26 CFR § 1.59A-1 - Base erosion and anti-abuse tax.

§ 1.59A-1 Base erosion and anti-abuse tax.

(a) Purpose. This section and §§ 1.59A-2 through 1.59A-10 (collectively, the “section 59A regulations”) provide rules under section 59A to determine the amount of the base erosion and anti-abuse tax. Paragraph (b) of this section provides definitions applicable to the section 59A regulations. Section 1.59A-2 provides rules regarding how to determine whether a taxpayer is an applicable taxpayer. Section 1.59A-3 provides rules regarding base erosion payments and base erosion tax benefits. Section 1.59A-4 provides rules for calculating modified taxable income. Section 1.59A-5 provides rules for calculating the base erosion minimum tax amount. Section 1.59A-6 provides rules relating to qualified derivative payments. Section 1.59A-7 provides rules regarding the application of section 59A to partnerships. Section 1.59A-8 is reserved for rules regarding the application of section 59A to certain expatriated entities. Section 1.59A-9 provides anti-abuse rules to prevent avoidance of section 59A. Finally, § 1.59A-10 provides the applicability date for the section 59A regulations.

(b) Definitions. For purposes of this section and §§ 1.59A-2 through 1.59A-10, the following terms have the meanings provided in this paragraph (b).

(1) Aggregate group. The term aggregate group means the group of corporations determined by -

(i) Identifying a controlled group of corporations as defined in section 1563(a), except that the phrase “more than 50 percent” is substituted for “at least 80 percent” each place it appears in section 1563(a)(1) and the determination is made without regard to sections 1563(a)(4) and (e)(3)(C), and

(ii) Once the controlled group of corporations is determined, excluding foreign corporations except with regard to income that is, or is treated as, effectively connected with the conduct of a trade or business in the United States under an applicable provision of the Internal Revenue Code or regulations published under 26 CFR chapter I. Notwithstanding the foregoing, if a foreign corporation is subject to tax on a net basis pursuant to an applicable income tax treaty of the United States, it is excluded from the controlled group of corporations except with regard to income taken into account in determining its net taxable income.

(2) Applicable section 38 credits. The term applicable section 38 credits means the credits allowed under section 38 for the taxable year that are properly allocable to -

(i) The low-income housing credit determined under section 42(a),

(ii) The renewable electricity production credit determined under section 45(a), and

(iii) The investment credit determined under section 46, but only to the extent properly allocable to the energy credit determined under section 48.

(3) Applicable taxpayer. The term applicable taxpayer means a taxpayer that meets the requirements set forth in § 1.59A-2(b).

(4) Bank. The term bank has the meaning provided in section 581.

(5) Base erosion and anti-abuse tax rate. The term base erosion and anti-abuse tax rate means the percentage that the taxpayer applies to its modified taxable income for the taxable year to calculate its base erosion minimum tax amount. See § 1.59A-5(c) for the base erosion and anti-abuse tax rate applicable for the relevant taxable year.

(6) Business interest expense. The term business interest expense, with respect to a taxpayer and a taxable year, has the meaning provided in § 1.163(j)-1(b)(2).

(7) Deduction. The term deduction means any deduction allowable under chapter 1 of subtitle A of the Internal Revenue Code.

(8) Disallowed business interest expense carryforward. The term disallowed business interest expense carryforward has the meaning provided in § 1.163(j)-1(b)(9).

(9) Domestic related business interest expense. The term domestic related business interest expense for any taxable year is the taxpayer's business interest expense paid or accrued to a related party that is not a foreign related party.

(10) Foreign person. The term foreign person means any person who is not a United States person. For purposes of the preceding sentence, a United States person has the meaning provided in section 7701(a)(30), except that any individual who is a citizen of any possession of the United States (but not otherwise a citizen of the United States) and who is not a resident of the United States is not a United States person. See § 1.59A-7(b) for rules applicable to partnerships.

(11) Foreign related business interest expense. The term foreign related business interest expense for any taxable year is the taxpayer's business interest expense paid or accrued to a foreign related party.

(12) Foreign related party. The term foreign related party means a foreign person, as defined in paragraph (b)(10) of this section, that is a related party, as defined in paragraph (b)(17) of this section, with respect to the taxpayer. In addition, for purposes of § 1.59A-3(b)(4)(v)(B) (relating to internal dealings under certain income tax treaties), a foreign related party also includes the foreign corporation's home office or a foreign branch of the foreign corporation. See § 1.59A-7(b), (c), and (f) for rules applicable to partnerships.

(13) Gross receipts. The term gross receipts has the meaning provided in § 1.448-1T(f)(2)(iv).

(14) Member of an aggregate group. The term member of an aggregate group means a corporation that is included in an aggregate group, as defined in paragraph (b)(1) of this section.

(15) Registered securities dealer. The term registered securities dealer means any dealer as defined in section 3(a)(5) of the Securities Exchange Act of 1934 that is registered, or required to be registered, under section 15 of the Securities Exchange Act of 1934.

(16) Regular tax liability. The term regular tax liability has the meaning provided in section 26(b).

(17) Related party -

(i) In general. A related party, with respect to an applicable taxpayer, is -

(A) Any 25-percent owner of the taxpayer;

(B) Any person who is related (within the meaning of section 267(b) or 707(b)(1)) to the taxpayer or any 25-percent owner of the taxpayer; or

(C) A controlled taxpayer within the meaning of § 1.482-1(i)(5) together with, or with respect to, the taxpayer.

(ii) 25-percent owner. With respect to any corporation, a 25-percent owner means any person who owns at least 25 percent of -

(A) The total voting power of all classes of stock of the corporation entitled to vote; or

(B) The total value of all classes of stock of the corporation.

(iii) Application of section 318. Section 318 applies for purposes of paragraphs (b)(17)(i) and (ii) of this section, except that -

(A) “10 percent” is substituted for “50 percent” in section 318(a)(2)(C); and

(B) Section 318(a)(3)(A) through (C) are not applied so as to consider a United States person as owning stock that is owned by a person who is not a United States person.

(18) TLAC long-term debt required amount. The term TLAC long-term debt required amount means the specified minimum amount of debt that is required pursuant to 12 CFR 252.162(a).

(19) TLAC securities amount. The term TLAC securities amount is the sum of the adjusted issue prices (as determined for purposes of § 1.1275-1(b)) of all TLAC securities issued and outstanding by the taxpayer, without regard to whether interest thereunder would be a base erosion payment absent § 1.59A-3(b)(3)(v).

(20) TLAC security. The term TLAC security means an eligible internal debt security, as defined in 12 CFR 252.161.

(21) Unrelated business interest expense. The term unrelated business interest expense for any taxable year is the taxpayer's business interest expense paid or accrued to a party that is not a related party.

[T.D. 9885, 84 FR 67017, Dec. 6, 2019]