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April 24, 2024

IRS finalizes domestically controlled QIE rules under IRC Section 897

The IRS and Treasury Department today released final regulations (TD 9992) for determining whether qualified investment entities (QIEs), which include real estate investment trusts (REITs), are considered domestically controlled for purposes of the Foreign Investment in Real Property Tax Act (FIRPTA) rules of IRC Section 897. The final regulations increase the amount of foreign ownership required to look through a non-public domestic C corporation from 25% or more to greater than 50%. The final regulations do not address the treatment of qualified foreign pension funds (QFPFs) and qualified controlled entities (QCEs) for purposes of the US tax exemption for income of foreign governments under IRC Section 892, which the IRS and Treasury said would be addressed in separate guidance. A Tax Alert is forthcoming.

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Published by NTD’s Tax Technical Knowledge Services group; Chris DeZinno, legal editor