The Final Reg’s for Section 250, used in FDII and GILTI calculations, have been finalized. These Reg’s are now undergoing analyses in trying to understand the complexities and nuances. Some highlights include:
- The Final Reg’s are effective for tax years beginning on or after 1/1/2021, although they can be applied retroactively in their entirety
- General relaxation of the FDII documentation requirements
- Formal ordering rules for interaction with other Code sections are reserved in the Final Reg’s
- Final Reg’s require deductions to be apportioned to gross DEI and gross FDDEI without regard to the limitations in Sections 163(j), 170(b)(2), 246(b) and 250k, that may cause a mismatch in the deductions allowable for taxable income
- Final Reg’s apply the exclusive geographic apportionment rule of Treas. Reg. Section 1.861-17(b) for purposes of apportioning R&E expenses to gross DEI and gross FDDEI
The Final Reg’s provided additional clarity, although a taxpayer will have to consider if the Proposed Reg’s or Final Reg’s will be favorable for tax years prior to 2021.
EY’s Tax Alert provides additional details, as referenced.