The IRS recently issued final regulations (TD 9973) treating members of a consolidated group as a single U.S. shareholder in certain cases for purposes of Section 951(a)(2)(B) with respect to controlled foreign corporation-to-controlled foreign corporation (CFC-to-CFC) distributions of previously taxed earnings and profits under Section 959(b) (PTEP distributions).
Per the preamble to the regulations, the IRS did not receive any comments, nor was a public hearing requested or held. As a result, the preamble does not provide a description of the provisions, and the IRS finalized the previously proposed regulations without modification.
Under the final regulations, members of a consolidated group will be treated as a single U.S. shareholder for purposes of determining the amount described in Section 951(a)(2)(B) subsequent to a PTEP distribution from one CFC to another CFC before a transfer of such CFC between members within the consolidated group. As a result of such treatment, the transferee member’s pro rata share would reflect the period that both members owned stock of the CFC.
The regulations apply to tax years for which the original consolidated return is due (without extensions) after Feb. 23, 2023. Therefore, for calendar-year taxpayers, the regulations would apply to transactions occurring in 2022.
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