Defining Issues | October 2017

US Treasury postpones Section 987 regulations

Applicability

US Treasury Report, October 2, 2017

  • Companies with foreign branches

Relevant dates

  • October 2, 2017 – US Treasury and IRS announce postponed regulations (i.e. the enactment date)
  • January 1, 2019 – Regulations need to be applied by affected taxpayers

Key impacts

Section 987 regulations, which were issued in December 2016, can significantly change how a company measures taxable income when a foreign branch has a functional currency different from its owner’s functional currency.

On October 2, 2017, a US Treasury Report and IRS Notice announced that the Treasury plans to:

  • Postpone the application of the Section 987 regulations by one year (i.e. will be effective on January 1, 2019 for calendar year taxpayers), and
  • Propose changes to further simplify the regulations.

We believe that the IRS Notice effectively enacts the postponement (i.e. the enactment date for the change is October 2, 2017).

Companies will need to assess the effect of this change in tax law on the recognition and measurement of deferred tax assets or liabilities in the period that includes October 2, 2017.

Related content

Final report: Treasury regulations, executive order to reduce tax burden

Handbook: Accounting for income taxes

 

 

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