The US Internal Revenue Service (IRS) and Treasury published the final regulations – Section 367(d) Rules for Certain Repatriations of Intangible Property in the Federal Register on 10 October 2024, which contains final additions and amendments to 26 CFR part 1 under section 367(d) of the Internal Revenue Code (Code) regarding the termination of the continued application of specific tax provisions arising from a previous transfer of intangible property to a foreign corporation when the intangible property is repatriated to certain United States persons.
The primary provisions of the final regulations are issued pursuant to the express delegations of authority to the Secretary of the Treasury (or her delegate) provided under sections 367(d) and 6038B.
Section 367(d) stipulates that when US individuals transfer intangible property to a foreign corporation under specific circumstances, they are deemed to receive income related to that intangible property.
The US transferor is considered to receive annual payments over the intangible property’s useful life or a lump sum upon its disposition. The US transferor must ensure that the amounts considered are proportionate to the income generated by the transferred intangible property.
The final regulations resolve issues of excessive US taxation when intangible property is repatriated from a foreign corporation. If Section 367(d) remains applicable, this could potentially discourage taxpayers from such repatriation.
The final regulations take effect from the date they are published in the Federal Register.
