Internal Revenue Bulletin 2018-47 (PDF rendition): IRS Revenue Procedures

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HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
Administrative
REV. PROC. 2018–55, page 775.
The procedure publishes the amount of unused housing
credit carryovers allocated to qualified states under section
42(h)(3)(D) of the Code for calendar year 2018.
Employee Plans
Notice 2018–83, page 774.
Section 415 of the Internal Revenue Code (the Code) provides
for dollar limitations on benefits and contributions under qual-
ified retirement plans. Section 415(d) requires that the Secre-
tary of the Treasury annually adjust these limits for cost of
living increases. Other limitations applicable to deferred com-
pensation plans are also affected by these adjustments under
§ 415. Under § 415(d), the adjustments are to be made under
adjustment procedures similar to those used to adjust benefit
amounts under § 215(i)(2)(A) of the Social Security Act.
Income Tax
REG–114540–18, page 777.
These proposed regulations reduce the amount determined
under section 956 with respect to certain domestic corpora-
tions. The proposed regulations affect United States sharehold-
ers of controlled foreign corporations.
Finding Lists begin on page ii.
Bulletin No. 2018–47
November 19, 2018

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-
force the law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all
substantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of internal
management are not published; however, statements of inter-
nal practices and procedures that affect the rights and duties
of taxpayers are published.
Revenue rulings represent the conclusions of the Service on
the application of the law to the pivotal facts stated in the
revenue ruling. In those based on positions taken in rulings to
taxpayers or technical advice to Service field offices, identify-
ing details and information of a confidential nature are deleted
to prevent unwarranted invasions of privacy and to comply with
statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions of
the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A, Tax
Conventions and Other Related Items, and Subpart B, Legisla-
tion and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Sec-
retary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index for
the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
November 19, 2018Bulletin No. 2018–47

Part III. Administrative, Procedural, and Miscellaneous
2019 Limitations Adjusted
As Provided in Section
415(d), etc.
Notice 2018–83
Section 415 of the Internal Revenue
Code (the Code) provides for dollar limi-
tations on benefits and contributions under
qualified retirement plans. Section 415(d)
requires that the Secretary of the Treasury
annually adjust these limits for cost-of-
living increases. Other limitations appli-
cable to deferred compensation plans are
also affected by these adjustments under
§ 415. Under § 415(d), the adjustments
are to be made under adjustment proce-
dures similar to those used to adjust ben-
efit amounts under § 215(i)(2)(A) of the
Social Security Act.
Cost-of-Living Adjusted Limits for 2019
Effective January 1, 2019, the limita-
tion on the annual benefit under a defined
benefit plan under § 415(b)(1)(A) is in-
creased from $220,000 to $225,000.
For a participant who separated from
service before January 1, 2019, the partic-
ipant’s limitation under a defined benefit
plan under § 415(b)(1)(B) is computed by
multiplying the participant’s compensa-
tion limitation, as adjusted through 2018,
by 1.0264.
The limitation for defined contribution
plans under § 415(c)(1)(A) is increased in
2019 from $55,000 to $56,000.
The Code provides that various other
dollar amounts are to be adjusted at the
same time and in the same manner as the
dollar limitation of § 415(b)(1)(A). After
taking into account the applicable round-
ing rules, the amounts for 2019 are as
follows:
The limitation under § 402(g)(1) on
the exclusion for elective deferrals
described in § 402(g)(3) is increased
from $18,500 to $19,000.
The annual compensation limit un-
der §§ 401(a)(17), 404(l), 408(k)
(3)(C), and 408(k)(6)(D)(ii) is in-
creased from $275,000 to $280,000.
The dollar limitation under § 416(i)
(1)(A)(i) concerning the definition of
“key employee” in a top-heavy plan
is increased from $175,000 to
$180,000.
The dollar amount under § 409(o)(1)
(C)(ii) for determining the maximum
account balance in an employee stock
ownership plan subject to a 5-year
distribution period is increased from
$1,105,000 to $1,130,000, while the
dollar amount used to determine the
lengthening of the 5-year distribution
period is increased from $220,000 to
$225,000.
The limitation used in the definition
of “highly compensated employee”
under § 414(q)(1)(B) is increased
from $120,000 to $125,000.
The dollar limitation under § 414(v)
(2)(B)(i) for catch-up contributions to
an applicable employer plan other
than a plan described in § 401(k)(11)
or § 408(p) for individuals aged 50 or
over remains unchanged at $6,000.
The dollar limitation under § 414(v)
(2)(B)(ii) for catch-up contributions
to an applicable employer plan de-
scribed in § 401(k)(11) or 408(p) for
individuals aged 50 or over remains
unchanged at $3,000.
The annual compensation limitation
under § 401(a)(17) foreligible partic-
ipants in certain governmental plans
that, under the plan as in effect on July
1, 1993, allowed cost-of-living adjust-
ments to the compensation limitation
under the plan under § 401(a)(17) to be
taken into account, is increased from
$405,000 to $415,000.
The compensation amount under
§ 408(k)(2)(C) regarding simplified
employee pensions (SEPs) remains
unchanged at $600.
The limitation under § 408(p)(2)(E)
regarding SIMPLE retirement ac-
counts is increased from $12,500 to
$13,000.
The limitation on deferrals under § 457(e)
(15) concerning deferred compensation
plans of state and local governments and
tax-exempt organizations is increased
from $18,500 to $19,000.
The limitation under § 664(g)(7) con-
cerning the qualified gratuitous trans-
fer of qualified employer securities to
an employee stock ownership plan re-
mains unchanged at $50,000.
The compensation amount under
§ 1.61–21(f)(5)(i) of the Income Tax
Regulations concerning the definition
of “control employee” for fringe bene-
fit valuation purposesremains un-
changed at $110,000. The compensation
amount under § 1.61–21(f)(5)(iii) is in-
creased from $220,000 to $225,000.
The dollar limitation on premiums
paid with respect to a qualifying
longevity annuity contract under
§ 1.401(a)(9)–6, A–17(b)(2)(i) of the
Income Tax Regulations remains un-
changed at $130,000.
1
The Code provides that the $1,000,000,000
threshold used to determine whether a mul-
tiemployer plan is a systemically important
plan under § 432(e)(9)(H)(v)(III)(aa) is ad-
justed using the cost-of-living adjustment pro-
vided under § 432(e)(9)(H)(v)(III)(bb). After
taking the applicable rounding rule into ac-
count, the threshold used to determine whether
a multiemployer plan is a systemically impor-
tant plan under § 432(e)(9)(H)(v)(III)(aa) is
increased from $1,087,000,000 to
$1,097,000,000.
The Code also provides that several
retirement-related amounts are to be ad-
justed using the cost-of-living adjustment
under § 1(f)(3). After taking the applica-
ble rounding rules into account, the
amounts for 2019 are as follows:
The adjusted gross income limitation
under § 25B(b)(1)(A) for determining
the retirement savings contributions
credit for married taxpayers filing a
joint return is increased from $38,000
to $38,500; the limitation under
1
Notice 2017–64, 2017–45 I.R.B. 486, raised this limit from $125,000 to $130,000 although § 1.401(a)(9)–6, A-17(d)(2) provides for increases of the $125,000 limitation only in multiples
of $10,000. The limitation will remain at $130,000 until it would be adjusted to $135,000 pursuant to § 1.401(a)(9)–6, A-17(d)(2). For subsequent years, the limitation will be adjusted only
in increments of $10,000.
November 19, 2018Bulletin No. 2018–47
774

§ 25B(b)(1)(B) is increased from
$41,000 to $41,500; and the limita-
tion under §§ 25B(b)(1)(C) and
25B(b)(1)(D) is increased from
$63,000 to $64,000.
The adjusted gross income limitation
under § 25B(b)(1)(A) for determining
the retirement savings contributions
credit for taxpayers filing as head of
household is increased from $28,500
to $28,875; the limitation under
§ 25B(b)(1)(B) is increased from
$30,750 to $31,125; and the limita-
tion under §§ 25B(b)(1)(C) and
25B(b)(1)(D) is increased from
$47,250 to $48,000.
The adjusted gross income limitation
under § 25B(b)(1)(A) for determining
the retirement savings contributions
credit for all other taxpayers is in-
creased from $19,000 to $19,250; the
limitation under § 25B(b)(1)(B) is in-
creased from $20,500 to $20,750; and
the limitation under §§ 25B(b)(1)(C)
and 25B(b)(1)(D) is increased from
$31,500 to $32,000.
The deductible amount under
§ 219(b)(5)(A) for an individual mak-
ing qualified retirement contributions
is increased from $5,500 to $6,000.
The applicable dollar amount under
§ 219(g)(3)(B)(i) for determining the
deductible amount of an IRA contri-
bution for taxpayers who are active
participants filing a joint return or as
a qualifying widow(er) is increased
from $101,000 to $103,000. The ap-
plicable dollar amount under § 219(g)
(3)(B)(ii) for all other taxpayers who
are active participants (other than
married taxpayers filing separate re-
turns) is increased from $63,000 to
$64,000. If an individual or the indi-
vidual’s spouse is an active partici-
pant, the applicable dollar amount un-
der § 219(g)(3)(B)(iii) for a married
individual filing a separate return is
not subject to an annual cost-of-living
adjustment and remains $0. The ap-
plicable dollar amount under § 219(g)
(7)(A) for a taxpayer who is not an
active participant but whose spouse is
an active participant is increased from
$189,000 to $193,000.
Accordingly, under § 219(g)(2)(A),
the deduction for taxpayers making
contributions to a traditional IRA is
phased out for single individuals and
heads of household who are active
participants in a qualified plan (or
another retirement plan specified in
§ 219(g)(5)) and have adjusted gross
incomes (as defined in § 219(g)(3)
(A)) between $64,000 and $74,000,
increased from between $63,000 and
$73,000. For married couples filing
jointly, if the spouse who makes the
IRA contribution is an active partici-
pant, the income phase-out range is be-
tween $103,000 and $123,000, in-
creased from between $101,000 and
$121,000. For an IRA contributor who
is not an active participant and is mar-
ried to someone who is an active
participant, the deduction is phased out
if the couple’s income is between
$193,000 and $203,000, increased
from between $189,000 and $199,000.
For a married individual filing a sepa-
rate return who is an active participant,
the phase-out range is not subject to an
annual cost-of-living adjustment and
remains $0 to $10,000.
The adjusted gross income limitation
under §408A(c)(3)(B)(ii)(I) for deter-
mining the maximum Roth IRA contri-
bution for married taxpayers filing a
joint return or for taxpayers filing as a
qualifying widow(er) is increased from
$189,000 to $193,000. Theadjusted
gross income limitation under
§ 408A(c)(3)(B)(ii)(II) for all other
taxpayers(other than married taxpay-
ers filing separate returns) is increased
from $120,000 to $122,000. The appli-
cable dollar amount under § 408A(c)
(3)(B)(ii)(III) for a married individual
filing a separate return is not subject to
an annual cost-of-living adjustment and
remains $0.
Accordingly, under § 408A(c)(3)(A),
the adjusted gross income phase-out
range for taxpayers making contribu-
tions to a Roth IRA is $193,000 to
$203,000 for married couples filing
jointly, increased from $189,000 to
$199,000. For singles and heads of
household, the income phase-out
range is $122,000 to $137,000, in-
creased from $120,000 to $135,000.
For a married individual filing a sep-
arate return, the phase-out range is
not subject to an annual cost-of-living
adjustment and remains $0 to
$10,000.
Drafting Information
The principal author of this notice is
Tom Morgan of the Office of the Asso-
ciate Chief Counsel (Tax Exempt and
Government Entities). However, other
personnel from the IRS participated in
the development of this guidance. For
further information regarding this no-
tice, contact Mr. Morgan at 202-317-
6700 or John Heil at 443-853-5519 (not
toll-free numbers).
26 CFR 601.105
Rev. Proc. 2018–55
SECTION 1. PURPOSE
This revenue procedure publishes the
amounts of unused housing credit carry-
overs allocated to qualified states under
§ 42(h)(3)(D) of the Internal Revenue
Code for calendar year 2018.
SECTION 2. BACKGROUND
Rev. Proc. 92–31, 1992–1 C.B. 775,
provides guidance to state housing
credit agencies of qualified states on the
procedure for requesting an allocation
of unused housing credit carryovers un-
der § 42(h)(3)(D). Section 4.06 of Rev.
Proc. 92–31 providesthat the Internal
Revenue Service will publish in the Internal
Revenue Bulletin the amount of unused
housing credit carryovers allocated to qual-
ified states for a calendar year from a na-
tional pool of unused credit authority (the
National Pool). This revenue procedure
publishes these amounts for calendar year
2018.
SECTION 3. PROCEDURE
The unused housing credit carryover
amount allocated from the National Pool
by the Secretary to each qualified state for
calendar year 2018 is as follows:
Bulletin No. 2018–47November 19, 2018
775

Qualified State
Amount
Allocated
Alabama49,984
California405,396
Connecticut36,792
Delaware9,863
Florida215,167
Georgia106,939
Idaho17,605
Illinois131,268
Indiana68,359
Kentucky45,672
Maine13,698
Maryland62,057
Massachusetts70,338
Michigan102,150
Minnesota57,181
Missouri62,686
Montana10,771
Nebraska19,688
New Mexico21,410
Qualified StateAmount
Allocated
New York203,529
North Carolina105,340
Ohio119,544
Pennsylvania131,304
Puerto Rico34,218
Rhode Island10,865
South Dakota8,917
Texas290,226
Utah31,805
Vermont6,395
Virginia86,849
Washington75,936
West Virginia18,619
Wisconsin59,425
EFFECTIVE DATE
This revenue procedure is effective
for allocations of housing credit dollar
amounts attributable to the National
Pool component of a qualified state’s
housing credit ceiling for calendar year
2018.
DRAFTING INFORMATION
The principal author of this revenue
procedure is James A. Holmes of the Of-
fice of Associate Chief Counsel (Pass-
throughs and Special Industries). For fur-
ther information regarding this revenue
procedure, contact Mr. Holmes at (202)
317-4137 (not a toll-free number).
Section 42.—Low-Income
Housing Credit
26 CFR 1.42–14. Allocation rules for post-1989
State housing credit ceiling amounts. Guidance is
provided to state housing credit agencies of qualified
states that request an allocation of unused housing
credit carryover under section 42(h)(3)(D) of the
Internal Revenue Code. See Rev. Proc. 2018–55.
November 19, 2018Bulletin No. 2018–47
776

Part IV. Items of General Interest
Notice of Proposed
Rulemaking
Amount Determined Under
Section 956 for Corporate
United States Shareholders
REG–114540–18
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION:Notice of proposed rulemaking.
SUMMARY:This document contains pro-
posed regulations that reduce the amount
determined under section 956 of the Internal
Revenue Code with respect to certain do-
mestic corporations. The proposed regula-
tions affect certain domestic corporations
that own (or are treated as owning) stock in
foreign corporations.
DATES: Written or electronic comments
and requests for a public hearing must be
received by December 5, 2018.
ADDRESSES: Send submissions to: CC:
PA:LPD:PR (REG–114540–18), Internal
Revenue Service, Room 5203, P.O. Box
7604, Ben Franklin Station, Washington,
DC 20044. Submissions may be hand-
delivered Monday through Friday be-
tween the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG–114540–18),
Courier’s Desk, Internal Revenue Ser-
vice, 1111 Constitution Avenue, NW,
Washington, DC 20224, or sent elec-
tronically via the Federal eRulemaking
Portal athttp://www.regulations.gov
(IRS REG–114540–18).
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, Rose E. Jenkins, (202) 317-
6934; concerning submissions of com-
ments or requests for a public hearing,
Regina Johnson, (202) 317-6901 (not toll-
free numbers).
SUPPLEMENTARY INFORMATION:
Background
I.Section 956
The Revenue Act of 1962 (the “1962
Act”), Pub. L. No. 87–834, sec. 12, 76
Stat. at 1006, enacted sections 951 and
956 as part of subpart F of part III, sub-
chapter N, chapter 1 of the 1954 Internal
Revenue Code (“subpart F”), as amended.
Subpart F was enacted in order to limit the
use of low-tax jurisdictions for the pur-
poses of obtaining indefinite deferral of
U.S. tax on certain earnings that would
otherwise be subject to U.S. federal in-
come tax. H.R. Rep. No. 1447 at 57
(1962). Congress enacted subpart F in part
to address taxpayers who had “taken ad-
vantage of the multiplicity of foreign tax
systems to avoid taxation by the United
States on what could ordinarily be ex-
pected to be U.S. source income.”Id.at
58.
Before the 1962 Act, United States
shareholders (as defined in section 951(b))
(“U.S. shareholders”) of controlled for-
eign corporations (as defined in section
957) (“CFCs”) were not subject to U.S.
tax on earnings of the foreign corporations
unless and until earnings of the foreign
corporations were distributed to the share-
holders as a dividend. S. Rep. No. 1881 at
78 (1962). The subpart F regime elimi-
nated deferral for certain – generally pas-
sive or highly mobile – earnings of CFCs
by subjecting those earnings to immediate
U.S. taxation regardless of whether there
was an actual distribution.Id.at 80. Earn-
ings that were not subject to immediate
U.S. taxation under the subpart F regime
were generally taxable only upon repatri-
ation, as those earnings did not present the
same concerns regarding indefinite tax de-
ferral compared to earnings subject to
subpart F.
Section 956 was enacted alongside the
subpart F regime in the 1962 Act to ensure
that a CFC’s earnings not subject to im-
mediate tax when earned (under the sub-
part F regime) would be taxed when re-
patriated, either through a dividend or an
effective repatriation. Recognizing that re-
patriation of foreign earnings was possible
through means other than a taxable distri-
bution, Congress enacted section 956 “to
prevent the repatriation of income to the
United States in a manner which does not
subject it to U.S. taxation.” H.R. Rep. No.
1447 at 58. Congress determined that the
investment by a CFC of its earnings in
United States property, including obliga-
tions of a U.S. person, “is substantially the
equivalent of a dividend.”SeeS. Rep. No.
1881 at 88 (1962).See alsoS. Rep. No.
94–938 at 226 (1976) (“[S]ince the in-
vestment...inthestock or debt obliga-
tions of a related U.S. person or its do-
mestic affiliates makes funds available for
use by the U.S. shareholders, it constitutes
an effective repatriation of earnings which
should be taxed.”). Accordingly, Con-
gress enacted section 956 as an anti-abuse
measure to tax a CFC’s investment of
earnings in United States property in the
same manner as if it had distributed those
earnings to the United States.SeeJCS–
10–87 at 1081–82(1987) (“In general,
two kinds of transactions are repatriations
that end deferral and trigger tax. First, an
actual dividend payment ends deferral....
Second, in the case of a controlled foreign
corporation, an investment in U.S. property,
such as a loan to the lender’s U.S. parent or
the purchase of U.S. real estate, is also a
repatriation that ends deferral (Code sec.
956).”). Failure to tax CFC investments in
United States property would have allowed
taxpayers to circumvent the U.S. system of
deferral by effectively repatriating earnings
without paying U.S. tax on the substantial
equivalent of a taxable dividend. Section
956 was thus designed to ensure symmetry
between the tax treatment of repatriations
through dividends and effective repatria-
tions.See generallyNotice 2014–52,
2014–42 I.R.B. 712 (“In the absence of
section 956, a U.S. shareholder of a CFC
could access the CFC’s funds (untaxed
earnings and profits) in a variety of ways
other than by the payment of an actual tax-
able dividend, such that there would be no
reason for the U.S. shareholder to incur the
dividend tax. Section 956 eliminates this
disincentive to pay a dividend by ensuring
parity of treatment for different ways that
CFC earnings can be made available for use
in the United States or for use by the U.S.
shareholder.”).
Section 951(a)(1)(B) requires a U.S.
shareholder of a CFC to include in gross
income the amount determined under sec-
tion 956 (the “section 956 amount”) with
respect to the CFC to the extent not ex-
cluded from gross income under section
959(a)(2) (the inclusion, a “section 956
Bulletin No. 2018–47November 19, 2018
777

inclusion”).Seesections 951(a)(1)(B),
959(a)(2), and 959(f)(1). Section 951(b)
defines a U.S. shareholder as a United
States person that owns within the mean-
ing of section 958(a), or is considered as
owning by reason of the constructive
ownership rules of section 958(b), 10 per-
cent or more of the voting power or value
of a foreign corporation. A U.S. share-
holder’s section 956 amount with respect
to a CFC for a taxable year is the lesser of
(1) the excess (if any) of such sharehold-
er’s pro rata share of the average of the
amounts of United States property held
(directly or indirectly) by the CFC as of
the close of each quarter of such taxable
year, over the amount of earnings and
profits described in section 959(c)(1)(A)
with respect to such shareholder, or (2)
such shareholder’s pro rata share of the
applicable earnings of the CFC.Seesec-
tion 956(a). Applicable earnings are de-
fined as the sum of accumulated earnings
and profits (not including deficits) de-
scribed in section 316(a)(1) and current
earnings and profits described in section
316(a)(2), reduced by distributions made
during the year and earnings and profits
described in section 959(c)(1).Seesection
956(b)(1). Under section 956(c), United
States property includes tangible property
located in the United States, stock of a
domestic corporation, an obligation of a
United States person, and any right to use
in the United States certain intangible
property. Enacted as part of the Omnibus
Budget Reconciliation Act of 1993, Pub.
L. No. 103–66, sec. 13232(b), 107 Stat.
312, section 956(e) grants the Secretary of
the Department of Treasury (the “Secre-
tary”) the authority to prescribe “such reg-
ulations as may be necessary to carry out
the purposes of this section, including reg-
ulations to prevent the avoidance of the
provisions of this section through reorga-
nizations or otherwise.”
This regulatory authority is not limited
to the adoption of anti-avoidance rules,
but rather permits the Secretary to ensure
that the application of section 956 is con-
sistent with the “purposes of this sec-
tion”—chief among them, to ensure sym-
metry between the treatment of actual
dividends and payments which are “sub-
stantially the equivalent of a dividend.” S.
Rep. No. 1881 at 88 (1962). Consistent
with this understanding, the Department
of Treasury (the “Treasury Department”)
and the IRS have exercised this regulatory
authority to tailor the application of sec-
tion 956 to the abuse that motivated its
adoption, ensuring that the provision ap-
plies to the transactions Congress sought
to tax, but does not extend to transactions
the taxation of which would be inconsis-
tent with the purpose of section 956.
2
For
example, in 1964, shortly after section
956 was first enacted, the Treasury De-
partment and the IRS issued regulations
containing Treas. Reg. section 1.956–
2(d)(2)(ii), providing that any debt col-
lected within one year from the time in-
curred did not constitute an obligation that
could be United States property.SeeT.D.
6704, 29 Fed. Reg. 2599, 2603. This
short-term loan exception was removed
when the Treasury Department and the
IRS issued regulations in 1988 regarding
the treatment of factoring receivables as
United States property.SeeT.D. 8209, 53
Fed. Reg. 22163, 22169. A one-year debt
exception would have been inconsistent
with Congress’s expansion of section 956
in 1984 to reach factoring receivables,
which are often outstanding for less than
one year.
Alongside the removal of the 1964
short-term loan exception in the 1988 reg-
ulations, the Treasury Department and the
IRS issued Notice 88–108, 1988–2 C.B.
466, which indicated that regulations
would be issuedproviding a narrower
exception from the definition of obliga-
tion for purposes of section 956 for ob-
ligations collected within 30 days from
the time incurred (the “30-day rule”).
However, the notice provided that the
exception would not apply to a CFC that
holds for 60 or more calendar days dur-
ing the taxable year obligations which,
without regard to the 30-day rule, would
constitute United States property. The
30-day rule was expanded to 60 days in
order to facilitate the flow of funds from
foreign subsidiaries during a financial
crisis beginning in 2008, which expan-
sion was also extended to 2009 and
2010.SeeNotice 2008–91, 2008–43
I.R.B. 1001; Notice 2009–10, 2009–5
I.R.B. 419; Notice 2010–12, 2010–4
I.R.B. 326. The 30 day rule was ulti-
mately adopted in final regulations is-
sued on July 12, 2018, as Treas. Reg.
section 1.956–2(d)(2)(iv).SeeT.D.
9834, 83 Fed. Reg. 32524, 32537–38.
Since 1964, Congress has modified
section 956 several times without address-
ing Treasury’s short-term debt exception;
indeed, since then Congress adopted sec-
tion 956(e) as a positive grant of regula-
tory authority in 1993, and explicitly val-
idated the short-term debt exception in its
legislative history.SeeH.R. Rep. 103–111
at 701 (1993) (“The bill is not intended to
change the measurement of U.S. property
that may apply, for example, in the case of
certain short-term obligations, as provided
in IRS Notice 88–108 (1988–2 C.B. 445),
interpreting present law.”).
Conversely, the Treasury Department
and the IRS have at times expanded the
scope of section 956 by regulation to en-
sure that the provision reaches the type of
transactions intended by Congress.See,
e.g., T.D. 9402, 73Fed. Reg. 35580, 35582
(adding rules modifying the basis of prop-
erty transferred to a CFC incertain non-
recognition transactions solely for the
purposes of section 956 and providing
that “[t]he purpose of this [rule] is to
prevent the effective repatriation of
earnings and profits of a controlled for-
eign corporation that acquires United
States property in connection with an
exchange to which this [rule] applies
without a corresponding income inclu-
sion under section 951(a)(1)(B) by
claiming a basis in the United States
property less than the amount of earn-
ings and profits effectively repatri-
ated”).See alsoT.D. 9834, 83 Fed. Reg.
32524.
2
In addition to authorizing regulations by the Treasury Department and the IRS, Congress has acted on occasion to both expand and contract the scope of section 956 based on an evolving
understanding of the potential means by which taxpayers could achieve the abusive results that gave rise to its enactment (that is, the tax-free effective repatriation of earnings through
transactions that are economically equivalent to a taxable dividend). Thus, for example, Congress contracted the scope of section 956 in 1976, exempting investments in the stock of unrelated
(tested using a 25 percent ownership threshold) U.S. corporations from the definition of United States property.SeePub. L. No. 94–455, sec. 1021, 90 Stat. 1520. Conversely, Congress
expanded the scope of section 956 in the Deficit Reduction Act of 1984, Pub. L. No. 98–369, sec. 123(b), 98 Stat. 494, by adding certain factoring receivables as a type of United States
property because it recognized that certain “corporations based in the United States are using foreign subsidiaries to factor receivables as a device for repatriating foreign earnings tax-free.”
H.R. Rep. No. 98–432 at 1305 (1984).
November 19, 2018Bulletin No. 2018–47
778

II.Adoption of Participation Exemption
System
On December 22, 2017, Congress en-
acted the Tax Cuts and Jobs Act, P.L.
115–97 (the “Act”), which established a
participation exemption system for the
taxation of certain foreign income. Under
section 245A(a), in the case of any divi-
dend received from a specified 10-percent
owned foreign corporation by a domestic
corporation which is a U.S. shareholder
with respect to such foreign corporation,
there is allowed as a deduction an amount
equal to the foreign-source portion of such
dividend. A specified 10-percent owned
foreign corporation is defined in section
245A(b) as any foreign corporation (other
than certain passive foreign investment
companies) with respect to which a do-
mestic corporation is a U.S. shareholder.
Section 245A(g) grants the Secretary au-
thority to prescribe such regulations or
other guidance as may be necessary or
appropriate to carry out the provisions of
section 245A, including regulations for
the treatment of U.S. shareholders owning
stock of a specified 10-percent owned for-
eign corporation through a partnership.
Under section 246(c)(1) and (5), a do-
mestic corporation that is a U.S. share-
holder is not permitted a section 245A
deduction in respect of any dividend on
any share of stock of a specified 10-
percent owned foreign corporation that
the domestic corporation holds for 365
days or less during the 731-day period
beginning on the date that is 365 days
before the date on which the share be-
comes ex-dividend with respect to the div-
idend. Under section 246(c)(1)(B), a sec-
tion 245A deduction is also not allowed to
the extent the domestic corporation is un-
der an obligation to make related pay-
ments with respect to positions in substan-
tially similar or related property.
Explanation of Provisions
The Treasury Department and the IRS
have determined that as a result of the
enactment of the participation exemption
system, the current broad application of
section 956 to corporate U.S. shareholders
would be inconsistent with the purposes
of section 956 and the scope of transac-
tions it is intended to address. Congress
determined that certain investments by a
CFC of its earnings in United States prop-
erty are “substantially the equivalent of a
dividend” and enacted section 956 to pro-
vide similar treatment for dividends and
certain investments in United States prop-
erty constituting effective repatriations. S.
Rep. No. 1881 at 88. Before the Act,
section 956 applied appropriately to do-
mestic corporations because both divi-
dends from, and investments in United
States property by, CFCs were included in
income by such domestic corporations. As
noted, the purpose of section 956 is gen-
erally to create symmetry between the
taxation of actual repatriations and the
taxation of effective repatriations, by sub-
jecting effective repatriations to tax in the
same manner as actual repatriations. Un-
der the participation exemption system,
however, earnings of a CFC that are repa-
triated to a corporate U.S. shareholder as a
dividend are typically effectively exempt
from tax because the shareholder is gen-
erally afforded an equal and offsetting
dividends received deduction under sec-
tion 245A. A section 956 inclusion of a
corporate U.S. shareholder, on the other
hand, is not eligible for the dividends re-
ceived deduction under section 245A (be-
cause it is not a dividend). As a result, the
application of section 956 after the Act to
corporate U.S. shareholders of CFCs that
would qualify for section 245A deduc-
tions would result in disparate treatment
of actual dividends and amounts “substan-
tially the equivalent of a dividend”—a
result directly at odds with the manifest
purpose of section 956.
Accordingly, the proposed regulations
continue the Treasury Department and the
IRS’s longstanding practice of conform-
ing the application of section 956 to its
purpose. The proposed regulations ex-
clude corporate U.S. shareholders from
the application of section 956 to the extent
necessary to maintain symmetry between
the taxation of actual repatriations and the
taxation of effective repatriations. In gen-
eral, under section 245A and the proposed
regulations, respectively, neither an actual
dividend to a corporate U.S. shareholder,
nor such a shareholder’s amount deter-
mined under section 956, will result in
additional U.S. tax.
To achieve this result, the proposed
regulations provide that the amount other-
wise determined under section 956 with
respect to a U.S. shareholder for a taxable
year of a CFC is reduced to the extent that
the U.S. shareholder would be allowed a
deduction under section 245A if the U.S.
shareholder had received a distribution
from the CFC in an amount equal to the
amount otherwise determined under sec-
tion 956. The proposed regulations pro-
vide special rules with respect to indirect
ownership. Due to the broad applicability
of section 245A, in many cases a corpo-
rate U.S. shareholder will not have a sec-
tion 956 inclusion as a result of a CFC
holding U.S. property under the proposed
regulations.
Section 956 will continue to apply
without modification to U.S. shareholders
other than corporate U.S. shareholders,
such as individuals, to ensure that, consis-
tent with the purposes of section 956,
amounts that are substantially the equiva-
lent of a dividend will be treated similarly
to actual dividends. This treatment will
apply to individuals regardless of whether
they make an election under section 962.
Because individuals are not eligible for a
dividends received deduction under sec-
tion 245A even if they make an election
under section 962, the current application
of section 956 to individuals is still nec-
essary to ensure substantial equivalence
between an actual repatriation and a
deemed repatriation. Similarly, section
956 will continue to apply without reduc-
tion to regulated investment companies
and real estate investment trusts because
they are not allowed the dividends re-
ceived deduction under section 245A.See
sections 852(b)(2)(C) and 857(b)(2)(A).
In addition to carrying out the purposes
of section 956, the proposed regulations
would significantly reduce complexity,
costs, and compliance burdens for corpo-
rate U.S. shareholders of CFCs. Absent
the proposed regulations, corporate U.S.
shareholders would need to continue to
carefully monitor the application of sec-
tion 956 to their operations, including pro-
visions related to loans, guarantees, and
pledges, to ensure that earnings were re-
patriated only through actual dividends,
and therefore allowed a participation ex-
emption, rather than through a deemed
repatriation under section 956 subject to
additional U.S. tax. Similarly, in the ab-
sence of the proposed regulations, a U.S.-
parented group in many cases would need
Bulletin No. 2018–47November 19, 2018
779

to engage in complex and costly restruc-
turing upon the acquisition of a foreign
corporation that owns domestic subsidiar-
ies (since the foreign corporation becomes
a CFC and the stock of its domestic sub-
sidiaries represents United States prop-
erty) solely to avoid a section 956 inclu-
sion. Absent the proposed regulations,
section 956 could also serve as a “trap for
the unwary” for domestic corporations
that fail to recognize that, even though
they are entitled to the deduction under
section 245A for actual dividends, their
section 956 inclusions would continue to
be fully subject to U.S. tax.
The proposed regulations also add, in
proposed § 1.956–1(g)(5), the effective
date for § 1.956–1(e)(6) that was inadver-
tently deleted in TD 9792, published in
theFederal Registeron November 3,
2016 (81 FR 76497, as corrected at 81 FR
95470 and 95471).
Conforming Amendments
The Treasury Department and the IRS
intend to make conforming amendments
to the examples throughout the regula-
tions under section 956 upon finalization
of the proposed regulations.
Applicability Date
These changes are proposed to apply to
taxable years of a CFC beginning on or
after the date of publication of the Trea-
sury decision adopting these rules as final
regulations in theFederal Register(the
“finalization date”), and to taxable years
of a U.S. shareholder in which or with
which such taxable years of the CFC end.
With respect to taxable years of a CFC
beginning before the finalization date, a
taxpayer may rely on the proposed regu-
lations for taxable years of a CFC begin-
ning after December 31, 2017, and for
taxable years of a U.S. shareholder in
which or with which such taxable years of
the CFC end, provided that the taxpayer
and United States persons that are related
(within the meaning of section 267 or
707) to the taxpayer consistently apply the
proposed regulations with respect to all
CFCs in which they are U.S. shareholders.
Special Analyses
The Administrator of the Office of In-
formation and Regulatory Affairs (OIRA),
Office of Management and Budget, has
waived review ofthis proposed rule in ac-
cordance with section 6(a)(3)(A) of Execu-
tive Order 12866. OIRA will subsequently
make a significance determination of the
final rule, pursuant to section 3(f) of Exec-
utive Order (E.O.) 12866 and the April 11,
2018, Memorandum of Agreement between
the Department of Treasury and the Office
of Management and Budget (OMB).
Pursuant to the Regulatory Flexibility
Act (5 U.S.C. chapter 6), it is hereby
certified that this regulation, if adopted,
will not have a significant economic im-
pact on a substantial number of small en-
tities, although some small entities that are
domestic corporations could be affected
by the regulation and comments are re-
quested on the application of the regula-
tion to domestic partnerships. However,
even if a substantial number of small en-
tities were to be affected by this regula-
tion, the Treasury Department and the IRS
estimate that the economic impact on such
small entities would not besignificant as
the regulation is expected to marginally re-
duce compliance costs for smaller entities.
This is because the Treasury Department
and the IRS believe that the cost-saving
benefits of the proposed regulations with
respect to complex third-party borrowing
arrangements, internal financial manage-
ment structures, and restructurings of world-
wide operations will generally be available
only to large U.S. multinational corpora-
tions with 20 or more CFCs. The Treasury
Department and the IRS believe that U.S.
multinational corporations with less than 20
CFCs generally will not have the types of
arrangements in place that would otherwise
need to be structured and monitored to
avoid section 956. The proposed regula-
tions, if adopted, generally will not affect
small entities that are not domestic corpora-
tions. The Treasury Department and the IRS
invite comments on the impact of this rule
on small entities.
Pursuant to section 7805(f), this notice of
proposed rulemaking has been submitted to
the Chief Counsel for Advocacy of the
Small Business Administration for com-
ment on its impact on small businesses.
Comments and Requests for Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any comments that are
submitted timely to the IRS as prescribed
in this preamble under the “Addresses”
heading. The Treasury Department and
the IRS request comments on all aspects
of the proposed rules. In particular, com-
ments are requested as to the appropriate
application of the proposed regulations to
U.S. shareholders that are domestic part-
nerships, which may have partners that are
a combination of domestic corporations,
U.S. individuals, or other persons. For ex-
ample, one approach could be to reduce
the amount otherwise determined under
section 956 with respect to a domestic
partnership to the extent that a domestic
corporate partner would be entitled to a
section 245A deduction if the partnership
received the amount as a distribution. An
alternative could be to determine a domes-
tic partnership’s section 956 amount and
section 956 inclusion without regard to
the status of its partners, but then provide
that a corporate U.S. shareholder partner’s
distributive share of the section 956 inclu-
sion is not taxable. Comments are also
requested with respect to the maintenance
of previously taxed earnings and profits
accounts under section 959 and basis ad-
justments under section 961. Additionally,
comments are requested on the interaction
between the proposed regulations and sec-
tion 245A(e). All comments will be avail-
able at http://www.regulations.gov or
upon request.
A public hearing will be scheduled if
requested in writing by any person that
timely submits written comments. If a
public hearing is scheduled, notice of the
date, time, and place for the public hear-
ing will be published in theFederal Reg-
ister.
Drafting Information
The principal author of these proposed
regulations is Joshua G. Rabon, formerly
of the Office of Associate Chief Counsel
(International). However, other personnel
from the Treasury Department and the
IRS participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
November 19, 2018Bulletin No. 2018–47
780

Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is pro-
posed to be amended as follows:
PART 1–INCOME TAXES
Paragraph 1. The authority citation for
part 1 is amended by adding an entry to
read in part as follows:
Authority: 26 U.S.C. 7805***
Section 1.956–1 also issued under 26
U.S.C. 245A(g) and 956(e).
*****
Par. 2. Section 1.956–1 is amended by:
1. Revising paragraph (a).
2. In the first sentence of paragraph
(g)(1), removing the language
“Paragraph (a)” and adding in its
place “Paragraph (a)(1)”.
3. Adding paragraphs (g)(4) and (5).
The revisions and additions read as fol-
lows:
§ 1.956–1 Shareholder’s pro rata share
of the average of the amounts of United
States property held by a controlled
foreign corporation.
(a)Overview and scope–(1)In general.
Subject to the provisions of section 951(a)
and the regulations thereunder, a United
States shareholder of a controlled foreign
corporation is required to include in gross
income the amount determined under sec-
tion 956 with respect to the shareholder
for the taxable year but only to the extent
not excluded from gross income under
section 959(a)(2) and the regulations
thereunder.
(2)Reduction for certain United States
shareholders–(i)In general. For a taxable
year of a controlled foreign corporation,
the amount determined under section 956
with respect to each share of stock of the
controlled foreign corporation owned
(within the meaning of section 958(a)) by
a United States shareholder is the amount
that would be determined under section
956 with respect to such share for the
taxable year, absent the application of this
paragraph (a)(2) for the taxable year (such
amount, thetentative section 956 amount,
and in the aggregate with respect to all
shares owned (within the meaning of sec-
tion 958(a)) by the United States share-
holder, theaggregate tentative section
956 amount), reduced by the amount of
the deduction under section 245A that the
shareholder would be allowed if the share-
holder received as a distribution from the
controlled foreign corporation an amount
equal to the tentative section 956 amount
with respect to such share on the last day
during the taxable year on which the for-
eign corporation is a controlled foreign
corporation (hypothetical distribution).
(ii)Determination of the amount of the
deduction that would be allowed under
section 245A with respect to a hypotheti-
cal distribution. For purposes of determin-
ing the amount of the deduction under
section 245A that a United States share-
holder would be allowed with respect to a
share of stock of a controlled foreign cor-
poration by reason of a hypothetical dis-
tribution, the following rules apply–
(A) If a United States shareholder owns
a share of stock of a controlled foreign
corporation indirectly (within the meaning
of section 958(a)(2)), then–
(1) Sections 245A(a) through (d),
246(a), and 959 apply to the hypothetical
distribution as if the United States share-
holder directly owned (within the mean-
ing of section 958(a)(1)(A)) the share;
(2) Section 245A(e) applies to the hy-
pothetical distribution as if the distribu-
tion were made to the United States share-
holder through each entity by reason of
which the United States shareholder indi-
rectly owns such share and pro rata with
respect to the equity that gives rise to such
indirect ownership;
(3) To the extent that a distribution
treated as made to a controlled foreign
corporation pursuant to the hypothetical
distribution by reason of paragraph
(a)(2)(ii)(A)(2) of this section would be
subject to section 245A(e)(2), the United
States shareholder is treated as not being
allowed a deduction under section 245A
by reason of the hypothetical distribution;
and
(4) Section 246(c) applies to the hypo-
thetical distribution by substituting the
phrase “owned (within the meaning of
section 958(a))” for the term “held” each
place it appears in section 246(c); and
(B) Section 246(c) applies to the hypo-
thetical distribution by substituting “the
last day during the taxable year on which
the foreign corporation is a controlled for-
eign corporation” for the phrase “the date
on which such share becomes ex-dividend
with respect to such dividend” in section
246(c)(1)(A).
(3)Examples. The following examples
illustrate the application of paragraph
(a)(2) of this section.
(i)Example 1. (A)Facts.(1) USP, a domestic
corporation, owns all of the single class of stock of
CFC1, which is treated as equity for U.S. income tax
purposes and under the laws of thejurisdiction in
which CFC1 is organized and liable to tax as a resident.
The stock of CFC1 consists of 100 shares, and USP
satisfies the holding period requirement of section
246(c) (as modified by paragraph (a)(2)(ii)(B) of this
section) with respect to each share of CFC1 stock.
CFC1 owns all of the stock of USS, a domestic corpo-
ration. CFC1’s adjusted basis in the stock of USS is
$0x.
(2) The functional currency of CFC1 is the U.S.
dollar. CFC1 has $100x of undistributed earnings as
defined in section 245A(c)(2), $90x of which con-
stitute undistributed foreign earnings as defined in
section 245A(c)(3), and $10x of which are described
in section 245(a)(5)(B) (that is, earnings attributable
to a dividend that CFC1 received from USS). CFC1
would not receive a deduction or other tax benefit
with respect to any income, war profits, or excess
profits taxes on a distribution. None of the earnings
and profits of CFC1 are described in section
959(c)(1) or (2) or are earnings and profits attribut-
able to income excluded from subpart F income
under section 952(b). CFC1’s applicable earnings (as
defined in section 956(b)(1)) are $100x. CFC1 also
has held an obligation of USP with an adjusted basis
of $120x on every day during the taxable year that
was acquired while all of its stock was owned by
USP.
(B)Analysis. Because USP directly owns all of
the stock of CFC1 at the end of CFC1’s taxable year,
USP’s aggregate tentative section 956 amount with
respect to CFC1 is $100x, the lesser of USP’s pro
rata share of the average amounts of United States
property held by CFC1 ($120x) and its pro rata share
of CFC1’s applicable earnings ($100x). Under para-
graph (a)(2)(i) of this section, USP’s section 956
amount with respect to CFC1 is its aggregate tenta-
tive section 956 amount with respect to CFC1 re-
duced by the deduction under section 245A that USP
would be allowed if USP received an amount equal
to its aggregate tentative section 956 amount as a
distribution with respect to the CFC1 stock. With
respect to the tentative distribution from CFC1 to
USP, USP would be allowed a $90x deduction under
section 245A with respect to the foreign-source por-
tion of the $100x hypothetical distribution (that is, an
amount of the dividend that bears the same ratio to
the dividend as the $90x of undistributed foreign
earnings bears to the $100x of undistributed earn-
ings). Accordingly, USP’s section 956 amount with
respect to CFC1 is $10x, its aggregate tentative
section 956 amount ($100x) with respect to CFC1
reduced by the amount of the deduction that USP
would have been allowed under section 245A with
respect to the hypothetical distribution ($90x).
(ii)Example 2. (A)Facts. The facts are the same
as in paragraph (A) ofExample 1in paragraph
(a)(3)(i) of this section, except that all $100x of
Bulletin No. 2018–47November 19, 2018
781

CFC1’s undistributed earnings are described in sec-
tion 959(c)(2).
(B)Analysis. As in paragraph (B) ofExample 1
in this paragraph (a)(3)(i) of this section, USP’s
aggregate tentative section 956 amount with respect
to CFC1 is $100x, the lesser of USP’s pro rata share
of the average amounts of United States property
held by CFC1 ($120x) and its pro rata share of
CFC1’s applicable earnings ($100x). However, para-
graph (a)(2) of this section does not reduce USP’s
section 956 amount, because USP would not be
allowed any deduction under section 245A with re-
spect to the $100x hypothetical distribution by rea-
son of section 959(a) and (d). Accordingly, USP’s
section 956 amount is $100x. However, under sec-
tions 959(a)(2) and 959(f)(1), USP’s inclusion under
section 951(a)(1)(B) with respect to CFC1 is $0,
because USP’s section 956 amount with respect to
CFC1 does not exceed the earnings and profits of
CFC1 described in section 959(c)(2) with respect to
USP. The $100x of earnings and profits of CFC1
described in section 959(c)(2) are reclassified as
earnings and profits described in section 959(c)(1).
(iii)Example 3. (A)Facts.(1) USP, a domestic
corporation, owns all of the single class of stock of
CFC1, and has held such stock for five years. CFC1
has held 70% of the single class of stock of CFC2 for
three years. The other 30% of the CFC2 stock has
been held by a foreign individual unrelated to USP
or CFC1 since CFC2’s formation. All of the stock of
each of CFC1 and CFC2 is treated as equity for U.S.
income tax purposes and under the laws of the ju-
risdiction in which each respective corporation is
organized and liable to tax as a resident. CFC2 has a
calendar taxable year. On December 1, Year 1,
CFC1 acquires the remaining 30% of the stock of
CFC2 for cash. On June 30, Year 2, CFC1 sells to a
third party the 30% of CFC2 stock acquired in Year
1 at no gain. CFC2 made no distributions during
Year 1.
(2)The functional currency of CFC1 and CFC2
is the U.S. dollar. CFC2 has $120x of undistributed
earnings as defined in section 245A(c)(2), all of
which constitute undistributed foreign earnings. Nei-
ther CFC1 nor CFC2 would receive a deduction or
other tax benefit with respect to any income, war
profits, or excess profits taxes on a distribution. None
of the earnings and profits of CFC2 are described in
section 959(c)(1) or (2) or are earnings and profits
attributable to income excluded from subpart F in-
come under section 952(b). CFC2’s applicable earn-
ings (as defined in section 956(b)(1)) are $120x.
CFC2 has held an obligation of USP with an ad-
justed basis of $100x on every day of Year 1 that
was acquired while USP owned all of the stock of
CFC1 and CFC1 held 70% of the single class of
stock of CFC2.
(B)Analysis. Because USP indirectly owns
(within the meaning of section 958(a)) all of the
stock of CFC2 at the end of Year 1, USP’s aggregate
tentative section 956 amount with respect to CFC2
for Year 1 is $100x, the lesser of USP’s pro rata
share of the average amounts of United States prop-
erty held by CFC2 ($100x) and its pro rata share of
CFC2’s applicable earnings ($120x). Under para-
graph (a)(2)(i) of this section, USP’s section 956
amount with respect to CFC2 for Year 1 is its ag-
gregate tentative section 956 amount with respect to
CFC2 reduced by the deduction under section 245A
that USP would be allowed if USP received an
amount equal to its aggregate tentative section 956
amount as a distribution with respect to the CFC2
stock that USP owns indirectly within the meaning
of section 958(a)(2). For purposes of determining the
consequences of this hypothetical distribution, under
paragraph (a)(2)(ii)(A)(1) of this section, USP is
treated as owning the CFC2 stock directly. In addi-
tion, under paragraph (a)(2)(ii)(A)(4) of this section,
the holding period requirement of section 246(c) is
applied by reference to the period during which USP
owned (within the meaning of section 958(a)) the
stock of CFC2. Therefore, with respect to the hypo-
thetical distribution from CFC2 to USP, USP would
satisfy the holding period requirement under section
246(c) with respect to the 70% of the CFC2 stock
that USP indirectly owned for three years through
CFC1, but not with respect to the 30% of the CFC2
stock that USP indirectly owned through CFC1 for a
period of less than 365 days. Accordingly, USP’s
section 956 amount with respect to CFC2 for Year 1
is $30x, its aggregate tentative section 956 amount
($100x) reduced by the amount of the deduction that
USP would have been allowed under section 245A
with respect to the hypothetical distribution ($70x).
*****
(g)***
(4) Paragraphs (a)(2) and (3) of this
section apply to taxable years of con-
trolled foreign corporations beginning on
or after the date of publication of the
Treasury decision adopting paragraphs
(a)(2) and (3) of this section as final reg-
ulations in theFederal Register, and to
taxable years of a United States share-
holder in which or with which such tax-
able years of the controlled foreign corpo-
ration end.
(5) Paragraph (e)(6) of this section ap-
plies to property acquired in exchanges
occurring on or after June 24, 2011.
Kirsten Wielobob
Deputy Commissioner for Services and
Enforcement.
(Filed by the Office of the Federal Register on November 1,
2018, 4:15 p.m., and published in the issue of the Federal
Register for November 5, 2018, 83 F.R. 55324)
November 19, 2018Bulletin No. 2018–47
782

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarifiedis used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Supersededdescribes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a pe-
riod of time in separate rulings. If the new
ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example,modifiedand
supersededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current
use and formerly used will appear in ma-
terial published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE
—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.
Bulletin No. 2018–47November 19, 2018
i

Numerical Finding List
1
Bulletin 2018–27 through 2018–47
Announcements:
2018-09, 2018-28 I.R.B.206
2018-12, 2018-30 I.R.B.232
2018-13, 2018-43 I.R.B.232
2018-14, 2018-46 I.R.B.773
Notices:
2018-48, 2018-28 I.R.B.9
2018-56, 2018-27 I.R.B.3
2018-58, 2018-33 I.R.B.305
2018-59, 2018-28 I.R.B.196
2018-60, 2018-31 I.R.B.275
2018-61, 2018-31 I.R.B.278
2018-62, 2018-34 I.R.B.316
2018-63, 2018-34 I.R.B.318
2018-64, 2018-35 I.R.B.347
2018-65, 2018-35 I.R.B.350
2018-67, 2018-36 I.R.B.409
2018-68, 2018-36 I.R.B.418
2018-69, 2018-37 I.R.B.426
2018-70, 2018-38 I.R.B.441
2018-71, 2018-41 I.R.B.548
2018-72, 2018-40 I.R.B.522
2018-73, 2018-40 I.R.B.526
2018-74, 2018-40 I.R.B.529
2018-75, 2018-41 I.R.B.556
2018-76, 2018-42 I.R.B.599
2018-77, 2018-42 I.R.B.601
2018-78, 2018-42 I.R.B.604
2018-79, 2018-42 I.R.B.606
2018-80, 2018-42 I.R.B.609
2018-81, 2018-43 I.R.B.666
2018-82, 2018-44 I.R.B.718
2018-83, 2018-47 I.R.B.774
2018-84, 2018-45 I.R.B.768
Proposed Regulations:
REG-130244-17, 2018-41 I.R.B.593
REG-103474-18, 2018-32 I.R.B.284
REG-104390-18, 2018-43 I.R.B.671
REG-104397-18, 2018-41 I.R.B.560
REG-104872-18, 2018-44 I.R.B.762
REG-106977-18, 2018-27 I.R.B.6
REG-107892-18, 2018-35 I.R.B.353
REG-112176-18, 2018-37 I.R.B.430
REG-114540-18, 2018-47 I.R.B.777
Revenue Procedures:
2018-35, 2018-28 I.R.B.204
2018-36, 2018-38 I.R.B.442
2018-37, 2018-29 I.R.B.210
2018-38, 2018-31 I.R.B.280
2018-39, 2018-34 I.R.B.319
Revenue Procedures:—Continued
2018-40, 2018-34 I.R.B.320
2018-42, 2018-36 I.R.B.424
2018-43, 2018-36 I.R.B.425
2018-44, 2018-37 I.R.B.426
2018-45, 2018-37 I.R.B.428
2018-46, 2018-39 I.R.B.460
2018-47, 2018-39 I.R.B.518
2018-48, 2018-40 I.R.B.521
2018-49, 2018-41 I.R.B.548
2018-50, 2018-42 I.R.B.610
2018-51, 2018-44 I.R.B.721
2018-52, 2018-42 I.R.B.611
2018-53, 2018-43 I.R.B.667
2018-54, 2018-45 I.R.B.769
2018-55, 2018-47 I.R.B.775
Revenue Rulings:
2018-19, 2018-27 I.R.B.1
2018-20, 2018-28 I.R.B.8
2018-21, 2018-32 I.R.B.282
2018-22, 2018-34 I.R.B.308
2018-23, 2018-36 I.R.B.405
2018-24, 2018-36 I.R.B.407
2018-25, 2018-39 I.R.B.445
2018-26, 2018-40 I.R.B.520
2018-27, 2018-41 I.R.B.546
2018-28, 2018-45 I.R.B.764
2018-29, 2018-45 I.R.B.765
Treasury Decisions:
9834, 2018-31 I.R.B.233
9835, 2018-33 I.R.B.288
9836, 2018-33 I.R.B.291
9838, 2018-34 I.R.B.309
9839, 2018-35 I.R.B.325
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2018–01 through 2018–26 is in Internal Revenue Bulletin
2018–26, dated June 27, 2018.
November 19, 2018Bulletin No. 2018–47
ii

Finding List of Current Actions on
Previously Published Items
1
Bulletin 2018–27 through 2018–47
Notices:
2014-5
Modified by
Notice 2018-69, 2018-37 I.R.B.426
2015-28
Modified by
Notice 2018-69, 2018-37 I.R.B.426
2016-57
Modified by
Notice 2018-69, 2018-37 I.R.B.426
2017-45
Modified by
Notice 2018-69, 2018-37 I.R.B.426
Revenue Procedures:
2015-27
Amplified by
Rev. Proc. 2018-39, 2018-34 I.R.B.319
2017-24
Amplified by
Rev. Proc. 2018-39, 2018-34 I.R.B.319
2018-31
Modified by
Rev. Proc. 2018-44, 2018-37 I.R.B.426
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2018–01 through 2018–26 is in Internal Revenue Bulletin
2018–26, dated June 27, 2018.
Bulletin No. 2018–47November 19, 2018
iii

INTERNAL REVENUE BULLETIN
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