The IRS on 25 November released Notice 2025-72, which addresses the repeal under the "One Big Beautiful Bill Act" (OBBBA) of the "one-month deferral election" in IRC Section 898(c)(2). The notice announces the government's intention to issue proposed regulations on the allocation of foreign taxes of foreign corporations affected by the OBBBA repeal. The notice also announces that Treasury and the IRS will issue proposed regulations under IRC Section 987 that would "modify the election to recognize pre-transition Section 987 gain or loss ratably over the transition period pursuant to §1.987-10(e)(5)(ii)(A)."

More specifically, the notice indicates that regulations will be issued that would allocate certain foreign income taxes that accrue during the mandatory, one-month "short year" and the succeeding tax year caused by the repeal of the one-month deferral election. This allocation would apply the principles of Reg. Section 1.1502-76(b) to foreign law taxable income. There are several exceptions and special rules.

The notice also states that future guidance will modify the IRC Section 987 loss transition rule to require amortization of pre-transition losses over 120 months (rather than over 10 tax years).

Treasury and the IRS reportedly will issue at least three other international tax-focused notices before the end of the year. The government also is expected to issue at least one more corporate alternative minimum tax (CAMT) notice as well as guidance covering other areas.

Digital asset owners and brokers preparing for the 2025 filing season must contend with new information reporting obligations, expanded disclosure requirements and potential modifications to the tax characterization and treatment of certain digital asset transactions.

Most significantly, digital asset owners must implement a per-wallet or per-account cost-basis tracking method for digital assets and incorporate into their tax returns any Forms 1099-DA furnished by brokers. In addition, digital asset brokers must file Form 1099-DA with the IRS and furnish a corresponding statement to the customer reporting the gross proceeds from digital asset sales effected for that customer on or after 1 January 2025. A Tax Alert provides details. Register here for an EY Webcast on 5 December, "Navigating digital asset tax rules: tax year 2025 and the road ahead."

The BEPS 2.0 project remains a moving target for multinationals. On Pillar Two, there has been limited official communication on the progress at the Inclusive Framework in the development of the "side-by-side" system and a permanent compliance safe harbor. (Recall last June the G7 issued a statement that reflects an understanding on support for a side-by-side system that would exempt US multinationals from certain Pillar Two global minimum tax rules.) However, the 13 November meeting of the EU Economic and Financial Affairs Council (ECOFIN) underscored that there is still an active debate.

Most recently, the G20 Leaders' Declaration, released at the conclusion of the 22-23 November Summit, references the G20 Leaders' continuing constructive engagement to address concerns regarding Pillar Two global minimum taxes, with the goal of finding a balanced, practical solution acceptable to all as soon as possible. A Global Tax Alert provides details.

At the same time, implementation of Pillar Two is continuing to move ahead. A growing number of jurisdictions are in the process of updating their domestic legislation to reflect the latest Administrative Guidance. In practice, many multinational enterprise groups with a calendar-year reporting period face their first Qualified Domestic Minimum Top-up Tax (QDMTT) return filings before year-end. There are also new registration requirements in various jurisdictions. This first compliance cycle will be a test, for tax authorities and taxpayers, around data quality and systems readiness.

Pillar One negotiations, meanwhile, are stalled in the Inclusive Framework, although some jurisdictions are showing renewed interest in unilateral measures. At the same time, the United States is addressing digital services taxes (DSTs) through its trade policy, seeking commitments from trading partners to refrain from adopting or imposing such taxes.

In parallel, a recent OECD review of Pillar One Amount B adoption shows a fragmented picture. Only a limited number of jurisdictions have indicated plans to fully implement Amount B, while many others have indicated that they will not apply it domestically but will respect its application by covered jurisdictions in line with Inclusive Framework commitments. Other countries remain in an assessment phase. This suggests that, in the short term, the promise of global simplification for baseline marketing and distribution activities is likely to be only partially realized and that transfer pricing controversy may increase rather than decline. For more on the status of the BEPS 2.0 project, read the November issue of EY's "Latest on BEPS and Beyond."