The IRS announced it intends to amend the Code Sec. 59A and Code Sec. 6038A regulations to defer the qualified derivative payments reporting requirements until tax years beginning on or after January 1, 2025.
Qualified derivative payment reporting regs.
In 2019, the IRS published final regs (2019 regs) that, in part, addressed the reporting of qualified derivative payments (QDPs).
Note. Generally, a QDP is any payment made by the taxpayer pursuant to a derivative contract if the taxpayer recognizes gain or loss on the contract as if it were sold for its fair market value on the last business day of the tax year; treats the gain or loss as ordinary; and treats all other items of income, deduction, gain, or loss with respect to the contract as ordinary.
Under Reg §1.59A-6(b)(2)(i), a payment doesn’t qualify as a QDP unless the taxpayer reports certain required information for the tax year. See Final regs implement base-erosion and anti-abuse tax (12/04/2019).
The QDP reporting requirements apply to tax years beginning on or after June 7, 2021. During the “transition period” provided in the regs, a taxpayer is treated as satisfying the QDP reporting requirements if the taxpayer, in good faith, reports the aggregate amount of their QDPs on Schedule A of Form 8991, Tax on Base Erosion Payments of Taxpayers with Substantial Gross Receipts.
2021 guidance.
In 2021, the IRS announced it would extend the transition period through tax years beginning before January 1, 2023, while it studied the interaction of the QDP exception, the BEAT (base erosion and anti-abuse tax) netting rule in Reg §1.59A-2(e)(3)(vi), and the QDP reporting requirements. See Qualified derivative payment reporting requirements delayed until 2023 (06/11/2021).
Reporting requirements delayed again.
The IRS has delayed the QDP reporting requirements again as it continues to study how the above provisions interact. The IRS will amend the 2019 regs to provide that the QDP reporting requirements will apply to tax years beginning on or after January 1, 2025.
Until the IRS amends the regs, the rules described in Reg §1.59A-6(b)(2)(iv) that apply during the transition period will continue to apply.
Taxpayer reliance.
Taxpayers may rely on the Notice before the IRS issues the proposed amendments to the final regs.
See QDP reporting requirements, for more information.
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