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Multinationals Get Final, Proposed Base Erosion Tax Rules

Dec. 2, 2019, 9:26 PM

Multinational businesses now have a better idea of the kinds of payments captured in the 2017 tax overhaul’s anti-base erosion measure.

The Internal Revenue Service on Dec. 2 released final rules (TD 9885) on the base erosion and anti-abuse tax, or BEAT, which is designed to stop U.S. multinationals from moving profits offshore.

The agency also issued new proposed rules (REG-112607-19) related to BEAT in a second package. The proposal offers guidance on how companies should apply BEAT when they elect to waive certain deductions and how the BEAT should apply to partnerships. Companies won’t be required to follow the new proposed rules until after they’re final, but they can adopt them immediately, a senior Treasury official said on a call with reporters.

  • A company becomes subject to the BEAT, under tax code Section 59A, when 3% or more of its deductible payments are considered base-erosion payments. When that happens, the company is slapped with a 10% tax. The BEAT increases to 12.5% after 2025.
  • The IRS released proposed regulations under 59A (REG-104259-18) on Dec. 17, 2018.

To contact the reporter on this story: Sony Kassam in Washington at skassam1@bloombergtax.com

To contact the editors responsible for this story: Meg Shreve at mshreve@bloombergtax.com; Colleen Murphy at cmurphy@bloombergtax.com