Notice 2014-31 - IRS extends treatment of income from government bonds under PFIC rules 

April 24:  The IRS today released an advance copy of Notice 2014-31 that extends application of Notice 2012-45 to tax years of foreign corporations beginning in 2014, 2015, and 2016.

Read Notice 2014-31 [PDF 11 KB].


Notice 2012-45 provided that in certain instances, income from “qualifying government bonds” held by an “active bank” qualifies for the active banking exception.

Specifically, Notice 2012-45 provided:

  • Certain foreign corporations that are active foreign banks, not otherwise passive foreign investment companies (PFICs), may become PFICs as a result of their increased holdings of certain government bonds.
  • For purposes of determining whether certain foreign corporations are PFICs for tax years beginning in 2011, 2012, and 2013 under the passive income test of section 1297(a), the income from “qualifying government bonds” held by an “active bank” may qualify for the active banking exception from passive income in section 1297(b)(2)(A).

The IRS provided definitions of “active bank” and “qualifying government bonds” in Notice 2012-45.

Read TaxNewsFlash-United States [PDF 33 KB] (June 28, 2012).

Notice 2014-31

Today’s notice provides that for tax years 2014, 2015, and 2016, and solely for purposes of section 1297, income from “qualifying government bonds” held by an “active bank” qualifies for the active banking exception, as those terms are defined in Notice 2012-45.

©2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

The KPMG logo and name are trademarks of KPMG International.

KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.

The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Direct comments, including requests for subscriptions, to
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.

Share this

Share this


Current and future KPMG clients may subscribe to TaxNewsFlash email alerts.

Email your contact information.

TaxNewsFlash-United States by year