The Proposed Regulations under the Foreign-Derived Intangible Income Regime
The IRS and Treasury released proposed regulations under IRC Section 250 on March 4th, 2019 (the “Proposed Regulations”). The Proposed Regulations provide guidance with respect to special federal tax deduction under the new foreign-derived intangible income regime enacted as part of the 2017 tax reform effective for tax year 2018. Under this regime, domestic corporations with qualifying income is allowed a deduction equal to 37.5% of their foreign-derived intangible income and 50% of their global intangible low-taxed income.
The Proposed Regulations provide guidance related to the mechanics of determining a domestic corporations foreign-derived intangible income, the application of the deduction in the consolidated group and partnership structure, and the its interplay with IRC sections 163(j), 172(a) and 78. Most importantly, the Proposed Regulations requires contemporaneous documentation requirement for companies claiming deductions under the regime.
Please click on the link below to view the Proposed Regulations.
https://s3.amazonaws.com/public-inspection.federalregister.gov/2019-03848.pdf