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May 2, 2023

BREAKING TAX NEWS | Treasury releases proposed regulations on repatriation of intangible property subject to IRC Section 367(d)

Today, the Treasury Department released proposed regulations under IRC Section 367(d) (REG-124064-19; Proposed Regulations) that would govern certain "repatriations" of intangible property (IP).

Following certain nontaxable transfers of IP to a foreign corporation, a US transferor generally must include in income annually amounts that are (1) contingent upon productivity, use and disposition of the IP; and (2) commensurate with the income that the transferee foreign corporation earns from the IP (Outbounded IP) during its useful life. The Proposed Regulations would permit the annual inclusions to cease, before the end of the Outbounded IP's useful life, without a fully taxable disposition of the Outbounded IP. Specifically, no further annual inclusions would be required upon a transfer of the Outbounded IP to a "qualified domestic person." Depending on the nature of the transfer, moreover, no gain might have to be recognized. The Proposed Regulations would apply only to subsequent transfers of Outbounded IP occurring on or after the date on which the regulations are finalized.

Other highlights of the Proposed Regulations include rules:

  • Addressing how much gain, if any, the US transferor would have to recognize upon the repatriation of the Outbounded IP and its resulting basis
  • Specifying that the new IRC Section 367(d) termination rule would not apply when computing foreign branch income
  • Requiring certain information to be reported in connection with the new IRC Section 367(d) termination rule

A Tax Alert on the proposed regulations is forthcoming.

Published by NTD’s Tax Technical Knowledge Services group; Maureen Sanelli, legal editor