The Internal Revenue Service (IRS) has issued a final regulation on the implementation of the the base erosion and anti-abuse (“BEAT”) tax, which was part of the Tax Cuts and Jobs Act and was designed to prevent the reduction of tax liability by certain large corporate taxpayers through certain payments made to foreign related parties and certain tax credits. The BEAT Tax impacts certain LIHTC, NMTC and Historic Credit investors that are either foreign owned or have significant foreign operations. It has the potential to erode an investor’s benefit from tax credits and losses over time. The final regulations retain the basic approach and structure of the proposed regulations, with certain revisions.
Effective date: The final regulations are effective on December 6, 2019.
Additionally, the IRS also issued new proposed rules that provide guidance regarding the base erosion and anti-abuse tax under sections 59A and 6031 regarding certain aspects of the BEAT. Part II of this Explanation of Provisions describes proposed modifications to the rules set forth in the final regulations relating to how a taxpayer determines its aggregate group for purposes of determining gross receipts and the base erosion percentage. Part III of this Explanation of Provisions describes proposed regulations providing an election to waive deductions. Part IV of this Explanation of Provisions describes proposed regulations addressing the application of the BEAT to partnerships.
