Final FDII regulations pending OIRA review

Tax Hot Topics newsletter Final regulations under Section 250 were received for review on May 26 at the Office of Management and Budget’s Office of Information and Regulatory Affairs.

Section 250 provides a deduction to certain taxpayers equal to 50% of their global intangible low-taxed income (GILTI) and 37.5% of their foreign-derived intangible income (FDII). The regulations under review were initially proposed in March of 2019. Generally, those proposed regulations provided guidance with respect to the types of income that qualify as foreign derived deduction eligible income (FDDEI) and documentation required to be maintained by taxpayers to substantiate a FDII deduction. See our prior coverage on the proposed regulations here.

Treasury received a myriad of comments in response to the proposed regulations. A few of the more significant issues taxpayers commented on include:

  • The need for additional guidance with respect to the determination of an end user with respect to revenue generated from intangible property
  • Requesting a more expansive “menu” of options that satisfy the documentation requirements, including items that are commonly obtained for general business purposes
  • Suggesting alternatives to the requirement for a taxpayer to amend its tax return for a year of a foreign-related party sale in situations where the subsequent unrelated party sale by the foreign related party occurs in a future tax year
  • Recommending limitations on anti-abuse rules to prevent the rules from capturing common business transactions

David Sites
Washington National Tax Office
T +1 202 861 4104

David Zaiken
Managing Director
Washington National Tax Office
T +1 202 521 1543

Cory Perry
Senior Manager
Washington National Tax Office
T +1 202 521 1509

Yasmin Dirks
Washington National Tax Office
T +1 202 521 1506

Mike Del Medico
Washington National Tax Office
T +1 202 521 1522

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