n-21-36.pdf

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Section 59A Qualified Derivative Payments Reporting Requirements

Notice 2021-36

I. PURPOSE
This Notice announces that the Department of the Treasury (Treasury
Department) and the Internal Revenue Service (IRS) intend to amend the regulations
under sections 59A and 6038A to defer the applicability date of certain provisions of the
regulations relating to the reporting of qualified derivative payments (“QDP”) until
taxable years beginning on or after January 1, 2023.
II. BACKGROUND
On December 6, 2019, the Treasury Department and the IRS published TD 9885
in the Federal Register (84 FR 66968), which contains final regulations addressing the
base erosion and anti-abuse tax (“BEAT”) of section 59A (the “2019 final regulations”).
The 2019 final regulations generally apply to taxable years ending on or after December
17, 2018. The 2019 final regulations included rules under sections 59A and 6038A
addressing the reporting of QDPs, which are not base erosion payments.
Under §1.59A-6(b)(2)(i), a payment does not qualify as a QDP unless the

taxpayer reports the information required in §1.6038A-2(b)(7)(ix) for the taxable year.
Section 1.6038A-2(b)(7)(ix) requires a taxpayer subject to the BEAT to report on Form
8991 the aggregate amount of QDPs for the taxable year and make a representation
that all payments satisfy the requirements of §1.59A-6(b)(2). If a taxpayer fails to satisfy
the reporting requirements of §1.59A-6(b)(2)(i) with respect to any payments, §1.59A-
6(b)(2)(ii) (the reporting failure exclusion) provides that those payments are not eligible
for the QDP exception described in §1.59A-3(b)(3)(ii) and are base erosion payments
unless another exception applies.
Section 1.6038A-2(b)(7)(ix) applies to taxable years beginning on or after June 7,
2021. Section 1.6038A-2(g). Before §1.6038A-2(b)(7)(ix) is applicable (the transition
period), a taxpayer is treated as satisfying the QDP reporting requirements to the extent
that the taxpayer reports the aggregate amount of QDPs on Form 8991, Schedule A,
provided that the taxpayer reports this amount in good faith. See §1.59A-6(b)(2)(iv) and
§1.6038A-2(g).
On October 9, 2020, the Treasury Department and the IRS published TD 9910 in
the Federal Register (85 FR 64368), which contains additional final regulations relating
to section 59A (the “2020 final regulations”). As described in the preamble to the 2020
final regulations, a comment was submitted that recommended that the Treasury
Department and the IRS address the interaction of the QDP exception, the BEAT
netting rule in §1.59A-2(e)(3)(vi) (with respect to positions for which a taxpayer applies a
mark-to-market method of accounting for U.S. federal income tax purposes), and the
QDP reporting requirements in §1.59A-6 and §1.6038A-2(b)(7)(ix)–each in the 2019

final regulations. The Treasury Department and the IRS continue to study whether
future guidance may be appropriate. While studying this matter, the Treasury
Department and the IRS have determined that it is appropriate to extend the transition
period.
III. AMENDED APPLICABILITY DATE
Therefore, the Treasury Department and the IRS intend to amend §1.6038A-2(g)
to provide that §1.6038A-2(b)(7)(ix) will apply to taxable years beginning on or after
January 1, 2023. Until §1.6038A-2(b)(7)(ix) applies, the rules described in §1.59A-
6(b)(2)(iv) that apply during the transition period will continue to apply.
IV. TAXPAYER RELIANCE
Taxpayers may rely on the provisions of this Notice before the issuance of the
amendments to the final regulations described in section III of this Notice.
V. DRAFTING INFORMATION
The principal author of this notice is Sheila Ramaswamy of the Office of
Associate Chief Counsel (International). For further information regarding this notice
contact Sheila Ramaswamy at (202) 317-6938 (not a toll-free call).