Sec 163(j): Proposed & Final Regs
Proposed and Final Regulations were issued addressing Section 163(j) interest.
Links are attached for reference
nprm_reg_107911_18td_9905_reg_106089_18
Posts tagged ‘Sec. 163(j)’
US Sec 163(j): New Prop Regs
Final Section 163(j) business interest deduction limitation regulations will be released with newly proposed regulations that will address issues not covered by the coming final regulations.
The proposed regulations under Section 163(j) have not been sent to the Office of Management and Budget’s (OMB) Office of Information and Regulatory Affairs (OIRA) for review, which may delay the release of the final interest limitation regulations, already at OIRA.
Share this:
US: TCJA Reg chronology
Pending developments this year are focused on the Tax Cuts and Jobs Act (TCJA).
This week expectations – Final FTC Regs, final and proposed BEAT Regs
This year (maybe) – Final and proposed Sec. 163(j) Regs (currently at 550 pages)
This year/January 2020 – Sec 267A final and proposed Regs, Sec 863(b) sourcing proposed Regs
by June 30, 2020 – Final FDII regulations, GILTI high-tax exclusion, Sec 250 participation exemption
EY’s Global Tax Alert provides further details, including OECD developments reported on previously
Share this:
US Sec. 163(j): Guidance/complexity
The IRS recently released Proposed Regulations on Section 163(j): an interest limitation that is applicable for the calculation of Global Intangible Low-Taxed Income (“GILTI”) under the US Tax Act (“TCJA”). A copy of the Proposed Regulations are provided for reference, highlighting some areas of clarity/surprise. Comments are due within 60 days of publication in the Federal Register, with a public hearing set for Feb. 25, 2019.
- Former Proposed Regulations for Sec. 163(j), never finalized, are withdrawn
- Proposed Regulations may be elected for 2018
- General rule-Same as C corp; election (alternative method) for a CFC group
- One limit for a consolidated group (affiliated, non-cons. group, or partnership n/a)
- Adjusted Taxable Income (“ATI”) requires an adjustment for:
- Capitalizable Sec. 263A costs re: inventory/sales
- sales/dispositions of certain property
- Sec. 78 gross-up, Sec. 951(a) Subpart F, Sec. 951A GILTI, Sec. 250(a)(1)(B) deduction, without regard to Sec. 250(a)(2) limitation, related to GILTI
- Upper tier CFC members include “excess interest” of lower tier CFC’s
- Further guidance re: ordering of Code provisions, including BEAT, will be issued
- A “new” definition of interest is provided, including:
- Sec. 1275(a) and Reg. Sec. 1.1275-1(d) instruments
- Factoring income
- OID
- Accrued market discount
- Guaranteed payments of Sec. 702(c)
- Income/loss re: hedges of interest-bearing assets/liabilities
- Swaps, separated into a loan and payment swap (collateralized swap n/a)
- Commitment fees
- Debt issuance costs
- Anti-avoidance rule
- Sec. 382 attribution for pre/post-change periods
- Sec. 381 includes the attribute for disallowed interest expense carryovers
- No effect on E&P
- Sec. 163(j) limit at partnership level
- Intercompany CFC debt is included as interest income and expense, thus resulting in a net -0-; other debt will be a net adjustment to be allocated to separate CFC’s
- New Form 8990 will be required
The most contentious items, as noted in recent days, are the adjustment of Sec. 263A depreciation (thus a factory does not add back depreciation in EBITDA), add back of Sec. 78, Sec. 951(a), Sec. 951A as reduced by the relevant Sec. 250 amount, complexity including excess ATI adjustments, and the new definition of interest, which includes interest equivalent instruments/transactions that will be included as a potential limitation.
The 439 pages require several readings for a general comprehension, aided by webinars and summaries from various advisory firms.
Click to access REG-106089-18-NPRM.pdf
Strategizing Multinational Tax Risks 