The IRS has issued Notice 2018-13 describing additional regulations that it intends to issue for determining amounts included in gross income by a U.S. shareholder under Section 951(a)(1) as a result of Section 965 (enacted as part of the Tax Cuts and Jobs Act) that imposes a transition tax, including rules addressing the calculation of earnings under the tax. Notice 2018-13 also describes a modification to regulations described in Notice 2018-7 (see our prior coverage here) regarding the repatriation of earnings subject to the transition tax and provides guidance under Sections 863 and 6038 in connection with the repeal of Section 958(b)(4). (Section references are to the Internal Revenue Code of 1986, as amended.)

IRS Rules on Whether Foreign Currency Arrangement Constitutes Insurance
The IRS issued Chief Counsel Advice 201802014, in which it found that an arrangement between affiliated operating entities and a captive insurance affiliate concerning fluctuation in value of specified foreign currencies was not insurance for federal income tax purposes where, although an economic risk of loss arising from fluctuation could be an insurable risk, certain terms of arrangement did not comport with a commonly accepted sense of insurance.

IRS Suspends Exams on Stock-based Compensation as Intangible Development Costs
The IRS’s Large Business & International (LB&I) division has issued a directive to its examiners to stop opening issues related to stock-based compensation (SBC) included in cost-sharing arrangements’ (CSA) intangible development costs until the Ninth Circuit issues an opinion in Altera. In Altera Corp. v. Comm’r, 145 T.C. 91 (2015), the Tax Court invalidated Treasury’s final cost-sharing regulations (T.D. 9088), which require taxpayers to include SBC when determining operating expenses under a qualified CSA. (See our prior coverage of Altera here.)

US Tax Court Upholds Regulation on US Property as Part of CFC Income Calculation
The U.S. Tax Court, in SIH Partners, LLLP (2018) 150 T.C. No. 3, upheld the validity of Treasury Regulation Section 1.956-2(c)(1), which provides that any obligation of a U.S. person with respect to which a controlled foreign corporation (CFC) is a pledgor or guarantor is considered to be U.S. property held by the CFC. The court also upheld the finding in an earlier case that amounts included in income under the regulation are not qualified dividends.

NYSBA Tax Section Submits Report on Proposed Registered Form Regulations
The New York State Bar Association Tax Section has submitted comments on the recently proposed regulations on the definitions of registration-required obligation and registered form, including guidance on the issuance of pass-through certificates and participation interests in registered form.

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