IRS Issues Final Regulations on Qualified Improvement Property Under Sections 250 and 951

September 22, 2021

The IRS recently published final regulations regarding the calculation of qualified business asset investment (QBAI) for qualified improvement property (QIP) under the alternative depreciation system (ADS) under Sections 250 and 951, the foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI) provisions.

The regulations, T.D. 9956, also finalize transition rules relating to the impact on separate limitation loss or overall foreign loss accounts of certain net operating loss (NOL) carrybacks allowed by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136.

The CARES Act amended Sec. 168(e) to state that QIP is classified as 15-year property under the general depreciation system with a 20-year recovery period under the ADS. This technical amendment was required due to its omission from the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, which was enacted in 2017. In January 2021, the IRS issued proposed regulations to clarify that the CARES Act’s technical amendment regarding QIP for the purpose of determining the adjusted basis of property under Sec. 951A(d)(3) applies as if it had originally been part of the TCJA. T.D. 9956 adopts these regulations essentially as proposed.

T.D. 9956 also finalizes proposed regulations regarding revisions to the transition rules for post-2017 NOL carrybacks to pre-2018 tax years.

The final regulations are effective when published in the Federal Register.