Legal Alert: Rev. Proc. 2021-26 provides accounting method change procedures for CFCs seeking to use the alternative depreciation system
Posted on May 26, 2021 in Legal Alerts, Tax Accounting
Recently released Revenue Procedure 2021-26 (the Revenue Procedure) provides taxpayers with guidance regarding accounting method changes made on behalf of foreign corporations. The Revenue Procedure:
- Allows controlled foreign corporations (CFCs) to obtain automatic consent to change depreciation methods to use the alternative depreciation system under section 168(g) (ADS) (or to change the convention or recovery period under ADS) for purposes of calculating taxable income and earnings and profits (E&P).
- Updates the rules for the computation of section 481(a) adjustments resulting from method changes made by CFCs to take into account the new global intangible low-taxed income (GILTI) regime.
- Clarifies the “150 percent rule” that limits audit protection for CFCs and certain other foreign corporations (10/50 corporations) that have a 10% United States shareholder (US shareholder) based on the amount of foreign taxes deemed paid by US shareholders with respect to such corporations.