The Section 987 regulations are being deferred yet again for the sixth time. Originally, the regulations were set to be effective for the 2018 calendar year.
Recently, the Internal Revenue Service (IRS) released Notice 2022-34 announcing its intention to defer yet again the foreign currency regulations covering US taxpayers with foreign branches, or foreign companies they own that have elected to treat them as branches. These entities, often referred to as “check-the-box” foreign entities, have a functional currency other than the US dollar.
The IRS now intends to amend the 2016 final regulations and the related 2019 final regulations so they apply to tax years beginning after Dec. 7, 2023. This means the regulations will be applicable to calendar year taxpayers beginning Jan. 1, 2024. The notice also said taxpayers may rely on certain related proposed regulations that cross-reference temporary expired regulations.
Any taxpayer who is involved with a branch, which is probably a qualified business unit, or otherwise deals with foreign currencies should be aware of the ramifications of these regulations. The full history of deferrals can be viewed here, as well as background on what this means for you.
These regulations are complex. Guidance has been deferred several times because of the complexity of the issues and to allow taxpayers time to determine its impact on their particular situation. To discuss how this might impact your unique circumstances, contact a Moore Doeren Mayhew international tax advisor today.