On October 12, the US Internal Revenue Service announced that it would amend certain regulations on the taxable income of “qualified business units,” such as foreign branches, that operate in a foreign currency to delay their applicability for another year.
The regulations under Internal Revenue Code section 987 and related sections were initially issued in 2016 in final form with accompanying temporary and proposed regulations. As issued, they were intended to apply to “taxable years beginning on or after one year after the first day of the first taxable year following December 7, 2016” – which is to say, for calendar-year taxpayers, 2018.
However, the IRS has now delayed the rules several times, most recently last year pushing their applicability back until 2022. Nonetheless, in the meantime, in 2019, the IRS finalized portions of the 2016 temporary regulations.
The IRS now plans to delay application of relevant portions of the 2016 and 2019 regulations “to taxable years beginning after December 7, 2022” – i.e., to 2023 for calendar-year taxpayers.
In addition to providing rules for determining the taxable income or loss of a taxpayer with respect to an IRC section 987 qualified business unit, the deferred regulations include rules for determining the relevant timing, amount, character, and source of IRC section 987 gain or loss.
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