Global Tax Alert | 3 July 2013

IRS no longer granting requests for early adoption of 2006 Section 987 proposed regulations

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On 3 July 2013 the Office of Chief Counsel for the Internal Revenue Service, Associate Chief Counsel: International, Branch 5, informed Ernst & Young that the IRS will cease granting rulings allowing taxpayers to early adopt the 2006 Section 987 proposed regulations (the 2006 proposed regulations) as set forth in the Notice of Proposed Rule Making (NPRM) 71 F.R. 52875 (6 September 2006). Thus it will no longer be accepting Form 3115 Applications requesting this change.

Branch 5 indicated that it had been granting early adoption of the 2006 proposed regulations1 under the “fresh start” transition method2 but that, due in part to the current project to finalize these regulations, as well as budgetary constraints, they have decided to discontinue the practice of granting early adoptions.

For applications already submitted, rulings may be granted, subject to the exceptions below, only if the requests deal solely with matters addressed and resolved by the 2006 proposed regulations, as the IRS has been doing to date.

If, however, the application already submitted is a request for matters either reserved under the 2006 proposed regulations, or not directly resolved by the 2006 proposed regulations (such as rules for taxpayers in the financial services or insurance industries, partnership issues, non-recognition provision issues, or consolidated return issues) or requests that involve significant amounts of unrecognized Section 987 or 988 gain or loss, the application will likely NOT be granted. If this is applicable to you, please contact ITS Capital Markets immediately for further discussion.

Endnotes

1. “IRS Will Take Up Branch Currency Transaction Regs This Summer, Official Says,” Doc 2008-7911, 2008 TNT 70-4, 9 April 2008; “Proposed Branch Currency Transaction Rules May Be Available To Taxpayers, Practitioner Says,” Doc 2008-3139, 2008 TNT 31-6 (14 February 2008).

2. Prop. Reg. Section 1.987-10(c)(4)(i) (2006).

For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP, ITS — Capital Markets, Washington, DC
  • David Golden
    +1 202 327 6526
    david.golden@ey.com
  • Doug Chestnut
    +1 202 327 5780
    doug.chestnut@ey.com
  • Liz Hale
    +1 202 327 8070
    liz.hale@ey.com
  • David Peppelman
    +1 202 327 6448
    david.peppelman@ey.com
Ernst & Young LLP, ITS — Capital Markets, New York
  • Lee Holt
    +1 212 773 9636
    lee.holt@ey.com
  • Karla Johnsen
    +1 212 773 5510
    karla.johnsen@ey.com
  • Julio Jimenez
    +1 212 773 5297
    julio.jimenez@ey.com
Ernst & Young LLP, ITS — Capital Markets, Chicago
  • Tim Wichman
    +1 312 879 2282
    timothy.wichman@ey.com

EYG no. CM3620