Today, the Treasury Department and IRS proposed regulations (REG-115646-25) under IRC Sections 245A, 951, 951A and 951B that would implement changes made by the "One Big Beautiful Bill Act" (OBBBA) to pro-rata share rules that govern a US shareholder's inclusions of subpart F income, tested income or tested loss from a controlled foreign corporation (CFC).

Highlights of the proposed regulations include:

• Expanding on the OBBBA's new attribution approach under which a shareholder's pro-rata share would include subpart F and tested income attributable to stock it owned during a foreign corporation's tax year while the shareholder was a U.S. shareholder and the corporation was a CFC
• Determining the portion of a CFC's total subpart F or tested income attributable to a shareholder's stock based on the number of days it held the stock (i.e., day-count proration)
• Requiring a foreign corporation's tax year to close if the corporation undergoes a "status change" (i.e., the corporation becomes or ceases to be a CFC or a foreign CFC)
• Allowing taxpayers to elect to close the foreign corporation's tax year if a "significant ownership variance" occurs
• Terminating the extraordinary reduction rules in Treas. Reg. Section 1.245A-5(e) and (f), along with Treas. Reg. Section 1.1502-80(j), for tax years of foreign corporations beginning after December 31, 2025

Taxpayers that follow the proposed regulations consistently and in their entirety may rely on them until they are finalized. A Tax Alert is forthcoming.