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].

Background

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.




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