In guidance, the IRS has announced that it intends to amend regulations on income and currency gains or losses by a qualified business unit (QBU) with a functional currency that differs from the taxpayer’s. The move will delay the effective date by one more year.
In Notice 2018-57, the tax agency said it will make amendments so the final regulations and the related temporary regulations will apply to taxable years beginning on or after the date that is three years after the first day of the first taxable year following December 7, 2016. In October 2017, the IRS also delayed the effective date for a year, to January 1, 2018.
Under the amended regs, for a taxpayer whose first tax year after December 7, 2016, begins on January 1, 2017, the final regulations and the related temporary regulations will apply for the tax year beginning on January 1, 2020.
The notice states that taxpayers may still elect to apply the final regulations and the related temporary regulations to taxable years beginning after December 7, 2016, provided the taxpayer consistently applies the regulations with respect to all QBUs directly or indirectly owned by the taxpayer, members of the taxpayer’s consolidated group, or certain related controlled foreign corporations. The notice also states that the IRS and Treasury are considering changes to the final regulations that would allow taxpayers to elect to apply alternative rules for transitioning to the final regulations and for determining Section 987 gain or loss.
The affected regs were among eight tax regulations that were being reviewed following an executive order signed by President Trump early in his administration aimed at reducing burdensome federal regulations.
For a no-obligation discussion on the possible impact and steps you should take now, contact Jason Sanders, our Tax Department Chair.