Tax insight

Treasury releases three international tax notices related to tax act enactment

Insight
5 minute read
December 04, 2025

What happened?

The IRS and Treasury on December 4 issued three Notices—2025-75, 2025-77 and 2025-78—providing early guidance on several international tax provisions enacted as part of the One Big Beautiful Bill Act (the Act).

Notice 2025-75 announces the intent to issue proposed regulations implementing the transition rule under Section 70354(c)(2) of the Act. The transition rule affects how Section 951(a)(2)(B) reductions apply for certain dividends paid by controlled foreign corporations (CFCs) in tax years beginning before January 1, 2026.
Notice 2025-77 provides interim guidance on the implementation of Section 960(d)(4), a new rule enacted by the Act that disallows 10% of foreign tax credits (FTCs) associated with certain previously taxed earnings and profits (PTEP) distributions tied to Section 951A inclusions.
Notice 2025-78 announces the intent to propose regulations interpreting the new exclusion from deduction eligible income (DEI) for income or gain from the sale or other disposition of certain intangible and depreciable, amortizable, or depletable property under Section 250(b)(3)(A)(i)(VII). This provision generally removes that income from the foreign derived deduction eligible income (FDDEI) benefit calculation for transactions occurring after June 16, 2025.

Why is it relevant?

Notice 2025-75 clarifies when certain dividends will not be treated as reducing a US shareholder’s inclusion of subpart F income or GILTI, under Section 951(a)(2)(B), during the transition to the Act’s post-2025 rules. The guidance may impact parties’ approaches to divestitures and acquisitions of CFC stock, the availability of elections under Section 245A regulations, and CFC reporting requirements (including Form 5471).

Notice 2025-77 clarifies the timing and application of new Section 960(d)(4), which denies a foreign tax credit for 10% of foreign income taxes imposed on certain distributions of PTEP. The notice announces future regulations will apply the disallowance only to foreign income taxes imposed on distributions of PTEP to the extent the PTEP arose from post-June 28, 2025, Section 951A inclusions. This application may impact the availability of FTCs for distributions made during 2025, even if made prior to the introduction or enactment of the Act. The notice also introduces new bifurcation and tracking rules, which may require system updates and granular recordkeeping around PTEP, particularly for taxpayers with large, multi-jurisdictional CFC structures.

Notice 2025-78 provides early insight into how Treasury and the IRS intend to interpret the Act’s new FDDEI limitation, which excludes gain and other income from sales of intangible property and certain depreciable, amortizable, or depletable property. The notice clarifies that for this purpose intangible property does not include copyrighted articles and that the limitation applies to depreciable, amortizable, or depletable property only if the item of property is or has been subject to such an allowance in the hands of the taxpayer (and thus typically not to property held as inventory). The notice also introduces anti-abuse rules for related-party transactions involving basis-carryover structures designed to circumvent the exclusions.

Actions to consider

Comments on the frameworks in Notices 2025-75 and 2025-78 are due by February 2, 2026. Notice 2025-77 does not solicit comments, but taxpayers may rely on it as well as the other two notices until proposed regulations are issued, provided taxpayers apply the respective notice’s rules fully and consistently.