On March 4, 2019, the Treasury released proposed regulations (REG-104464-18) under Section 250 (proposed Section 250 regulations) with guidance on determining the deduction allowable to a domestic corporation for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI). Treasury previously proposed regulations for determining a domestic corporation's GILTI inclusion on September 13, 2018. See EY Tax Alert 2018-1824.

In general, the proposed Section 250 regulations would:

1. Provide guidance for determining, and substantiating, whether a sale or license of property is for a foreign use, with different rules provided for tangible property and intangible property
2. Provide guidance for determining whether services are provided to a foreign person or with respect to property located outside the United States and basing that guidance on the type of service provided and the type of recipient of the service (e.g., consumers)
3. Provide guidance for determining the extent to which sales of property and provision of services to the US military for resale or "on-service" to a foreign government may qualify for the Section 250 deduction
4. Provide value-based and price-based bright-line thresholds to determine whether the statutory "anti-round tripping" rules apply to deny FDII treatment to services provided to related foreign persons
5. Coordinate the determination of the Section 250 deduction with deductions allowable to the domestic corporation in the same tax year, particularly the Section 163(j) deduction for interest and the Section 172(a) net operating loss deduction
6. Apply the allocation and apportionment rules under Section 861 to determine the deductions properly taken into account in determining deduction-eligible income, foreign-derived deduction eligible income, and, by extension, FDI
7. Disregard certain transfers of tangible property in determining the domestic corporation's QBAI when the domestic corporation continues to use the property after the transfer
8. Provide that a domestic corporate partner of a domestic or foreign partnership takes its distributive share of partnership items into account for purposes of computing the partner's FDII
9. Provide guidance on the application of Section 250 to consolidated groups
10. Establish threshold reporting requirements

A more detailed Tax Alert and a webcast invitation are forthcoming.