Extraordinary Considerations: the 245A DRD regulations

Doug McHoney (PwC's US International Tax Services (ITS) Leader) and Aaron Junge (ITS Partner in PwC's Washington National Tax Services practice) discuss the recently-released final and proposed dividends received deduction (DRD) regulations under Section 245A. Doug and Aaron discuss: Aaron's background as Tax Counsel for the Committee on Ways and Means in the US House of Representatives and how this experience proves valuable in the private sector; the background and architecture of Section 245A; important topics included in the final and proposed DRD regulations including hybrid dividends, extraordinary dispositions (ED), and extraordinary reductions (ER); topics not fully contemplated in the final and proposed regulations, including certain mechanical rules of the DRD; how the ED rules interplay with the global intangible low-taxed income (GILTI) and Section 965 'toll charge' rules; notable changes from the 2019 temporary DRD regulations to the 2020 final DRD regulations, including changes to the treatment of sales of intellectual property (IP) and mitigating the circumstances in which the DRD rules produce double-taxation; what an ER is and how the final regulations clarify the year-end close election; and major takeaways from the proposed regulations, including coordination of the ED rules and application of the disqualified basis rules.