26 CFR § 1.59A-5 - Base erosion minimum tax amount.

§ 1.59A-5 Base erosion minimum tax amount.

(a) Scope. Paragraph (b) of this section provides rules regarding the calculation of the base erosion minimum tax amount. Paragraph (c) of this section describes the base erosion and anti-abuse tax rate applicable to the taxable year.

(b) Base erosion minimum tax amount -

(1) In general. For each taxable year, an applicable taxpayer must determine its base erosion minimum tax amount.

(2) Calculation of base erosion minimum tax amount. With respect to any applicable taxpayer, the base erosion minimum tax amount for any taxable year is, the excess (if any) of -

(i) An amount equal to the base erosion and anti-abuse tax rate multiplied by the modified taxable income of the taxpayer for the taxable year, over

(ii) An amount equal to the regular tax liability as defined in § 1.59A-1(b)(16) of the taxpayer for the taxable year, reduced (but not below zero) by the excess (if any) of -

(A) The credits allowed under chapter 1 of subtitle A of the Code against regular tax liability over

(B) The sum of the credits described in paragraph (b)(3) of this section.

(3) Credits that do not reduce regular tax liability. The sum of the following credits are used in paragraph (b)(2)(ii)(B) of this section to limit the amount by which the credits allowed under chapter 1 of subtitle A of the Internal Revenue Code reduce regular tax liability -

(i) Taxable years beginning on or before December 31, 2025. For any taxable year beginning on or before December 31, 2025 -

(A) The credit allowed under section 38 for the taxable year that is properly allocable to the research credit determined under section 41(a);

(B) The portion of the applicable section 38 credits not in excess of 80 percent of the lesser of the amount of those applicable section 38 credits or the base erosion minimum tax amount (determined without regard to this paragraph (b)(3)(i)(B)); and

(C) Any credits allowed under sections 33, 37, and 53.

(ii) Taxable years beginning after December 31, 2025. For any taxable year beginning after December 31, 2025, any credits allowed under sections 33, 37, and 53.

(c) Base erosion and anti-abuse tax rate -

(1) In general. For purposes of calculating the base erosion minimum tax amount, the base erosion and anti-abuse tax rate is -

(i) Calendar year 2018. For taxable years beginning in calendar year 2018, five percent.

(ii) Calendar years 2019 through 2025. For taxable years beginning after December 31, 2018, through taxable years beginning before January 1, 2026, 10 percent.

(iii) Calendar years after 2025. For taxable years beginning after December 31, 2025, 12.5 percent.

(2) Increased rate for banks and registered securities dealers -

(i) In general. In the case of a taxpayer that is a member of an affiliated group (as defined in section 1504(a)(1)) that includes a bank or a registered securities dealer, the percentage otherwise in effect under paragraph (c)(1) of this section is increased by one percentage point.

(ii) De minimis exception to increased rate for banks and registered securities dealers. Paragraph (c)(2)(i) of this section does not apply to a taxpayer that is a member of an affiliated group (as defined in section 1504(a)(1)) that includes a bank or registered securities dealer if, in that taxable year, the total gross receipts of the affiliated group attributable to the bank or the registered securities dealer (or attributable to all of the banks and registered securities dealers in the group, if more than one) represent less than two percent of the total gross receipts of the affiliated group, as determined under § 1.59A-2(d).

(3) Application of section 15 to tax rates in section 59A -

(i) New tax. Section 15 does not apply to any taxable year that includes January 1, 2018.

(ii) Change in tax rate pursuant to section 59A(b)(1)(A). Section 15 does not apply to any taxable year that includes January 1, 2019.

(iii) Change in rate pursuant to section 59A(b)(2). Section 15 applies to the change in tax rate pursuant to section 59A(b)(2)(A).

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