The US Internal Revenue Service (IRS) has released a Practice Unit with an overview of the base erosion and anti-abuse tax (BEAT) under section 59A of the Internal Revenue Code (IRC).
The Practice Unit is entitled "IRC 59A Base Erosion Anti-Abuse Tax Overview" (INT-C-245). The Practice Unit, released on 14 December 2021, indicates a revised date of 9 August 2021.
IRC section 59A imposes the BEAT, which is a corporate minimum tax imposed on taxpayers who make certain base erosion payments to foreign related parties beginning after 31 December 2017 (see Note 1).
The Practice Unit discusses various topics related to the BEAT, including:
- taxpayers subject to the BEAT;
- base erosion payments;
- base erosion tax benefits;
- the steps required for calculating the BEAT amount;
- certain reporting requirements;
- aggregate groups;
- BEAT waiver exceptions;
- the application of the BEAT to partnerships; and
- an anti-abuse rule with respect to certain basis step-up transactions.
Note 1: The BEAT generally applies to corporations that have annual gross receipts for the preceding 3 years of at least USD 500 million and a base erosion percentage of at least 3% for the taxable year (2% for certain taxpayers that include a bank or registered securities dealer in their affiliated group). If the taxpayer has an aggregate group, the determination for both of those figures is made at the aggregate group level.
Note 2: Practice Units, issued by the Large Business & International (LB&I) division of the IRS, serve as both job aids and training materials on tax issues for IRS staff. Practice Units are not official pronouncements of law or directives and thus may not be used or cited as precedent.