The Internal Revenue Service (IRS) issued final regulations providing additional guidance on the base erosion and anti-abuse tax (BEAT). The final regulations provide detailed guidance regarding how to compute certain BEAT calculations for groups of related taxpayers. The final regulations also contain rules permitting taxpayers to waive deductions for purposes of the BEAT, and additional guidance regarding partnerships and anti-abuse rules. The final regulations are effective 60 days after official publication in the Federal Register.
The BEAT Tax is 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.