[Federal Register Volume 89, Number 161 (Tuesday, August 20, 2024)] [Proposed Rules] [Pages 67336-67341] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2024-18281] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [REG-111629-23] RIN 1545-BM80 Guidance Regarding Elections Relating to Foreign Currency Gains and Losses AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemaking; partial withdrawal of proposed rulemaking. ----------------------------------------------------------------------- SUMMARY: This document contains proposed regulations regarding the time for making and revoking certain elections relating to foreign currency gain or loss. DATES: Written or electronic comments and requests for a public hearing must be received by October 18, 2024. As of August 20, 2024, proposed Sec. 1.954-2(g)(3)(iii) and (g)(4)(iii) and proposed Sec. 1.988-7(c) through (e), contained in the notice of proposed rulemaking published in the Federal Register of December 19, 2017 (82 FR 60135), are withdrawn. ADDRESSES: Commenters are strongly encouraged to submit public comments electronically via the Federal eRulemaking Portal at www.regulations.gov (indicate IRS and REG-111629-23) by following the online instructions for submitting comments. Once submitted to the Federal eRulemaking Portal, comments cannot be edited or withdrawn. The Department of the Treasury (``Treasury Department'') and the IRS will publish for public availability any comments submitted to the IRS's public docket. Send hard copy submissions to: CC:PA:01:PR (REG-111629- 23), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. FOR FURTHER INFORMATION CONTACT: Concerning proposed Sec. 1.954- 2(g)(3)(ii) and (iii) and (g)(4)(iii), Edward Tracy at (202) 317-6934; concerning proposed Sec. 1.988-7(c) and (d), Shane Ward at (202) 317- 6938; concerning submissions of comments or requests for a public hearing, Vivian Hayes at (202) 317-6901 (not toll free numbers) or [email protected]. SUPPLEMENTARY INFORMATION: Background I. Elections Under Sec. 1.954-2(g) In general, section 954(c)(1)(D) of the Internal Revenue Code and Sec. 1.954-2(g) provide that foreign personal holding company income (``FPHCI'') includes the excess of foreign currency gains over foreign currency losses attributable to any section 988 transactions. Under Sec. 1.954-2(g)(3) and (4), two different elections are available to United States shareholders (``U.S. shareholders'') that are controlling United States shareholders (``controlling U.S. shareholders'') of a controlled foreign corporation (``CFC'') with respect to the CFC's computation of its FPHCI. First, under Sec. 1.954-2(g)(3), controlling U.S. shareholders may elect to exclude foreign currency gain or loss otherwise includible in the CFC's FPHCI computation under Sec. 1.954- 2(g) and instead include such foreign currency gain or loss in the category (or categories) of subpart F income to which such gain or loss relates (the ``Sec. 1.954-2(g)(3) election''). Second, Sec. 1.954- 2(g)(4) provides that controlling U.S. shareholders may elect to treat as FPHCI all foreign currency gains or losses attributable to any section 988 transaction (except those described in Sec. 1.954-2(g)(5)) and any section 1256 contract that would be a section 988 transaction but for section 988(c)(1)(D) (the ``Sec. 1.954-2(g)(4) election'' and, together with the Sec. 1.954-2(g)(3) election, the ``Sec. 1.954-2(g) elections''). A Sec. 1.954-2(g)(4) election supersedes a Sec. 1.954- 2(g)(3) election. Under Sec. 1.954-2(g)(3)(ii) and (g)(4)(ii), controlling U.S. shareholders make either of the Sec. 1.954-2(g) elections on behalf of the CFC by filing a statement with their original income tax return for the ``taxable year of [the U.S. shareholders] ending with or within the taxable year of the [CFC]'' for which the election is made, clearly indicating that the election has been made. [[Page 67337]] II. Revocations Under Sec. 1.954-2(g)(3)(iii) and (g)(4)(iii) and Proposed Sec. 1.954-2(g)(3)(iii) and (g)(4)(iii) Under Sec. 1.954-2(g)(3)(iii) and (g)(4)(iii), a CFC's controlling U.S. shareholders may revoke a Sec. 1.954-2(g) election by or with the consent of the Commissioner. As part of the 2017 notice of proposed rulemaking in respect of Sec. 1.988-7 (the ``2017 proposed regulations'') (described further in sections III and IV of this Background section of the preamble), revisions were proposed to the rules for revoking Sec. 1.954-2(g) elections. 82 FR 60135, 60142- 60143. Under the 2017 proposed regulations, a CFC's controlling U.S. shareholders would be permitted to revoke the CFC's Sec. 1.954-2(g) election at any time. Proposed Sec. 1.954-2(g)(3)(iii) and (g)(4)(iii). Further, the 2017 proposed regulations would provide that if the election is revoked, a new election cannot be made until the sixth taxable year following the year in which the previous election was revoked, and the subsequent election cannot be revoked until the sixth taxable year following the year in which the subsequent election was made. Id. Similar to the procedure for making Sec. 1.954-2(g) elections, a CFC's controlling U.S. shareholders would revoke Sec. 1.954-2(g) elections on behalf of the CFC under the 2017 proposed regulations by filing a statement that clearly indicates that the election has been revoked with their original or amended income tax returns for ``the taxable year of [the U.S. shareholders] ending with or within the taxable year of the [CFC] for which the election is revoked.'' Id. The 2017 proposed regulations permitted taxpayers to rely on proposed Sec. 1.954-2(g)(3)(iii) and (g)(4)(iii) to revoke Sec. 1.954-2(g) elections for taxable years ending on or after December 19, 2017, subject to a consistency requirement. 82 FR 60135, 60141. III. Election Under Proposed Sec. 1.988-7(c) Under the 2017 proposed regulations, a taxpayer, including a CFC, would be permitted to elect to use a mark-to-market method of accounting for section 988 gain or loss with respect to certain section 988 transactions (the ``proposed Sec. 1.988-7 election''). Proposed Sec. 1.988-7(a). Under proposed Sec. 1.988-7(c) of the 2017 proposed regulations, a taxpayer makes a proposed Sec. 1.988-7 election by filing a statement that clearly indicates that the election has been made with its timely-filed original Federal income tax return for the taxable year for which the election is made. In the case of a CFC, the controlling U.S. shareholders make the proposed Sec. 1.988-7 election on behalf of the CFC by filing a statement that clearly indicates that the election has been made with their timely-filed, original Federal income tax returns for the ``taxable year of [the U.S. shareholders] ending with or within the taxable year of the [CFC] for which the election is made.'' The preamble to the 2017 proposed regulations stated that taxpayers are permitted to rely on proposed Sec. 1.988- 7(c) to make a proposed Sec. 1.988-7 election for taxable years ending on or after December 19, 2017, subject to a consistency requirement. 82 FR 60135, 60141. IV. Revocation Under Proposed Sec. 1.988-7(d) Under the 2017 proposed regulations, a taxpayer, including a CFC, would be permitted to revoke its proposed Sec. 1.988-7 election at any time. Proposed Sec. 1.988-7(d). Further, the 2017 proposed regulations provided that if a proposed Sec. 1.988-7 election has been revoked, a new proposed Sec. 1.988-7 election cannot be made until the sixth taxable year following the year in which the previous election was revoked, and a subsequent election cannot be revoked until the sixth taxable year following the year in which the subsequent election was made. Id. Under the 2017 proposed regulations, a taxpayer would revoke a proposed Sec. 1.988-7 election by filing a statement that clearly indicates that the election has been revoked with its original or amended Federal income tax return for the taxable year for which the election is revoked. Id. The preamble to the 2017 proposed regulations stated that taxpayers are permitted to rely on proposed Sec. 1.988- 7(d) to revoke a proposed Sec. 1.988-7 election for taxable years ending on or after December 19, 2017, subject to a consistency requirement. 82 FR 60135, 60141. Explanation of Provisions I. Proposed Modification to Sec. 1.954-2(g)(3)(ii) and Withdrawal and Re-Proposal of Proposed Sec. 1.954-2(g)(3)(iii) and (g)(4)(iii) The Treasury Department and the IRS have received several inquiries regarding the procedure for making Sec. 1.954-2(g) elections. Specifically, practitioners have noted that the language of Sec. 1.954-2(g)(3)(ii) is inconsistent with other filing requirements with respect to CFCs, which generally must be filed by U.S. shareholders for the taxable year of a CFC that ends with or within the taxable year of the U.S. shareholders. See, e.g., Sec. Sec. 1.964-1(c)(3)(ii) and 1.951A-2(c)(7)(viii)(A)(1)(i). Additionally, the practitioners noted that under Sec. 1.954-2(g)(3)(ii), inconsistencies in treatment can arise between a controlling U.S. shareholder that owns a CFC with a matching taxable year and a controlling U.S. shareholder that owns a CFC with a short year or whose taxable year differs from the controlling U.S. shareholder's taxable year. With respect to CFCs with short years, a controlling U.S. shareholder will be prevented from making Sec. 1.954-2(g) elections for those years if no year of the controlling U.S. shareholder ends with or within the CFC's short year. To address the issues raised by practitioners' inquiries, and to promote consistency with other filing requirements with respect to CFCs, these proposed regulations would revise Sec. 1.954-2(g)(3)(ii) to provide that controlling U.S. shareholders make a Sec. 1.954-2(g) election on behalf of a CFC by filing a statement with their original income tax returns for the taxable years of the controlling U.S. shareholders in which or with which the taxable year of the CFC for which the election is made ends, clearly indicating that the election has been made. Additionally, these proposed regulations withdraw proposed Sec. 1.954-2(g)(3)(iii) and (g)(4)(iii) as included in the 2017 proposed regulations and re-propose them to provide that controlling U.S. shareholders revoke a Sec. 1.954-2(g) election on behalf of a CFC by filing a statement with their original income tax returns for the taxable years of the controlling U.S. shareholders in which or with which the taxable year of the CFC for which the revocation is made ends, clearly indicating that the Sec. 1.954-2(g) election has been revoked. Under newly proposed Sec. 1.954-2(g)(3)(iii) and (g)(4)(iii), however, controlling U.S. shareholders would be precluded from revoking a Sec. 1.954-2(g) election made on behalf of a CFC (including an initial election) until the sixth taxable year following the year in which the election was made. Further, proposed Sec. 1.954-2(g)(3)(iii) and (g)(4)(iii) would provide that if a CFC's controlling U.S. shareholders revoke a Sec. 1.954-2(g) election, they may not make a new Sec. 1.954-2(g) election on behalf of the CFC until the sixth taxable year following the year in which the previous election was revoked. This change to the revocation rules under proposed Sec. 1.954-2(g)(3)(iii) and (g)(4)(iii) would limit taxpayers from opportunistically making or revoking a Sec. 1.954-2(g) election; for example, this change would limit taxpayers' ability to selectively recognize certain foreign currency losses. The Treasury [[Page 67338]] Department and the IRS request comments on this aspect of proposed Sec. 1.954-2(g)(3)(iii) and (g)(4)(iii). II. Proposed Amendments to Proposed Sec. 1.988-7(c) and (d) The Treasury Department and the IRS are of the view that the rules for making and revoking a proposed Sec. 1.988-7 election under the 2017 proposed regulations provided an excessive amount of flexibility. The 2017 proposed regulations would have permitted a taxpayer to make a proposed Sec. 1.988-7 election after the end of the year to which the election would apply, which would give the taxpayer the ability to determine with certainty whether the election would be beneficial for that year. For example, and as one comment noted, the ability to make and revoke an initial election without restriction would provide a one- time opportunity to selectively recognize foreign currency losses by making an initial election for a particular year after the taxpayer has determined that it has net foreign currency losses on section 988 transactions for a taxable year and then immediately revoking the election. Upon further consideration of the 2017 proposed regulations and the comments received, the Treasury Department and the IRS are of the view that the time for making and revoking a proposed Sec. 1.988-7 election (permitting a taxpayer to use a mark-to-market method of accounting for section 988 gain or loss with respect to section 988 transactions) should accord with the time for making and revoking an election under section 475(e) or (f) (a ``section 475 election'') (permitting a dealer in commodities or a trader in securities or commodities to use the mark-to-market method of accounting). The Treasury Department and the IRS are of the view that aligning proposed Sec. 1.988-7 with the rules for making a section 475 election will deter selectively recognizing losses. The rules for making or revoking a section 475 election deter taxpayers from selectively recognizing losses by requiring that taxpayers generally make an election on the tax return for the year immediately preceding the year to which the election applies, see section 5.03 of Rev. Proc. 99-17, 1999-1 C.B. 503, 504-505, and then by requiring taxpayers to apply that election to all subsequent years unless the taxpayers obtain the consent of the Commissioner. See section 475(e)(3) and (f)(3). The Treasury Department and the IRS expect that implementing similar rules for making a proposed Sec. 1.988-7 election would also prevent selective recognition of losses. The Treasury Department and the IRS also expect that aligning the rules for making a proposed Sec. 1.988-7 election with the rules for making a section 475 election will foster compliance, especially for those taxpayers already making a section 475 election, by providing the same procedures for making or revoking these elections to adopt a mark-to- market method of accounting. As a result, these proposed regulations would permit taxpayers to make and revoke a proposed Sec. 1.988-7 election under rules similar to the rules for making and revoking a section 475 election. Proposed Sec. 1.988-7(d) would provide that the election made pursuant to proposed Sec. 1.988-7(c) is subject to rules similar to those imposed on section 475 elections. The election would be effective for the taxable year for which it is made and all subsequent years. Proposed Sec. 1.988-7(d) also would provide that a taxpayer may revoke the election only with the consent of the Commissioner. To adopt a method of accounting as described in proposed Sec. 1.988-7, a taxpayer must receive the consent of the Commissioner to implement that change of accounting method in accordance with the applicable administrative procedures provided in the Internal Revenue Bulletin. Section 446(e); Sec. 1.446-1(e)(2); see also Rev. Proc. 2015-13, 2015-5 I.R.B. 419; Rev. Proc. 2024-1, 2024-1 I.R.B. 1. When these proposed regulations are finalized, the Treasury Department and the IRS expect to issue a revenue procedure setting forth the terms and conditions under which a change of method of accounting with respect to the mark-to-market method under Sec. 1.988-7 will be granted. The Treasury Department and the IRS anticipate that these terms and conditions will address: whether this change should be subject to a cutoff method or another method requiring a section 481(a) adjustment; the appropriate circumstances under which a taxpayer must establish a substantial business reason for the change; whether there are appropriate circumstances under which an automatic change in method of accounting should be permitted; and the extent to which these terms and conditions should incorporate or deviate from the terms and conditions for changing a mark-to-market method of accounting under section 475(e) or (f), see section 24 of Rev. Proc. 2024-23. The Treasury Department and the IRS solicit comments regarding all aspects of the rules for making and revoking the proposed Sec. 1.988-7 election, including the terms and conditions under which a change of method of accounting with respect to the mark-to-market method under Sec. 1.988-7 will be granted and whether to require that related parties apply a proposed Sec. 1.988-7 election in a consistent manner, such as in the case of a section 987 election under proposed Sec. 1.987-1(g)(2) (88 FR 78134, 78164-78165). Comments submitted pursuant to the 2017 proposed regulations will also be considered. III. Other Nonsubstantive Changes These proposed regulations would make nonsubstantive changes to Sec. 1.954-2(g)(3)(ii) and re-proposed Sec. 1.954-2(g)(3)(iii) and (g)(4)(iii). These changes are intended to improve the clarity of those regulations, including by updating the cross-references to the definition of controlling U.S. shareholders from ``Sec. 1.964- 1(c)(5)'' to ``Sec. 1.964-1(c)(5)(i)'' to more precisely reference the definition with respect to CFCs and not other foreign corporations, and by providing that a Sec. 1.954-2(g) election must be made on a timely- filed, original Federal income tax return for consistency with proposed Sec. 1.988-7 elections. IV. Applicability Dates These proposed regulations generally are proposed to apply to taxable years ending on or after the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register (the ``finalization date''). See proposed Sec. Sec. 1.954-2(i)(3) and 1.988-7(e). The remainder of this section of the preamble discusses taxpayers' ability to rely on the proposed regulations and the treatment of certain elections, or revocation of elections, made in earlier periods. A. Section 954 regulations For taxable years ending before the finalization date, taxpayers may rely on proposed Sec. 1.954-2(g)(3)(ii) and re-proposed Sec. 1.954-2(g)(3)(iii) and (g)(4)(iii) in making and revoking Sec. 1.954- 2(g) elections, provided that they consistently apply proposed Sec. 1.954-2(g)(3)(ii) and (iii) and (g)(4)(iii) to such taxable years. Furthermore, with respect to any taxpayer that made a Sec. 1.954-2(g) election in the manner set forth in proposed Sec. 1.954-2(g)(3)(ii) of these proposed regulations for a taxable year beginning after November 6, 1995 (as provided in TD 8618, 60 FR 46517, 46527), and ending before August 19, 2024, and any taxpayer that revoked a Sec. 1.954-2(g) election in the manner set forth in proposed Sec. 1.954-2(g)(3)(iii) or (g)(4)(iii) of these proposed regulations for a taxable year ending on or after [[Page 67339]] December 19, 2017, and before August 19, 2024, the IRS will respect such election or revocation as having been timely made for the relevant taxable year. As of August 19, 2024, taxpayers may no longer rely on proposed Sec. 1.954-2(g)(3)(iii) and (g)(4)(iii) included in the 2017 proposed regulations. B. Section 988 regulations For taxable years ending before the finalization date, taxpayers may rely on proposed Sec. 1.988-7(c) and (d) in making and revoking the proposed Sec. 1.988-7 election, provided that they consistently apply proposed Sec. 1.988-7(c) and (d) to such taxable years. Furthermore, if a taxpayer made or revoked a proposed Sec. 1.988-7 election on behalf of a CFC pursuant to the reliance provided by 82 FR 60135, 60141, but filed the election or revocation in the manner set forth in proposed Sec. 1.988-7(c)(3)(ii), the IRS will respect such election or revocation as having been timely made for the relevant taxable year. However, as of August 19, 2024, taxpayers may no longer rely on proposed Sec. 1.988-7(c) and (d) included in the 2017 proposed regulations. Special Analyses I. Regulatory Planning and Review--Economic Analysis Pursuant to the Memorandum of Agreement, Review of Treasury Regulations under Executive Order 12866 (June 9, 2023), tax regulatory actions issued by the IRS are not subject to the requirements of section 6 of Executive Order 12866, as amended. Therefore, a regulatory impact assessment is not required. II. Paperwork Reduction Act The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) (``PRA'') generally requires that a Federal agency obtain the approval of the Office of Management and Budget (``OMB'') before collecting information from the public, whether the collection of information is mandatory, voluntary, or required to obtain or retain a benefit. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the OMB. The collections of information included in these proposed regulations are in proposed Sec. 1.954-2(g)(3)(ii) and (iii) and (g)(4)(iii) and proposed Sec. 1.988-7(c). The information provided will generally be used by the IRS for tax compliance purposes or by taxpayers to report making or revoking elections. The collection of information in these proposed regulations is for taxpayers to make or revoke an election as detailed in proposed Sec. 1.954-2(g)(3)(ii) and (iii) and (g)(4)(iii) and proposed Sec. 1.988- 7(c). Taxpayers must inform the IRS of these elections and revocations by attaching a statement to their tax return. The information is required to be provided by taxpayers that are U.S. shareholders of CFCs and shareholders of certain foreign corporations that make or revoke an election with respect to the treatment of a foreign corporation's foreign currency gains and losses. The likely respondents are individual, business, and trust and estate filers. For purposes of the PRA, the reporting and recordkeeping burden associated with the collections of information in proposed Sec. 1.954- 2(g)(3)(ii) and (iii) and (g)(4)(iii) and proposed Sec. 1.988-7(c) will be accounted for in OMB control number 1545-0074 for individual filers and 1545-0123 for business filers. The IRS will seek OMB approval under a new OMB Control Number (1545-NEW) for trust and estate filers. Estimated total annual reporting and recordkeeping burden for trusts and estates filers: 61 hours. Estimated average annual burden per respondent: 1 hour. Estimated number of respondents: 61. Estimated frequency of responses: one-time election or revocation. The collections of information contained in these proposed regulations have been submitted to OMB for review in accordance with the PRA. Commenters are strongly encouraged to submit public comments electronically. Written comments and recommendations for the proposed information collection should be sent to www.reginfo.gov/public/do/PRAMain, with copies to the IRS. Find this particular information collection by selecting ``Currently under Review--Open for Public Comments,'' then by using the search function. Submit electronic submissions for the proposed information collection to the IRS via email at [email protected] (indicate REG-111629-23 on the Subject line). Comments on the collection of information should be received by September 19, 2024. Comments are specifically requested concerning: Whether the proposed collection of information is necessary for the proper performance of the functions of the IRS, including whether the information will have practical utility; the accuracy of the estimated burden associated with the proposed collection of information; how the quality, utility, and clarity of the information to be collected may be enhanced; how the burden of complying with the proposed collection of information may be minimized, including through the application of automated collection techniques or other forms of information technology; and estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information. III. Regulatory Flexibility Act Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6) (``RFA''), it is hereby certified that these proposed regulations would not have a significant economic impact on a substantial number of small entities within the meaning of section 601(6) of the RFA (``small entities''). Generally, the proposed regulations affect certain U.S. taxpayers that have foreign operations. Specifically, the proposed regulations affect U.S. shareholders that make or revoke certain elections with respect to the computation of their CFCs' foreign currency gains and losses. The number of small entities potentially affected by the proposed regulations is unknown and cannot be reliably estimated; however, it is unlikely to be a substantial number because taxpayers with foreign operations are typically larger businesses. Due to the low expected number of potentially affected taxpayers, and the fact that the proposed regulations only amend the timing of these elections and revocations that taxpayers may already be making, the Treasury Department and the IRS believe the proposed regulations should not materially impact a substantial number of small entities within the meaning of the RFA. Accordingly, the Secretary certifies that the proposed regulations will not have a significant economic impact on a substantial number of small entities, and a regulatory flexibility analysis is not required. IV. Section 7805(f) Pursuant to section 7805(f), these proposed regulations have been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small businesses. The Treasury Department and the IRS also request comments from the public on the analysis in part III of the Special Analyses. V. Unfunded Mandates Reform Act Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires that agencies assess anticipated costs and benefits and take certain other actions before issuing a final rule that includes any Federal mandate that may [[Page 67340]] result in expenditures in any one year by a State, local, or Tribal government, in the aggregate, or by the private sector, of $100 million in 1995 dollars, updated annually for inflation. This proposed rule does not include any Federal mandate that may result in expenditures by State, local, or Tribal governments, or by the private sector in excess of that threshold. VI. Executive Order 13132: Federalism Executive Order 13132 (entitled ``Federalism'') prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial, direct compliance costs on State and local governments, and is not required by statute, or preempts State law, unless the agency meets the consultation and funding requirements of section 6 of the Executive order. These proposed regulations do not have federalism implications and do not impose substantial direct compliance costs on State and local governments or preempt State law within the meaning of the Executive order. Comments and Requests for Public Hearing Before these proposed regulations are adopted as final regulations, consideration will be given to any comments that are submitted timely to the IRS as prescribed in this preamble under the ADDRESSES section. The Treasury Department and the IRS request comments on all aspects of these proposed regulations, including the procedures for making and revoking a proposed Sec. 1.988-7 election. Any comments submitted will be made available at www.regulations.gov or upon request. A public hearing will be scheduled if requested in writing by any person who timely submits written comments. Requests for a public hearing are also encouraged to be made electronically. If a public hearing is scheduled, notice of the date and time for the public hearing will be published in the Federal Register. Drafting Information The principal authors of these regulations are Edward Tracy and Shane Ward of the Office of Associate Chief Counsel (International). However, other personnel from the Treasury Department and the IRS participated in their development. Statement of Availability of IRS Documents IRS Revenue Procedures, Revenue Rulings, Notices, and other guidance cited in this document are published in the Internal Revenue Bulletin or Cumulative Bulletin and are available from the Superintendent of Documents, U.S. Government Publishing Office, Washington, DC 20402, or by visiting the IRS website at www.irs.gov. Partial Withdrawal of Proposed Regulations Under the authority of 26 U.S.C. 7805, proposed Sec. 1.954- 2(g)(3)(iii) and (g)(4)(iii) and proposed Sec. 1.988-7(c) through (e), contained in the notice of proposed rulemaking that was published in the Federal Register on December 19, 2017 (82 FR 60135), are withdrawn. List of Subjects in 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. Proposed Amendments to the Regulations Accordingly, the Treasury Department and the IRS propose to amend 26 CFR part 1 as follows: PART 1--INCOME TAXES Paragraph 1. The authority citation for part 1 continues to read in part as follows: Authority: 26 U.S.C. 7805 * * * Par. 2. Section 1.954-2 is amended by: 0 1. Revising the first sentence of paragraph (g)(3)(ii) introductory text; 0 2. Revising paragraphs (g)(3)(iii) and (g)(4)(iii); and 0 3. Adding two sentences to the end of paragraph (i)(3). The revisions and additions read as follows: Sec. 1.954-2 Foreign personal holding company income. * * * * * (g) * * * (3) * * * (ii) * * * The controlling United States shareholders, as defined in Sec. 1.964-1(c)(5)(i), make the election on behalf of the controlled foreign corporation by filing a statement with their timely- filed, original Federal income tax returns for the taxable year of the United States shareholders in which or with which the taxable year of the controlled foreign corporation for which the election is made ends, clearly indicating that the election has been made. * * * (iii) Revocation of election. An election under this paragraph (g)(3) is effective for the taxable year of the controlled foreign corporation for which it is made and all subsequent taxable years of such corporation unless revoked by the Commissioner or as provided in this paragraph (g)(3)(iii) by the controlling United States shareholders (as defined in Sec. 1.964-1(c)(5)(i)) of the controlled foreign corporation. Once made, an election under this paragraph (g)(3) cannot be revoked by the controlled foreign corporation's controlling United States shareholders (as defined in Sec. 1.964-1(c)(5)(i)) until the sixth taxable year following the year in which the previous election was made. Further, if an election has been revoked under this paragraph (g)(3)(iii), a new election may not be made until the sixth taxable year following the year in which the previous election was revoked. The controlling United States shareholders revoke an election on behalf of a controlled foreign corporation by filing a statement that clearly indicates such election has been revoked with their original or amended income tax returns for the taxable year of such United States shareholders in which or with which the taxable year of the controlled foreign corporation for which the election is revoked ends. * * * * * (4) * * * (iii) Revocation of election. An election under this paragraph (g)(4) is effective for the taxable year of the controlled foreign corporation for which it is made and all subsequent taxable years of such corporation unless revoked by the Commissioner or as provided in this paragraph (g)(4)(iii) by the controlling United States shareholders (as defined in Sec. 1.964-1(c)(5)(i)) of the controlled foreign corporation. Once made, an election under this paragraph (g)(4) cannot be revoked by the controlled foreign corporation's controlling United States shareholders (as defined in Sec. 1.964-1(c)(5)(i)) until the sixth taxable year following the year in which the previous election was made. Further, if an election has been revoked under this paragraph (g)(4)(iii), a new election may not be made until the sixth taxable year following the year in which the previous election was revoked. The controlling United States shareholders revoke an election on behalf of a controlled foreign corporation by filing a statement that clearly indicates such election has been revoked with their original or amended income tax returns for the taxable year of such United States shareholders in which or with which the taxable year of the controlled foreign corporation for which the election is revoked ends. * * * * * (i) * * * [[Page 67341]] (3) * * * Paragraphs (g)(3)(ii) and (iii) and (g)(4)(iii) of this section apply to taxable years of controlled foreign corporations ending on or after [DATE OF PUBLICATION OF FINAL RULE]. For taxable years of controlled foreign corporations ending before [DATE OF PUBLICATION OF FINAL RULE], see Sec. 1.954-2(g)(3)(ii) and (iii) and (g)(4)(iii) as in effect and contained in 26 CFR part 1, as revised April 1, 2024. Par. 3. Section 1.988-7, as proposed to be added at 82 FR 60143 (December 19, 2017), is amended by adding paragraphs (c) through (e) to read as follows: Sec. 1.988-7 Election to mark-to-market foreign currency gain or loss on section 988 transactions. * * * * * (c) Time and manner of election--(1) In general. Except as otherwise provided in this paragraph (c), a taxpayer makes the election under paragraph (a) of this section by filing a statement that clearly indicates that the election has been made with the taxpayer's timely- filed (excluding extensions) original Federal income tax return for the taxable year immediately preceding the year for which the election is made. (2) New taxpayers. In the case of a taxpayer for which no Federal income tax return was required to be filed for the taxable year immediately preceding the year for which the election is made, the taxpayer makes the election under paragraph (a) of this section by preparing a statement that clearly indicates the election has been made and: (i) Placing the statement in the taxpayer's books and records by no later than 2 months and 15 days after the first day of the year for which the election is made; and (ii) Filing the statement with the taxpayer's original Federal income tax return for the taxable year for which the election is made. (3) Elections on behalf of CFCs. In the case of a controlled foreign corporation, the controlling United States shareholders (as defined in Sec. 1.964-1(c)(5)(i)) make the election under paragraph (a) of this section on behalf of the controlled foreign corporation by preparing a statement that clearly indicates the election has been made and: (i) Placing the statement in the controlled foreign corporation's books and records by no later than 2 months and 15 days after the first day of the year of the controlled foreign corporation for which the election is made; and (ii) Filing the statement with their original Federal income tax returns for the taxable year of the United States shareholders in which or with which the taxable year of the controlled foreign corporation for which the election is made ends. (d) Revocation. An election under paragraph (a) of this section is effective for the taxable year for which it is made and all subsequent taxable years unless the election is revoked with the consent of the Commissioner. (e) Applicability dates. This section applies to taxable years of taxpayers ending on or after [DATE OF PUBLICATION OF FINAL RULE]. Paragraph (c)(3) of this section applies to taxable years of controlled foreign corporations ending on or after [DATE OF PUBLICATION OF FINAL RULE], and to taxable years of United States shareholders in which or with which the taxable years of those controlled foreign corporations end. Heather C. Maloy, Acting Deputy Commissioner. [FR Doc. 2024-18281 Filed 8-19-24; 8:45 am] BILLING CODE 4830-01-P