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apply to events occurring on or after Jan. provisions of the proposed regulations, and outbound-loss-event rules of Regs.
6, 2017. provided that the taxpayer and its re- Sec. 1.987-12. Practitioners generally
Taxpayers may rely on the provisions lated parties consistently follow those view a reasonable method as includ-
of Notice 2022-34 before amendments proposed regulations in their entirety. ing (1) the methodology provided in
to the final regulations are issued. Additionally, taxpayers may rely on Prop. the 1991 proposed regulations, (2) the
Taxpayers may also choose to apply Regs. Secs. 1.987-7 (Sec. 987 aggregate “earnings only” methodology, or (3)
the 2016 final regulations, the related partnerships) and 1.988-2(b)(16) (defer- early adoption of the 2016 final regula-
temporary regulations (until they were ral of loss on certain related-party debt tions. Such Sec. 987 gain or loss can af-
revoked on May 13, 2019, or expired instruments), provided that the taxpayer fect taxable income or global intangible
on Dec. 6, 2019, as applicable), and the (and its related parties) consistently low-taxed income under Sec. 951A,
related 2019 final regulations (beginning follow each section of those proposed each of which in turn may affect many
on May 13, 2019) to tax years begin- regulations on which it relies. other current income tax provisions.
ning after Dec. 7, 2016, and before Dec. From Doug Chestnut, CPA, Wash-
7, 2023, provided the taxpayer and its Implications ington, D.C.; Menna Eltaki, J.D., Chi-
related parties consistently apply those The deferral was expected and is help- cago; Lee Holt, CPA, New York City;
regulations to those tax years. ful because it gives taxpayers time to Tim Kerr, CPA, J.D., Chicago; Ravi
Although the temporary regulations create and implement the complex Manne, J.D., Charlotte, N.C.; and Tim
have expired, the notice indicates that systems and processes necessary to Wichman, CPA, Chicago
taxpayers can rely on certain provisions transition to the 2016 final regulations.
of the proposed regulations, which Notice 2022-34 does not mention that
cross-reference the temporary regula- the IRS is considering changes to these Legislation
tions, provided the taxpayer and its regulations to simplify the rules (al-
related parties consistently follow the though it has been mentioned in prior The Inflation Reduction Act’s
proposed regulations in their entirety deferral notices). energy- and climate-related
and apply the 2016 final regulations and Until the final regulations are effec- tax provisions
the related 2019 final regulations for the tive, taxpayers must compute Sec. 987 The Inflation Reduction Act of 2022,
same tax year. A taxpayer may rely on gain or loss under a reasonable method P.L. 117-169, represents a monumental
the annual deemed termination election and must also apply the deferral-event and unprecedented investment in the
adoption and expansion of renewable and
alternative energy sources. The legislation
provides $369 billion to (1) incentivize
and accelerate the buildout of renew-
able energy; (2) advance the adoption
of electric vehicle technologies; and (3)
improve the energy efficiency of buildings
and communities.
Before discussing these changes
and their implications for taxpayers in
more detail, a high-level summary may
be helpful.
Broad overview
With respect to energy transition and
renewable energy, the Inflation Reduc-
PHOTO BY PGIAM/GETTY IMAGES ■ Includes a two-tiered credit struc-
tion Act:
ture for many of the applicable tax
credits, under which there is a base
amount, which can be increased to
a bonus amount, so long as require-

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