Note: After this story was published, Treasury and the IRS took a significant step Aug. 14 toward easing the compliance burden associated with the Section 987 foreign currency rules for multinational groups. Proposed regulations (PDF - 415.17KB) would allow controlled foreign corporations (CFCs) to elect out of computing and recognizing foreign currency gains and losses on certain transfers involving their foreign branches. Read our story on this for more information.
As multinational businesses continue to expand globally, managing foreign currency tax rules remains a significant compliance challenge. Section 987, which governs foreign currency gains and losses associated with foreign branches, has evolved through decades of regulatory changes, often creating complex calculations and administrative burdens for taxpayers. Recent IRS guidance may signal a more practical approach.
In “Notice 2026-17 Simplifies and Resets Section 987’s Evolving Landscape” published in the Tax Management International Journal, Grant Thornton’s Cory Perry and Wei Fan examine how the IRS is seeking to simplify the application of Section 987 while preserving key elements of the existing framework.
As Perry and Fan write, the notice introduces an elective-and-basis-pool methodology that reflects elements of the original 1991 proposed regulations. By replacing daily remittance calculations with a single annual computation, the proposal aims to reduce compliance complexity and operational costs for taxpayers with foreign branch operations.
Beyond computational simplification, Notice 2026-17 also proposes taxpayer-friendly changes to loss suspension rules and previews a future election that could reduce reporting obligations for certain controlled foreign corporations. These developments may influence how organizations manage foreign currency exposure, evaluate tax elections and approach international tax planning.
By examining the evolution of Section 987, the mechanics of the proposed changes and their practical implications, the Tax Management International Journal article highlights how companies can improve compliance efficiency while supporting strategic tax planning in an increasingly global business environment.
Contacts:
Partner, Tax Services
Washington National Tax Office
Grant Thornton Advisors LLC
Cory Perry is a Grant Thornton partner and Pillar Two leader, advising multinational companies on global tax reform, compliance, modeling, and M&A.
Washington DC, Washington DC
Industries
- Technology
- Manufacturing
- Private Equity
Service Experience
- Tax Services
San Francisco, California
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