February 2019
The IRS and Treasury (collectively, Treasury) recently released proposed regulations (Proposed Regulations) on Section 59A, commonly referred to as the base erosion and anti-abuse tax (BEAT). This provision was enacted as part of the 2017 tax reform known as the Tax Cuts and Jobs Act (TCJA). In general, Section 59A imposes an additional tax on an “applicable taxpayer” equal to the base erosion minimum tax amount (BEMTA) for the taxable year. For Section 59A to apply, there must be an applicable taxpayer. In determining whether there is an applicable taxpayer, a gross receipts test (discussed below) and a specified “base erosion percentage” test (discussed below) must be satisfied.
The Proposed Regulations provide much needed guidance relating to the application of the BEAT. More specifically, the Proposed Regulations include guidance relating to:
Important guidance contained in the Proposed Regulations can be found in more detail on BDO.com. For additional information on the Proposed Regulations, see REG-104259-18.
The Proposed Regulations contain much needed guidance on the BEAT, including guidance on the services cost method (SCM) exception. There is a significant amount of complexity relating to the calculation of the BEAT. A BDO international tax specialist can help you with applying the rules contained in the Proposed Regulations.
Joe Calianno
jcalianno@bdo.com
Monika Loving
mloving@bdo.com