The IRS has released a draft Form 8991 (Tax on Base Erosion Payments of Taxpayers with Substantial Gross Receipts) for taxpayers to compute their Base Erosion and Anti-Abuse Tax (BEAT) under Section 59A together with Schedules A (Base Erosion Payments and Base Erosion Tax Benefits) and B (Credits Reducing Regular Tax Liability in Computing Base Erosion Minimum Tax Amount). The IRS has not yet released instructions for the form, even though the draft form provides a link to instructions, and has not yet indicated when it will release the instructions.
For prior coverage on BEAT, see prior PwC Insights listed in the ‘See also’ section in this Insight.
Although the release of draft Form 8991 provides an applicable taxpayer with an initial method to calculate its liability under Section 59A, several unanswered questions remain. For example, the form does not provide any guidance on whether the BEAT tax liability should be computed on a consolidated, single entity, or affiliated group basis. However, Schedule B, Part I, Line 1 indicates that a taxpayer should enter the amount of credits from Form 1120 or the applicable line of the taxpayer’s return. The fact that a subsidiary corporation in a US consolidated group does not file a separate Form 1120 (i.e., the parent of the US consolidated group files one Form 1120) could suggest that BEAT is intended to apply on a consolidated basis. Moreover, the draft form does not appear to include any mechanics for multiple affiliated groups to be combined into a single entity for purposes of computing the BEAT tax liability.
The new form does not provide any guidance with respect to partnerships. While Line 1b requires a taxpayer to take into account the gross receipts of a partnership, Schedule A does not indicate whether payments to a partnership would be considered base eroding payments.