Law360 Quotes Elizabeth Stevens: Lack of Noncash Exceptions in BEAT Rules Has Wide Scope

Proposed base erosion and anti-abuse tax regulations provide U.S. multinationals with much-needed answers to calculation questions, but the inclusion of noncash transactions without any exceptions — including when there aren’t recognized gains or losses — could take companies by surprise.

. . .

In the absence of any regulations, a U.S. company might try to get around this category by arguing that no base erosion occurred because it didn’t pay cash to acquire the assets from a foreign affiliate, according to Elizabeth Stevens of Caplin & Drysdale.

“But there has been value that’s been transferred to the foreign person in exchange for the asset,” she said.

If the foreign party had a basis greater than zero, then usually in a nonrecognition transaction, the U.S. acquirer would take a transferred basis and depreciate it, Stevens noted.

She predicted the first category of base erosion payments under the statute, which covers “a payment with respect to which a deduction is allowable,” will have the biggest impact for companies.

. . .

As Stevens saw it, the statute itself was an invitation for companies to drill down into their cost accounting, and the regulations reiterated that.

“There are a lot of existing rules in case law, in statutes [and] in regulations,” she said. “They have become more relevant because of the BEAT, but they are what they are.”

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Excerpt taken from the article “Lack of Noncash Exceptions in BEAT Rules Has Wide Scope” by Natalie Olivo for Law360.