A one-year extension has been granted for applying the Code Sec. 987 final regulations, and certain related final and temporary regulations covering foreign branch transactions of U.S. corporations. The applicability date in the regulations will be amended, but taxpayers can rely on the notice until the regulations are amended.
Final and temporary regulations were issued in 2016 to provide long-awaited guidance on the Code Sec. 987 rules ( T.D. 9794 and T.D. 9795). The regulations were to apply to tax years beginning on or after one year after the first day of the first tax year following December 7, 2016. For a calendar year taxpayer, this was January 1, 2018. Notice 2017-38 later identified several significant tax regulations that required additional review under Executive Order 13789, including the Code Sec. 987 regulations.
Following two deferral notices ( Notice 2017-57 and Notice 2018-57), the regulations were to apply to tax years beginning on or after the first day of the first taxable year following December 7, 2019 (i.e., January 1, 2020, for a calendar year taxpayer). The amended applicability date also applied to final regulations issued in 2019 dealing with combinations and separations of section 987 qualified business units (QBUs) and the recognition and deferral of foreign currency gain or loss in connection with certain QBU terminations and other transactions ( T.D. 9857).
The 2016 final regulations and 2019 final regulations will now apply to tax years beginning on or after the date that is the first day of the first tax year following December 7, 2020. For a calendar year taxpayer, the extended date is January 1, 2021. Related temporary regulations will expire on December 6, 2019, and the amended applicability date will apply for purposes of the related proposed regulations.