returns26 U.S.C. § 6065
-
Mode or time of collection26 U.S.C. § 6302
-
Transfer of certain credits26 U.S.C. § 6418
-
American Opportunity and Lifetime Learning credits26 U.S.C. § 25A
-
Refundable credit for coverage under a qualified health plan26 U.S.C. § 36B
-
Clean electricity production credit26 U.S.C. § 45Y
-
Other special rules26 U.S.C. § 50
-
Treatment of community income26 U.S.C. § 66
-
Basis to corporations26 U.S.C. § 362
-
Election of taxable year other than required taxable year26 U.S.C. § 444
-
Transactions between partner and partnership26 U.S.C. § 707
-
Special allocation rules for certain asset acquisitions26 U.S.C. § 1060
-
Discounted unpaid losses defined26 U.S.C. § 846
-
Definitions and special rules26 U.S.C. § 864
-
Capital asset defined26 U.S.C. § 1221
-
Interest on tax deferral26 U.S.C. § 1291
-
Passive foreign investment company26 U.S.C. § 1297
-
Withholding of tax on nonresident aliens26 U.S.C. § 1441
-
Returns as to interests in foreign partnerships26 U.S.C. § 6046A
-
State and local income tax refunds26 U.S.C. § 6050E
-
Returns relating to exchanges of certain partnership interests26 U.S.C. § 6050K
-
Returns relating to higher education tuition and related expenses26 U.S.C. § 6050S
-
Reporting of health insurance coverage26 U.S.C. § 6055
-
Low-income housing credit26 U.S.C. § 42
-
New markets tax credit26 U.S.C. § 45D
-
Definitions and special rules26 U.S.C. § 414
-
Qualified asset account; limitation on additions to account26 U.S.C. § 419A
-
General rule for methods of accounting26 U.S.C. § 446
-
Interest on certain deferred payments26 U.S.C. § 483
-
Reserves for losses on loans of banks26 U.S.C. § 585
-
Certain revocable trusts treated as part of estate26 U.S.C. § 645
-
Insurance company taxable income26 U.S.C. § 832
-
Income from sources within the United States26 U.S.C. § 861
-
Treatment of certain foreign currency transactions26 U.S.C. § 988
-
Functional currency26 U.S.C. § 985
-
Other definitions and special rules26 U.S.C. § 1275
-
Election to extend time for payment of tax on undistributed earnings26 U.S.C. § 1294
-
Requirement to maintain minimum essential coverage26 U.S.C. § 5000A
-
Returns by exempt organizations26 U.S.C. § 6033
-
Information with respect to foreign financial assets26 U.S.C. § 6038D
-
Returns relating to the cancellation of indebtedness by certain entities26 U.S.C. § 6050P
-
Identifying numbers26 U.S.C. § 6109
-
Elective payment of applicable credits26 U.S.C. § 6417
-
Certain fringe benefits26 U.S.C. § 132
-
Dependent defined26 U.S.C. § 152
-
Interest26 U.S.C. § 163
-
Bad debts26 U.S.C. § 166
-
Special rules for credits and deductions26 U.S.C. § 642
-
General rule for inventories26 U.S.C. § 471
-
Political organizations26 U.S.C. § 527
-
Special rules applicable to sections 661 and 66226 U.S.C. § 663
-
Allowance of deductions and credits26 U.S.C. § 874
-
Branch profits tax26 U.S.C. § 884
-
Tax imposed on certain built-in gains26 U.S.C. § 1374
-
Foreign tax-exempt organizations26 U.S.C. § 1443
-
Valuation tables26 U.S.C. § 7520
-
Losses on small business stock26 U.S.C. § 1244
-
Distributions26 U.S.C. § 1368
-
Definitions26 U.S.C. § 1473
-
Information with respect to certain fines, penalties, and other amounts26 U.S.C. § 6050X
-
Failure by corporation to pay estimated income tax26 U.S.C. § 6655