Internal Revenue Service (IRS) proposed regulations addressing certain related-party amounts paid or accrued in hybrid transactions or with hybrid entities under the Tax Cuts and Jobs Act (TCJA) were sent to the Office of Management and Budget (OMB) for review on 13 November 2018, the latest in a series of regulatory projects that may be set for release soon.

Proposed regulations on foreign tax credits and regulations on the base-erosion and anti-abuse tax (BEAT) under Internal Revenue Code¹ Section 59A were sent to OMB for review last week. Rules regarding the limitation on the deductibility of business interest under Section 163(j) were listed as under review by OMB on 25 October. Public release of the proposed Section 163(j) regulations, which are said to be nearly 500 pages, reportedly is imminent.

In other regulatory news, final Section 965 transition tax regulations that are scheduled for release before the new year will include detailed ordering rules for determining earnings and profits, an IRS official said this week. Numerous examples will be included, she said, explaining how to make foreign tax credit calculations in a disregarded context, either because it is a specified payment or due to the anti-abuse rule.

And IRS Commissioner Charles Rettig told a Washington, DC audience this week that taxpayers should expect to see more informal guidance. He said “pay attention to the informal guidance as though it’s formal guidance.” The Commissioner also was quoted as saying that the Service would be issuing informal guidance on cryptocurrencies in the coming months.

In the absence of formal cryptocurrency guidance, an IRS official in the Large Business and International Division suggested this week that taxpayers may want to consider guidance from other areas to make informed decisions about how to report cryptocurrency, such as rules on exchanges or dispositions of property. IRS Notice 2014-21 remains the only formal tax guidance to have been issued by the IRS on the subject of virtual currency.

US House Ways and Means Committee Chairman Kevin Brady is said to be eying between 70 and 80 technical corrections to TCJA legislation for passage during the current congressional lame duck session. The chairman described the corrections as “very technical and very minor.” He further added: “We’ll see what appetite there is to pass some or the bulk of them before the end of the year.”

Democrats reportedly are down-playing the possibility of moving technical corrections at this time, suggesting that that would require oversight hearings on the tax reform law and during which Democrats would seek concessions.

Endnote

1. All “Section” references are to the Internal Revenue Code of 1986, and the regulations promulgated thereunder.

For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP, International Tax Services, Washington, DC

• Arlene Fitzpatrick | Arlene.fitzpatrick@ey.com
• Joshua Ruland | joshua.ruland@ey.com

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