US Treasury and the IRS on 19 August 2025 issued Notice 2025-45 announcing their intent to issue proposed regulations under IRC Section 897(d) and (e) that will modify the rules applicable to certain transactions involving the transfer of US real property interests. The forthcoming proposed regulations will apply to inbound asset reorganizations under IRC Section 368(a)(1)(F) that constitute a "covered inbound F reorganization."

The government stated in the notice its understanding that current rules described in Reg. Sections 1.897-5T(c)(4) and 1.897-6T(a), as modified by Notice 89-85 and Notice 2006-46, may impede publicly traded foreign corporations from redomiciling into the United States. A Tax Alert is forthcoming.

On 20 August, Treasury and the IRS also released Notice 2025-44, announcing the proposed removal of the final disregarded payment loss (DPL) rules, which were issued as final regulations earlier this year. The final regulations (T.D. 10026), issued on 10 January 2025, finalized two key aspects of the proposed regulations issued in August 2024: (1) the DPL rules, which require income inclusions for certain disregarded payments that are deductible under foreign law, and (2) an anti-avoidance rule applicable to dual consolidated losses (DCLs) and DPLs.

Notice 2025-44 also extends "transition relief" on application of the DCL rules to the BEPS Pillar Two rules. As a result, the global anti-base erosion (GloBE) rules in Pillar Two will not cause "foreign use" of a DCL until tax years beginning 1 January 2028.

The notice further announced the reversal of the changes to the deemed ordering rule in Reg. Section 1.1503(d)-3(c)(3) related to when losses and deductions are used when foreign law does not have an ordering rule.

Proposed regulations will follow, and taxpayers may rely on the announced updates in the notice until final regulations are published.

The IRS Large Business and International division this week announced (IR-2025-84) that the application period for the Compliance Assurance Process (CAP) program for tax year 2026 runs from 3 September 2025 to 31 October 2025. The IRS is continuing with the changes made to the program for the 2025 cycle. For that year, eligibility was expanded to privately held domestic and foreign corporations with audited financial statements.

CAP is a cooperative pre-filing program available to certain large taxpayers, begun as a pilot program in 2005 and made permanent in 2011. It generally allows the IRS and taxpayers to agree on the treatment of various tax issues before a return is filed. The IRS will notify participants in February 2026 if they are accepted into the program. A Tax Alert provides details.

President Trump on 21 August announced agreement on a framework for continued bilateral trade negotiations between the US and European Union (EU). The announcement, titled "Joint Statement on a United States-European Union Framework on an Agreement on Reciprocal, Fair, and Balanced Trade," states that EU will eliminate tariffs on all US industrial goods and provide preferential market access for a wide range of US seafood and agricultural goods.

In return, the US will commit to applying the higher of either the US Most Favored Nation (MFN) tariff rate or a rate of 15%, comprised of the MFN tariff and a reciprocal tariff, on EU originating goods. Effective 1 September, the US also commits to apply only the MFN tariff on all aircraft and aircraft parts, generic pharmaceuticals and their ingredients and chemical precursors.

The tax press this week reported on an internal draft OECD document regarding potential changes to the BEPS Pillar Two global minimum tax. According to the press report, the draft OECD document is meant to take into account US concerns over Pillar Two and addresses a June 2025 G-7 understanding on a "side-by-side" approach to the Pillar Two global minimum tax.

The G7 on 28 June published a shared understanding that a "side-by-side" solution for Pillar Two could preserve gains made in tackling base erosion and profit shifting and provide clarity and stability in the international tax landscape. The statement outlined four "accepted principles" underlying the understanding, including the exclusion of US-parented groups from the Income Inclusion Rule and Undertaxed Profits Rule.