On July 30, 2012, the Internal Revenue Service (IRS) issued Notice 2012-39 to provide guidance for the treatment of transfers of intangible property (including intellectual property) by a domestic corporation to a foreign corporation. The guidance in the Notice addresses concerns that “certain taxpayers are engaging in transactions intended to repatriate earnings from foreign corporations without the appropriate recognition of income.”
Section 367(d)(1) basically provides that if a United States person transfers any intangible property to a foreign corporation in an exchange described in sections 351 or 361 of the Code, section 367(d) will apply to the transfer and income or gain attributable to the transfer must be taken into account in accordance with Section 367(d) or 367(a) of the Code.
According to the Notice, “[t]he regulations will ensure that, with respect to all outbound section 367(d) transfers, the total income to be taken into account under section 367(d) is either included in income by the U.S. transferor in the year of the reorganization or, where appropriate, over time by one or more qualified successors.”
The IRS and the Department of the Treasury will issue regulations incorporating the guidance in Notice 2012-39, and applicable to transfers occurring on or after July 13, 2012.