April 20, 2020
Revenue Procedure 2020-24 and International Tax Considerations
Posted by Jon Davies
Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) modified section 172 by adding a new section 172(b)(1)(D)(i) which provides that net operating losses (“NOL”) arising in tax years beginning after December 31, 2017, and before January 1, 2021 may be carried back to each of the five tax years preceding the taxable year of the NOL.
In connection with this new provision, taxpayers may choose to make certain elections to waive carryback periods. IRS has detailed the procedures in Revenue Procedure 2020-24 on how and when to make such elections.
International Tax Considerations in Making Such Elections
As Taxpayers are absorbing the IRS guidance in Revenue Procedure 2020-24, it is important to model out how the Rev. Proc. 2020-24 elections will impact the Company’s cash tax liability for each impacted year. In addition to federal corporate tax laws, a list of a selected international tax consideration will need to be evaluated and factored in the modeling, few of them are highlighted below:
- Impact of NOL carryback to pre-section 965 inclusion year and subsequent impact of transition tax liability in a section 965 inclusion year as a result of excess foreign tax credit carryovers to transition tax year.
- Impact on foreign tax credit limitation, in general, under section 904. Tracking the allocation or recapture of a separate limitation losses (“SLL”), overall foreign losses (“OFL”) and overall domestic losses (“ODL”), under section 904(f) and (g).
- Impact of NOL carrybacks (relevant for tax years 2018 and 2019) on Base Erosion and Anti- Abuse Tax (“BEAT”) under section 59A.
- Impact of NOL carrybacks on section 250(a)(2) limitation, which reduces a domestic corporation’s section 250(a)(1) deduction with respect to Foreign- Derived Intangible Income (“FDII”) and global intangible low-taxed income (“GILTI”).
We’re Here to Help
For detail discussion on how these provisions may apply to your organization’s specific facts, reach out to our experts below:
Jon specializes in international tax structuring, cross-border transactions, transfer pricing, merger & acquisition integration and global earnings mobility strategies. He has extensive experience in the internet, software, computer hardware and services industries. Jon has a vast international network built on years of experience working with professionals around the world.
Jon is a Certified Public Accountant and earned his Bachelor of Science and Master’s in Taxation degrees at Brigham Young University. He is also a member of the American Institute of Certified Public Accountants and the California Society of Certified Public Accountants.
Co Authors :
Surbhi has over 10 years of extensive public accounting experience on addressing various complex international tax issues impacting companies’ ongoing international operations and future international operations. Surbhi has hands on experience in international tax restructuring, IP migration planning, legal entity rationalizations and integrations post mergers and acquisitions. Her areas of expertise include but is not limited to GILTI, BEAT, FDII, anti-hybrid rules, foreign tax credit, subpart F, withholding tax, investment in US property, FX gains and losses, treaty related issues, outbound transfers, permanent establishment and profit attribution rules etc. Before joining Armanino, Surbhi worked at PwC and Deloitte. Surbhi received her MBA at Haas School of Business at UC Berkeley, Master in Business and Bachelors of Commerce from Jai Narain Vyas University, India.
Tim has 25 years of public accounting experience, including experience at a Big Four firm, and works extensively with high tech, software and internet clients. He specializes in ASC 740 and Section 382, and he also has deep expertise assisting clients with ASC 740-10 (FIN 48), Sarbanes-Oxley, mergers and acquisitions, accounting periods and methods, tax audits, and state and local taxation.
Tim is a member of the California Society of CPAs and the American Institute of CPAs. He received a BS in agricultural management from California Polytechnic State University, San Luis Obispo.