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October 21, 2022

IRS withdraws proposed rules under IRC Section 959 on excluding from income previously taxed E&P held in CFCs

The IRS has withdrawn a notice of proposed rulemaking (REG-121509-00) under IRC Section 959 (published in 2006) that addressed the exclusion from gross income of previously taxed earnings and profits (E&P) held in controlled foreign corporations (CFC) and related basis adjustments under IRC Section 961. The IRS explains that the proposed regulations never went into effect and withdrawing them now "will help prevent possible abuse or other misuse of them … while the Treasury Department and the IRS continue to develop the new proposed regulations." The IRS may, however, challenge certain taxpayer positions.