The IRS has published proposed regulations (REG-107895-24) regarding the base erosion and anti-abuse tax (BEAT) imposed on certain large corporate taxpayers with respect to qualified derivative payments (QDPs) on securities lending transactions made to foreign related parties.
The proposed regulations provide guidance under Section 59A that would modify the rules set forth in the existing final regulations relating to how to determine QDPs in connection with securities lending transactions. In addition, the proposed regulations also include proposed amendments to the reporting requirements for QDPs.
The regulations are generally proposed to apply to taxable years ending on or after the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register, but it will be up to the new administration whether the guidance moves forward. Changes in the approach are also possible. The proposed rules relating to QDP reporting under Prop. Treas. Reg. 1.6038A-2(b)(7)(ix) are proposed to apply to payments made in taxable years beginning on or after Jan. 1, 2027.
If taxpayers make QDPs on securities lending transactions to foreign related parties, they should evaluate the potential implications of the proposed regulations.
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