Page 217 - Large Business IRS Training Guides

Interaction of IRC § 163(j) with the Base

Erosion Anti-Abuse Tax (BEAT)

• § 59A covers a new minimum tax amount (added to

regular income tax liability) imposed on “applicable

taxpayers” that make certain “base erosion payments”

to foreign related parties

• Under § 59A(c)(3), if the § 163(j) limitation applies, the

reduction in the amount of interest is allocable first to

interest paid or accrued to unrelated parties with

respect to the taxpayer, and then pro rata to related

domestic and foreign parties.

• The effect of this provision is to maximize the amount

of related party interest expense to be treated as a

base erosion tax benefit and potentially be subject to

the BEAT minimum tax.

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