The US House is now out of session until 9 September, beginning the August recess earlier than planned and cancelling votes for the week of 29 July. The Senate will be in session the week of 29 July, and then out until after Labor Day in September. Work is expected to continue during the August recess to lay the groundwork for the expiration of Tax Cuts and Jobs Act (TCJA) provisions at the end of 2025, at least for House Republicans, with tax teams active and at least one Committee hearing expected.

In the fall, addressing the expiration of both government funding and the farm bill on 30 September are the only must-do items. These could easily be put off until after the elections with short-term patches, however.

The US Court of Appeals for the District of Columbia Circuit (DC Circuit) has held that a foreign partner did not owe US tax on gain attributable to inventory and realized on the sale of her US partnership interest because the gain was foreign-source income. In Rawat v. Commissioner, No. 23-1142 (July 23, 2024), the DC Circuit reversed an earlier Tax Court decision (T.C. Memo. 15340-16) and rejected the IRS's view that IRC Section 751(a) requires gain from the sale of an interest in a partnership attributable to inventory to be treated as a deemed sale of the underlying inventory such that it could be taxable as US-source income. The events in the case predated the enactment of IRC Section 864(c)(8) as part of TCJA, which now governs the sale or exchange of certain partnership interests by a foreign person. A Tax Alert is forthcoming.

An IRS official this week said that proposed corporate alternative minimum tax (CAMT) regulations will generally follow the guidance in Notice 2024-10 in regard to controlled foreign corporation (CFC) distributions to US shareholders or other CFCs. In Notice 2024-10, the IRS addressed the impact that certain CFC distributions have on a taxpayer's applicable financial statement income (AFSI), providing guidance that was expected to significantly reduce the potential for duplication of items in the taxpayer's AFSI. The IRS official was quoted as saying the government is considering all options, but "it's fair to read the notice as a signal of the direction that we're going to take."

The official also clarified that the coming proposed rules will have broader applicability than Notice 2024-10 and not be limited to CFCs but also address deemed dividends and stock sales.

Proposed CAMT regulations continue to be a high priority, the official said, while declining to provide a timeline.

Another IRS official this week was quoted as saying long-delayed previously taxed earnings and profits (PTEP) regulations are in the "home stretch" before their release. The official confirmed earlier statements that regulations will come in two tranches. The first release reportedly will address the interplay of foreign currency gain or loss and PTEP distributions among two CFCs, and basis issues related to CFC stock owned by a partnership. The second tranche will cover nonrecognition transactions, he said.