Happy New Year to all our readers! To start off the New Year, the Internal Revenue Service (IRS) has released two pieces of guidance on international tax issues which are noteworthy. Each is briefly discussed below.
The first piece of guidance is Notice 2018-7, which announces the IRS’s intent to issue regulations for determining amounts included in gross income by a United States shareholder under Internal Revenue Code (Code) Section 951(a)(1) by reason of Code Section 965. The IRS has requested comments on the Notice and has indicated that it expects to issue additional guidance under Code Section 965.
The second piece of guidance is a Practice Unit on the substantial contribution test for the controlled manufacturing exception under the Code Section 954 regulations. This Practice Unit discusses the substantial contribution test and provides insight into the IRS’s approach in analyzing this issue in examinations of taxpayers. We previously posted about the purpose of Practice Units here, but to briefly recap this type of guidance is intended as job aids and training materials for IRS employees. A complete list of Practice Units can be found here.