Proposed regulations on transition tax for foreign earnings (Notice 2018 – 26) include rules intended to prevent the avoidance of section 965, rules and procedures relating to certain special elections under section 965, and guidance on the reporting and payment of the transition tax. The notice also provides relief to taxpayers from certain estimated tax requirements and penalties arising from the enactment of the transition tax and the change to existing stock attribution rules in the new law.

Notice 2018-29 provides guidance regarding the withholding on the transfer of non-publicly traded partnership interests. The new law treats a foreign taxpayer’s gain or loss on the sale or exchange of a partnership interest as effectively connected with the conduct of a trade or business in the United States to the extent that gain or loss would be treated as effectively connected with the conduct of a trade or business in the United States if the partnership sold all of its assets.  The new law also imposes a withholding tax on the disposition of a partnership interest by a foreign taxpayer.

Notice 2018 - 28 addresses computing the business interest expense limitation the law. In general, newly amended section 163(j) of the Internal Revenue Code imposes a limitation on deductions for business interest incurred by certain large businesses. For most large businesses, business interest expense is limited to any business interest income plus 30 percent of the business’ adjusted taxable income.