IRS to Delay Qualified Derivative Payment Reporting Requirements

IRS to Delay Qualified Derivative Payment Reporting Requirements

Internal Revenue Service

The IRS and Treasury have announced (Notice 2021-36) that they will defer the applicability date of some provisions of the regulations under <a href="/research/federal/usc26/59A" resolve="/lr/resolve//cqrh">sections 59A</a> and 6038A regarding the reporting of qualified derivative payments (QDP) until tax years beginning after December 31, 2022. Final regs (<a href="/lr/resolve//2b5s4">T.D. 9885</a>) issued in 2019 addressed the base erosion and antiabuse tax of <a href="/research/federal/usc26/59A" resolve="/lr/resolve//cqrh">section 59A</a> and included rules under <a href="/research/federal/usc26/59A" resolve="/lr/resolve//cqrh">sections 59A</a> and <a href="/research/federal/usc26/6038A" resolve="/lr/resolve//cqn5">6038A</a> on the reporting of QDPs, which are not base erosion payments. Under <a href="/research/federal/cfr26/1.59A-6#2b5vd-0000009" resolve="/lr/resolve//2b5vd#2b5vd-0000009">reg. section 1.59A-6(b)(2)(i)</a>, a payment does not qualify as a QDP unless the taxpayer reports the information required in <a href="/research/federal/cfr26/1.6038A-2#cv09-0000114" resolve="/lr/resolve//cv09#cv09-0000114">reg. section 1.6038A-2(b)(7)(ix)</a> for the tax year. Reg. section 1.6038A-2(b)(7)(ix) applies to tax years beginning after June 6, 2021. Before that provision is applicable (the transition period), the rules described in <a href="/research/federal/cfr26/1.59A-6#2b5vd-0000012" resolve="/lr/resolve//2b5vd#2b5vd-0000012">reg. section 1.59A-6(b)(2)(iv)</a> apply. As described in the preamble to final regs (<a href="/lr/resolve//2d1pl">T.D. 9910</a>) issued in 2020 that provide further rules regarding <a href="/research/federal/usc26/59A" resolve="/lr/resolve//cqrh">section 59A</a>, a commentator suggested that Treasury and the IRS address the interaction of the QDP exception, the BEAT netting rule, and the QDP reporting requirements. While Treasury and the IRS continue to study whether future guidance is appropriate, they have decided to extend the transition period.  Thus, Treasury and the IRS will amend the applicable rules to provide that <a href="/research/federal/cfr26/1.6038A-2#cv09-0000114" resolve="/lr/resolve//cv09#cv09-0000114">reg. section 1.6038A-2(b)(7)(ix)</a> will apply to tax years beginning after December 31, 2022, and until that provision applies, the rules described in <a href="/research/federal/cfr26/1.59A-6#2b5vd-0000012" resolve="/lr/resolve//2b5vd#2b5vd-0000012">reg. section 1.59A-6(b)(2)(iv)</a> that apply during the transition period will continue to apply.

The IRS and Treasury have announced (Notice 2021-36) that they will defer the applicability date of some provisions of the regulations under sections 59A and 6038A regarding the reporting of qualified derivative payments until tax years beginning after December 31, 2022.

The IRS and Treasury have announced (Notice 2021-36) that they will defer the applicability date of some provisions of the regulations under sections 59A and 6038A regarding the reporting of qualified derivative payments (QDP) until tax years beginning after December 31, 2022. Final regs (T.D. 9885) issued in 2019 addressed the base erosion and antiabuse tax of section 59A and included rules under sections 59A and 6038A on the reporting of QDPs, which are not base erosion payments. Under reg. section 1.59A-6(b)(2)(i), a payment does not qualify as a QDP unless the taxpayer reports the information required in reg. section 1.6038A-2(b)(7)(ix) for the tax year. Reg. section 1.6038A-2(b)(7)(ix) applies to tax years beginning after June 6, 2021. Before that provision is applicable (the transition period), the rules described in reg. section 1.59A-6(b)(2)(iv) apply. As described in the preamble to final regs (T.D. 9910) issued in 2020 that provide further rules regarding section 59A, a commentator suggested that Treasury and the IRS address the interaction of the QDP exception, the BEAT netting rule, and the QDP reporting requirements. While Treasury and the IRS continue to study whether future guidance is appropriate, they have decided to extend the transition period.  Thus, Treasury and the IRS will amend the applicable rules to provide that reg. section 1.6038A-2(b)(7)(ix) will apply to tax years beginning after December 31, 2022, and until that provision applies, the rules described in reg. section 1.59A-6(b)(2)(iv) that apply during the transition period will continue to apply.

Sec. 59A Tax on base erosion payments of taxpayers with substantial gross receipts

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IRS to Delay Qualified Derivative Payment Reporting Requirements