The US IRS today published final regulations that provide a mechanism to exclude corporations that are United States shareholders from the application of section 956.
Section 956 requires an inclusion in the income of US corporation that owns a controlled foreign corporation if the controlled foreign corporation makes certain investments in US property.
The final regulations provide rules exclude corporations that are United States shareholders, though, to maintain symmetry between the taxation of actual repatriations and the taxation of effective repatriations.
Today’s regulations finalize proposed regulations published November 5, 2018.
No substantive comments were received in response to the proposed regulations. In response to published commentary on the regulations, though, Treasury and the IRS added a new E&P ordering rule in the final regs.
The regs also adopt the first of two methods described in the proposed regs’ preamble for applying the rules to domestic partnerships.
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