7 Taxpayers subject to the BEAT calculate their BEAT liability as the excess of (i) the applicable tax rate (currently 10 percent) times "modified taxable income" for the tax year, over (ii) the taxpayer's regular tax liability reduced by certain credits (including foreign tax credits). 6 Both gross receipts and the base erosion percentage are computed by applying the aggregation rules provided in the statute and attendant regulations. The BEAT generally applies to C corporations that have average annual gross receipts of at least $500 million for the last three tax years and whose base erosion percentage (which is intended to measure the percentage of the taxpayer's aggregate deductions that is made up of "base erosion tax benefits") is three percent or higher. §§ 1.59A-7(c)(5)(v) and -9(b)(5)-(6) (which relate to the application of the BEAT to partnerships) apply to tax years ending on or after December 2, 2019, but taxpayers may similarly apply them back to 2018 as provided above. § 1.59A-3(c)(5) and (6) (relating to the BEAT waiver election, discussed below) for tax years beginning after December 31, 2017, if those provisions are applied in their entirety for all subsequent tax years. ![]() 3 Alternatively, taxpayers have the option of applying only Treas. The newly issued final regulations generally apply to tax years ending on or after the date the regulations are published in the Federal Register, but taxpayers may apply these regulations in their entirety for tax years beginning after December 31, 2017, provided that, once applied, taxpayers must continue to apply them in their entirety for all subsequent tax years. 2 Because the regulations provide that the decision to waive deductions is essentially irrevocable, taxpayers will have to consider carefully the advisability, content, and timing of such a waiver together with other tools for managing their BEAT exposure. 1 These final regulations finalize December 2019 proposed regulations, which, among other things, proposed a rule giving taxpayers the option to waive deductions (and therefore potentially avoid being subject to the BEAT). ![]() ![]() On September 1, 2020, Treasury and the IRS released additional guidance under section 59A, the base erosion and anti-abuse tax (BEAT) added by the 2017 Tax Cuts and Jobs Act.
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