On September 21, the IRS published final regulations on calculating qualified business asset investment (QBAI) under the global intangible-low taxed income (GILTI) and foreign-derived intangible income (FDII) provisions. The final regulations also include rules on net operating losses (NOLs) incurred in post-2017 tax years that are carried back to pre-2018 tax years.
The QBAI calculation rules address the treatment of qualified improvement property under the alternative depreciation system. They clarify that technical amendments in the 2020 “CARES Act” covid-relief legislation providing a recovery period of 20 years for qualified improvement property for purposes of the alternative depreciation system are treated as if enacted in the 2017 tax law that introduced GILTI and FDII.
The final NOL regulations contain transition rules addressing the impact on loss accounts of net operating loss carrybacks allowed under the CARES Act for post-2017 net operating loss carrybacks to pre-2018 tax years.
The QBAI rules were issued in proposed form in January 2021, the NOL rules in November 2020. The IRS is finalizing both “without substantive change.” Other rules included with the QBAI and NOL proposed regulations not currently finalized will be finalized separately.
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