Applicability Date of Branch Currency Regs to Be Delayed

Applicability Date of Branch Currency Regs to Be Delayed

Internal Revenue Service

The IRS and Treasury have announced (Notice 2021-59) their intent to amend regulations under section 987 to defer the applicability date of final regs (<a href="/lr/resolve//gbtl">T.D. 9794</a>) published in December 2016 and other related final regs by one additional year. The 2016 final regs provided guidance on the determination of the taxable income or loss of a taxpayer regarding a qualified business unit (QBU) subject to <a href="/research/federal/usc26/987" resolve="/lr/resolve//cnzp">section 987</a>, as well as the timing, amount, character, and source of any <a href="/research/federal/usc26/987" resolve="/lr/resolve//cnzp">section 987</a> gain or loss. Concurrently issued temporary and proposed regs (<a href="/lr/resolve//gbtc">T.D. 9795</a>, <a href="/lr/resolve//gbth">REG-128276-12</a>) provided guidance on the recognition and deferral of foreign currency gain or loss regarding a QBU in connection with specified QBU terminations and some other transactions involving partnerships. The temporary regs were partly finalized (<a href="/lr/resolve//29h2l">T.D. 9857</a>) and partly withdrawn in May 2019. The portions of the temporary regs that were not made final expired on December 6, 2019. The proposed regs that were not finalized in 2019 remain outstanding. Earlier notices deferred the applicability dates of the 2016 final regs, the remaining temporary regs, and the 2019 final regs. Most recently, in October 2020, the IRS announced (<a href="/lr/resolve//2cz1s">Notice 2020-73</a>) that future guidance would defer the applicability date of the 2016 final regs and the related 2019 final regs by one additional year to tax years beginning after December 7, 2021. Under Notice 2021-59, the 2016 final regs and the related 2019 final regs will apply to the tax year beginning on January 1, 2023, for calendar-year taxpayers. A taxpayer may choose to apply the 2016 final regs, the related temporary regs (until they were revoked on May 13, 2019, or expired on December 6, 2019), and the related 2019 final regs (beginning on May 13, 2019) to tax years beginning after December 7, 2016, and before the amended applicability date, as long as the taxpayer consistently applies those regulations for all <a href="/research/federal/usc26/987" resolve="/lr/resolve//cnzp">section 987</a> QBUs directly or indirectly owned by the taxpayer on the transition date, as well as all <a href="/research/federal/usc26/987" resolve="/lr/resolve//cnzp">section 987</a> QBUs directly or indirectly owned on the transition date by specified related parties. Until the regulations under section 987 are amended, taxpayers may rely on the provisions of Notice 2021-59.

The IRS and Treasury have announced (Notice 2021-59) their intent to amend regulations under section 987 to defer the applicability date of final regs (T.D. 9794) published in December 2016 and other related final regs by one additional year.

The IRS and Treasury have announced (Notice 2021-59) their intent to amend regulations under section 987 to defer the applicability date of final regs (T.D. 9794) published in December 2016 and other related final regs by one additional year. The 2016 final regs provided guidance on the determination of the taxable income or loss of a taxpayer regarding a qualified business unit (QBU) subject to section 987, as well as the timing, amount, character, and source of any section 987 gain or loss. Concurrently issued temporary and proposed regs (T.D. 9795, REG-128276-12) provided guidance on the recognition and deferral of foreign currency gain or loss regarding a QBU in connection with specified QBU terminations and some other transactions involving partnerships. The temporary regs were partly finalized (T.D. 9857) and partly withdrawn in May 2019. The portions of the temporary regs that were not made final expired on December 6, 2019. The proposed regs that were not finalized in 2019 remain outstanding. Earlier notices deferred the applicability dates of the 2016 final regs, the remaining temporary regs, and the 2019 final regs. Most recently, in October 2020, the IRS announced (Notice 2020-73) that future guidance would defer the applicability date of the 2016 final regs and the related 2019 final regs by one additional year to tax years beginning after December 7, 2021. Under Notice 2021-59, the 2016 final regs and the related 2019 final regs will apply to the tax year beginning on January 1, 2023, for calendar-year taxpayers. A taxpayer may choose to apply the 2016 final regs, the related temporary regs (until they were revoked on May 13, 2019, or expired on December 6, 2019), and the related 2019 final regs (beginning on May 13, 2019) to tax years beginning after December 7, 2016, and before the amended applicability date, as long as the taxpayer consistently applies those regulations for all section 987 QBUs directly or indirectly owned by the taxpayer on the transition date, as well as all section 987 QBUs directly or indirectly owned on the transition date by specified related parties. Until the regulations under section 987 are amended, taxpayers may rely on the provisions of Notice 2021-59.

Sec. 987 Branch transactions

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Applicability Date of Branch Currency Regs to Be Delayed