Treasury and the IRS, on September 1, released final regulations under Section 59A (‘the base erosion and anti-avoidance tax’ or ‘BEAT’). BEAT, which requires certain US corporations to pay a minimum tax associated with, broadly speaking, deductible payments to non-US related parties, was enacted by the 2017 tax reform act. These regulations finalize the previously proposed regulations published in the Federal Register on December 6, 2019. The Final Regulations retain the basic approach and structure of the proposed regulations, with certain revisions.
The Final Regulations provide, among other things, the ability for taxpayers to waive deductions in calculating their base erosion percentage. Taxpayers should review and assess the impact of these provisions. The highlights in this alert are not an exhaustive list of the provisions in the Final Regulations. We expect to publish an in-depth Insight in the coming days.