High-Level Summary Of BEAT Provision

The Treasury Department and the IRS published proposed regulations yesterday on the Base Erosion and Anti-Abuse Tax (BEAT) that was enacted by the Tax Cuts and Jobs Act of 2017. The BEAT had the potential to cause adverse U.S. tax consequences to companies that had material value chain inputs from foreign affiliates. These inputs may have come from borrowed capital, purchases of depreciable property, purchased services, IP licenses, etc. It did not matter whether the ultimate parent of the multinational group was in the United States or outside the United States.

The proposed regulations are instead taxpayer favorable on a number of important points and clarify a number of uncertainties in how the BEAT applies. Favorable rules adopted by the IRS include: