The New York State Bar Association’s Tax Section has recently released three new reports concerning (1) IRS Notice 2026-17, (2) IRS Notice 2026-15, and (3) Implications of the One Big Beautiful Bill Act for New York City Taxation of IRC Section 951A Income:

• Report Number 1526 (Report on Notice 2026-17):

This report . . . provides select comments of the Tax Section . . . on Notice 2026-17. . . issued by [Treasury] and the [IRS[ under section 987(3) on February 25, 2026. We have previously provided comments on the regulations proposed in 2006, submitted on January 3, 2008; on Notice 2017-57, regarding changes to the regulations finalized in 2016, submitted on January 22, 2018; and on select topics in the proposed regulations under Section 987, submitted February 12, 2024.

The 2026 Notice announces the intent of Treasury and the IRS to issue proposed regulations on certain aspects of computation and application of section 987. As relevant to this Report, Treasury and the IRS intend to issue future guidance that would provide an election under which controlled foreign corporations (“CFCs”) generally would not be required to compute or recognize foreign currency gain or loss under section 987(3) (the “CFC Election”).

We commend Treasury and the IRS for proposing the CFC Election because, properly structured, it will reduce complexity and improve administrability for certain taxpayers with the inclusion of appropriate safeguards to prevent the creation of undue opportunities for abuse. The proposed election substantially reduces the annual compliance burden for taxpayers operating their non-U.S. activities through QBUs owned by one or more CFCs, particularly in circumstances in which the assets of the QBUs are not expected to be repatriated to the United States. We have several suggestions, discussed in more detail below, for improving the CFC Election as a substantive and procedural matter.

• Report Number 1527 (Report on Notice 2026-15):

This report . . . of the Tax Section of the New York State Bar Association . . . addresses several new Code provisions enacted by Public Law 119-21, commonly referred to as the “One Big Beautiful Bill Act” (the “OBBBA”), that restrict eligibility for certain U.S. federal income tax credits for projects and producers owned by, controlled by, or receiving material assistance from, persons sufficiently associated with “covered nations” in 10 U.S.C. § 4872(f)(2) (a “Covered Nation”).

These new rules generally restrict ownership and control by, and material assistance from, “prohibited foreign entities” (“PFEs”) as defined in section 7701(a)(51)(A) (generally, “PFE Rules”) for taxpayers claiming certain U.S. federal income tax credits with respects to certain facilities, technologies, and components. These new rules (discussed in detail below) generally fall into two categories:

1. Authority, ownership and control rules. These rules (in section 7701(a)(51)) generally preclude determination of the credits available under section 45Q (carbon capture, utilization and sequestration), section 45U (zero-emission nuclear power production), section 45X (advanced manufacturing production), section 45Y (clean electricity production), section 45Z (clean fuel production), and section 48E (clean energy investment) for facilities owned or controlled by PFEs. Special “effective control” rules apply with respect to the credits under sections 45X, 45Y, and 48E.
2. Material assistance rules. These rules (in section 7701(a)(52)) generally preclude determination of the credits available under sections 45X, 45Y and 48E for facilities or producers receiving “material assistance” from PFEs, as defined in section 7701(a)(52)(A) (“Material Assistance”). Given the importance of these credits to taxpayers and the material impact and complexity of these new restrictions, there is a compelling need for accelerated guidance from the Internal Revenue Service (the “IRS”) and Department of the Treasury (“Treasury”) to ensure consistent interpretation and application of the law. On February 12, 2026, the IRS and Treasury issued Notice 2026-15, which provides interim guidance with respect to the Material Assistance rules and very limited guidance on the authority, ownership, and control rules in section 7701(a)(51). The IRS and Treasury stated that they intend to issue more comprehensive proposed regulations and other guidance and requested comments on certain topics in Notice 2016-15.

This Report identifies areas which, based on our expertise and experience with tax administration and interpretation, and our interactions with market participants, merit additional IRS and Treasury guidance under the PFE Rules on a priority basis. Although the underlying statutory provisions may also reflect Congressional judgments about national security and energy policy, we do not express a view on these issues, which are outside the Tax Section’s expertise.

• Report Number 1528 (Comments Concerning the Implications of the One Big Beautiful Bill Act for New York City Taxation of IRC Section 951A Income):

This letter first summarizes certain relevant changes to the IRC enacted by the OBBBA from a federal income tax standpoint, effective for tax years beginning after December 31, 2025. These federal changes expand the foreign income that is subject to current inclusion and taxation under section 951A, undercutting the notion that IRC Section 951A targets only intangible income that has been shifted abroad. It is now clear that IRC Section 951A is intended to result in inclusion of most active foreign business income.

The letter then explains why we believe that, because New York City generally does not include income earned from non-U.S. operations in its apportionable tax base, notably with respect to subpart F income, as a tax policy matter (i.e., equal treatment of similarly situated taxpayers), New York City also should not include IRC Section 951A income in its apportionable tax base in the first instance. However, we recognize that excluding IRC Section 951A income from the tax base would require legislative action, which is beyond the scope of this letter. Accordingly, the letter explains why, assuming New York City continues to include IRC Section 951A income in its apportionable tax base, New York City should not tax such income differently than it taxes income earned from U.S. operations. As discussed further below, we believe New York City should consider exercising its existing authority under Administrative Code Section 11-654.2.124 to achieve a proper allocation.