The IRS has issued proposed regs that treat members of a consolidated group as a single U.S. shareholder in certain cases for purposes of Code Sec. 951(a)(2)(B). (Preamble to Prop Reg REG-113839-22)
It is proposed that in determining the amount described in Code Sec. 951(a)(2)(B) (which addresses cases in which stock of a controlled foreign corporation owned by a U.S. shareholder on the last relevant day was acquired by the U.S. shareholder during the CFC’s tax year) that is attributable to distributions to which Code Sec. 959(b) applies, members of a group are treated as a single U.S. shareholder (within the meaning of Code Sec. 951(b) (or Code Sec. 953(c)(1)(A), if applicable)) for purposes of determining the part of the year during which such shareholder did not own (within the meaning of Code Sec. 958(a)) the stock described in Code Sec. 951(a)(2)(A). (Prop Reg §1.1502-80(j))
The proposed regs say that the purpose of this is to facilitate the clear reflection of income of a consolidated group by ensuring that the location of ownership of stock of a foreign corporation within the group does not affect the amount of the group’s income by reason of Code Sec. 951(a)(1)(A) and Code Sec. 951A(a). (Prop Reg §1.1502-80(j))
The proposed regs would apply to tax years for which the original consolidated Federal income tax return is due (without extensions) after the date a Treasury decision adopting these rules as final regulations is published in the Federal Register. (Preamble to Prop Reg REG-113839-22)
For more information on defining who is a U.S. shareholder, see Checkpoint’s Federal Tax Coordinator ¶O-2303.
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