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Jeffrey Tebbs Discusses New IP Regulation Rules in Tax Notes

"IP Repatriation Regs Reflect Concern Over 'Scope Creep'"

Tax Notes

At the American Bar Association (ABA) Section of Taxation (Tax Section) meeting on May 5, Jeff Tebbs commented on recent proposed regulations addressing the repatriation of intangible property (IP), which was covered by Tax Notes. The proposed rules would resolve a longstanding issue with existing regulations under section 367(d), where U.S. taxpayers must include deemed royalties under section 367(d), even if IP is repatriated to the U.S. group. Under the proposed regulations, annual inclusions under section 367(d) would terminate if a foreign subsidiary transfers the IP to a "qualified domestic person" and satisfies reporting requirements. During the panel, Tebbs posed a question to Brenda Zent of the U.S. Department of the Treasury Office of International Tax Counsel, on how to calculate the U.S. taxpayer's basis in the repatriated IP, given uncertainty in existing law on the IP's basis while held by the foreign affiliate.  Zent confirmed that taxpayers should calculate basis consistent with their historic position.