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ARTICLE · 24 AUGUST 2007

Temporary And Proposed Regulations Under Section 883

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On June 22, 2007, the US Treasury Department and the US Internal Revenue Service (the "IRS") released temporary and proposed regulations under section 883 (the "Temporary Regulations"), relating to the reciprocal shipping income exemption.

United StatesTax
Kenneth Klein
Kenneth Klein
Rafic Barrage
Rafic Barrage
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Originally published July 16, 2007

INTRODUCTION

On June 22, 2007, the US Treasury Department and the US Internal Revenue Service (the "IRS") released temporary and proposed regulations under section 883 (the "Temporary Regulations"), relating to the reciprocal shipping income exemption.1 The Temporary Regulations generally apply to taxable years of a foreign corporation beginning after June 25, 2007.2 A public hearing on the Temporary Regulations has been scheduled for October 24, 2007. In addition, the Treasury and the IRS have invited comments on the Temporary Regulations, which must be received by September 24, 2007.

The Temporary Regulations make important changes to the existing final regulations under section 883 by: (1) replacing the income inclusion test of the controlled foreign corporation (CFC) stock ownership test with a qualified US person ownership test; (2) explicitly broadening the categories of activities that qualify as incidental to the international operation

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