![]() ![]() Base erosion payments may include amounts paid or accrued by the taxpayer to a foreign related party in cash or in any non-cash consideration, such as amounts arising from tax-free transactions that involve the acquisition of depreciable or amortizable property.Partnerships are treated as an aggregate of partners rather than as entities for purposes of the BEAT.Foreign currency losses are excluded from the base erosion percentage computation.trade or business” or, if there is an applicable treaty, are taken into account in determining a foreign member’s net taxable income. Base erosion payments do not include gross receipts of a foreign taxpayer to the extent they are “effectively connected with a U.S.In short, under the Proposed Regulations: ![]() ![]() The Proposed Regulations provide guidance regarding which taxpayers are subject to the BEAT, which payments give rise to base erosion tax benefits, the calculation of modified taxable income, and certain exceptions to the BEAT. For more information, please contact any of the Proskauer tax lawyers listed on this post or your regular Proskauer contact. This post provides background and summarizes some of the most important aspects of the Proposed Regulations. The Proposed Regulations are generally effective for taxable years after December 31, 2017, and a taxpayer may rely on them before they are finalized so long as the taxpayer applies them consistently for all taxable years before they are finalized. The Proposed Regulations clarify which taxpayers are subject to the BEAT and how the BEAT rules apply. corporations from using deductible payments to reduce (or “base erode”) their corporate tax liability. The BEAT is designed to prevent these U.S. corporations that make deductible payments to foreign related parties. The BEAT is an additional tax that has the effect of a minimum tax on certain large U.S. The BEAT was enacted in 2017 as part of the tax reform act. On December 13, 2018, the Internal Revenue Service (the “IRS”) and the Department of the Treasury (the “Treasury”) released proposed regulations (the “Proposed Regulations”) with respect to the “base erosion and anti-abuse tax” (the “BEAT”) under section 59A of the Internal Revenue Code. ![]()
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