IRS announces prop. regs. on international tax law provisions in OBBBA

The IRS on Thursday issued three notices about its intent to publish proposed regulations on changes to international tax law provisions in H.R. 1, P.L. 119-21, commonly known as the One Big Beautiful Bill Act.

In Notice 2025-75, the IRS said it will issue proposed regulations regarding the transition rule for dividends in Section 70354(c)(2) of H.R. 1, which modified the application of Sec. 951(a)(2)(B) for certain tax years of foreign corporations beginning before Jan. 1, 2026.

The proposed regulations would apply to the tax years of a controlled foreign corporation (CFC) that either (1) include June 28, 2025, or (2) begin after June 28, 2025, but before such CFC’s first tax year beginning after Dec. 31, 2025. The IRS said taxpayers may rely on the rules described in Section 3 of the notice for dividends paid before proposed regulations are published in the Federal Register, provided the taxpayer and its related parties (within the meaning of Secs. 267(b) and 707(b)(1)) follow the rules in their entirety and in a consistent manner for all dividends paid before the proposed regulations are published.

In Notice 2025-77, the IRS describes proposed regulations that it intends to issue under Section 70312 of H.R. 1, providing guidance on the effective date and application of Sec. 960(d)(4). This provision disallows a foreign tax credit for 10% of any foreign income taxes paid or accrued (or deemed paid under Sec. 960(b)(1)) with respect to any amount excluded from gross income under Sec. 959(a) by reason of an inclusion in gross income under Sec. 951A(a).

The proposed regulations would apply to foreign income taxes paid or accrued (or deemed paid under Sec. 960(b)(1)) with respect to any amount excluded from gross income under Sec. 959(a) by reason of an inclusion in the gross income of a U.S. shareholder under Sec. 951A(a), provided that the inclusion is in a tax year of the U.S. shareholder ending after June 28, 2025. The IRS said taxpayers may rely on the guidance provided in Section 3 of the notice for tax years of U.S. shareholders beginning before the date the proposed regulations are published in the Federal Register, provided taxpayers follow the guidance in its entirety and in a consistent manner for all applicable tax years.

In Notice 2025-78, the IRS said it intends to issue regulations regarding the new rules for calculating deduction-eligible income. The notice primarily addresses the meanings of intangible property, “any other property of a type,” and sale or other disposition for Sec. 250.

The proposed regulations would apply, when finalized, to sales or other dispositions (including pursuant to deemed sales, deemed dispositions, or transactions subject to Sec. 367(d)) occurring after June 16, 2025. The IRS said taxpayers may rely on the rules described in Section 3 of the notice for sales or other dispositions occurring before the forthcoming proposed regulations are published in the Federal Register, provided taxpayers apply the rules in their entirety and in a consistent manner for all applicable tax years.

Comments on Notice 2025-75 and Notice 2025-78 are due by Feb. 2, 2026. The IRS did not seek comments on Notice 2025-77.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.