Practical considerations from the final BEAT regulations

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September 2020

Overview

Treasury and the IRS on September 1 released 103 pages of Final Regulations (the 2020 Final Regulations) for the Base Erosion and Anti-Abuse Tax (BEAT) under Section 59A as enacted by the 2017 tax reform legislation (the Act). The BEAT rules require certain corporations to pay a minimum tax on taxable income as computed without certain deductions for certain payments to foreign related parties. 

The 2020 Final Regulations incorporate with modifications the rules set forth in prior proposed regulations issued on December 2, 2019 (the 2019 Proposed Regulations) and provide additional guidance on determining the aggregate group, allow taxpayers an election to waive deductions for purposes of calculating their base erosion percentage, and provide certain rules applicable to partnerships. 

The takeaway

The 2020 Final Regulations provide additional guidance related to the determination of a taxpayer’s aggregate group for purposes of determining gross receipts and the base erosion percentage; an election to waive deductions for purposes of the BEAT; the application of the BEAT to partnerships; the anti-abuse rule with respect to certain basis step-up transactions; and reference the possibility for future guidance relating to the qualified derivative payment (QDP) reporting requirements. Taxpayers should review and assess the impact of the provisions in the 2020 Final Regulations.

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Doug McHoney

International Tax Services Leader, PwC US

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