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December 21, 2020

BREAKING TAX NEWS | United States Treasury and the IRS release final regulations on income recognition under IRC Section 451

The Treasury Department and the IRS have released final regulations under IRC Section 451 (T.D. 9941). These final regulations interpret IRC Section 451 as amended by Public Law No. 115-97, which is known as the "Tax Cuts and Jobs Act." The final regulations are expected to be generally applicable for tax years beginning on or after the later of January 1, 2021, or the date the final regulations are published in the Federal Register. The final regulations include two packages: Treas. Reg. Section 1.451-3 under IRC Section 451(b) (Inclusion not later than for financial accounting purposes) and Treas. Reg. Section 1.451-8 under IRC Section 451(c) (Advance payments for goods, services, and certain other items).

Taxpayers may choose to apply the final regulations, in their entirety and in a consistent manner, to tax years beginning before the effective date or may continue to rely on the proposed regulations (REG-104554-18) for tax years beginning after December 31, 2017, and before the effective date of the final regulations.

The IRS and Treasury Department are expected to publish a Revenue Procedure to provide rules for taxpayers to comply with, and transition to, the final regulations. Tax Alerts on the final regulations and other guidance are forthcoming. An invitation to an upcoming webcast on the final regulations will be sent soon.