Treasury And IRS Issue New Temporary Treasury Regulations

On September 2, 2015, the U.S. Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) issued new temporary Treasury regulations addressing the application of Internal Revenue Code Section 956 to certain structures involving foreign partnerships.

Background

Section 956 provides for the accelerated taxation of a controlled foreign corporation's (CFC) earnings when the earnings are invested in certain "U.S. property." In effect, Section 956 provides that, subject to specific rules and exceptions, to the extent CFC earnings are made available for the use or benefit of any U.S. shareholder of the CFC, the U.S. shareholder is subject to current U.S. taxation with respect to such amounts under Section 951(a)(1)(B). For these purposes, the definition of U.S. property includes obligations of U.S. persons.