Applicable taxpayer.

An applicable taxpayer is, with respect to any tax year, a taxpayer which meets all of the following criteria.

See Regulations section 1.59A-2 for more information on how to determine whether a taxpayer is an applicable taxpayer.

Base erosion minimum tax amount.

The base erosion minimum tax amount for the tax year is the excess of 10% (5% in the case of a tax year beginning in 2018) of the modified taxable income of the applicable taxpayer for the tax year over the applicable taxpayer’s regular tax liability under section 26(b), reduced (but not below zero) by the excess, if any, of:

If the applicable taxpayer is a member of an affiliated group under section 1504(a)(1) that includes a bank (as defined in section 581) or a registered securities dealer (as defined in Regulations section 1.59A-1(b)(15)), the tax rate in effect for the tax year for the base erosion minimum tax amount is increased by an additional 1%.

See Regulations section 1.59A-5 for more information on how to compute the base erosion minimum tax amount.

Base erosion payment.

A base erosion payment is any amount paid or accrued by a taxpayer to a foreign person (as defined in Regulations section 1.59A-1(b)(10)) that is a related party (as defined in Regulations section 1.59A-1(b)(12)) with respect to which a deduction is allowable under chapter 1.

The amount paid or accrued, and the identity of the payor and recipient of the amount paid or accrued, is determined under general tax principles.

An amount paid or accrued includes an amount paid or accrued using any form of consideration, such as cash, property, stock, a partnership interest, or the assumption of a liability.

Base erosion payments are generally determined on a gross basis, unless the Code or regulations expressly permit netting of amounts in determining payments.

For purposes of determining whether a taxpayer has made a base erosion payment, the taxpayer must treat a payment to or from a partnership as made to or from each partner. See Regulations section 1.59A-7 for more information on how the BEAT applies to partners.

Base erosion payments also include the following.

See Regulations section 1.59A-3 for more information on the definition of a base erosion payment.

Base erosion payments do not include the following types of payments made to a foreign person that is a related party.

See Regulations section 1.59A-3(b)(3)(i)–(ix) for further information on whether a payment or accrual is not a base erosion payment.

Related party.

A related party is:

Section 318, with certain modifications, applies in determining whether a person is a related party. See Regulations section 1.59A-1(b)(17)(iii) for additional rules relating to the modification of section 318 for use in determining a person’s relatedness.

Base erosion tax benefit.

Generally, a base erosion tax benefit is any deduction that is allowed under chapter 1 for the tax year for any base erosion payment. Base erosion tax benefits also include any deductions allowed for the tax year for depreciation or amortization with respect to the property acquired with a base erosion payment (that are paid or accrued in tax years beginning after 2017). Base erosion tax benefits also include certain reductions in the gross amount of premiums and other consideration on insurance and annuity contracts, or any deduction from the amount of gross premiums written on insurance contracts during the tax year for premiums paid for reinsurance, and payments to certain expatriated entities (as defined under Base erosion payment , earlier) that cause a reduction in gross receipts in computing gross income of the taxpayer for the tax year.

See the instructions for Schedule A, later, for special rules applicable in determining the amount of the base erosion tax benefit when taxes have been imposed by section 871 or 881 and withheld under section 1441 or 1442 on a base erosion payment; or when the taxpayer has made an interest payment that gives rise to a base erosion tax benefit and section 163(j) applies for the tax year.

Base erosion percentage.

The base erosion percentage of the taxpayer's aggregate group (or if the taxpayer does not have an aggregate group, the taxpayer) is determined by dividing:

See Regulations section 1.59A-2(e)(3) for further information on how to compute the base erosion percentage.

Modified taxable income.

Modified taxable income is the applicable taxpayer’s taxable income plus any base erosion tax benefit with respect to any base erosion payment and the base erosion percentage of any net operating loss deduction allowed under section 172 for the tax year.

See Regulations section 1.59A-4(b) for further information on the computation of modified taxable income.

Applicable section 38 credits.

Applicable section 38 credits are the credits allowed under section 38 for the tax year that are properly allocable to:

See also the instructions for Schedule C, later.

Aggregation rules.

When applying the gross receipts test and base erosion percentage test, a taxpayer that is a member of an aggregate group determines its gross receipts and base erosion percentage as if it were 1 person, on the basis of its aggregate group. A taxpayer is a member of an aggregate group if it belongs to a controlled group of corporations. The term “controlled group of corporations” has the meaning given by section 1563(a) except that:

Foreign corporations are excluded from an aggregate group except to the extent the foreign corporation has income effectively connected with the conduct of a trade or business in the United States or income taken into account in determining net taxable income using an income tax treaty.

An aggregate group is determined for each taxpayer. A taxpayer that is a member of an aggregate group determines its gross receipts and base erosion percentage on the basis of its aggregate group by taking into account the gross receipts, base erosion payments, base erosion tax benefits, and deductions of the members of the aggregate group for the tax years that end with or within the taxpayer's tax year.

See Regulations section 1.59A-2(c) for further information on how to apply the aggregation rules.

Line 3a.

Enter the amount of taxable income after any net operating loss.

If the current year reports a loss, without any net operating loss carryovers, the amount entered here may be less than zero.

If the current year reports taxable income and there is a net operating loss carryover that would reduce taxable income below zero, enter “-0-.” Do not enter an amount less than zero.

Line 3b.

Enter the amount of base erosion tax benefits for the tax year with respect to base erosion payments from Schedule A, line 15, column (b-2).

Line 3c.

Enter the amount of net operating loss deduction to be added back to taxable income for purposes of determining modified taxable income. To calculate this amount, first determine the amount of net operating loss deduction allowed under section 172 that does not exceed taxable income before taking into account the net operating loss deduction for all applicable tax years. Second, multiply this net operating loss deduction by the base erosion percentage for the tax year in which the net operating loss arose. If the net operating loss deduction is attributable to net operating losses that arose in more than one tax year, multiply the net operating loss attributable to each tax year by the base erosion percentage for that tax year and determine the total amount by adding the result from each tax year. For any tax year beginning before 2018, the base erosion percentage is zero.

Line 3d.

Combine the amounts on lines 3a through 3c.

Line 4a.

Enter the amount of regular tax liability (as defined in section 26(b)) of the applicable taxpayer for the tax year.

Line 4c.

Subtract line 4b from 4a. If zero or less, enter “-0-.”

Line 5b.

Enter the applicable tax rate for the tax year. For tax years beginning during 2018, the applicable rate is 5%. For tax years beginning and ending during 2019 through 2025, the applicable rate is 10%. For any tax year that includes January 1, 2026, the applicable rate is 12.5%.

The rates above are increased by 1% if the applicable taxpayer is a member of an affiliated group (as defined in section 1504(a)(1)) that includes either a bank (as defined in section 581), or a registered securities dealer (as defined in Regulations section 1.59A-1(b)(15)).

Line 5e.

Subtract line 5d from line 5c. If zero or less, enter “-0-.” This is your base erosion minimum tax amount. For an applicable taxpayer filing Form 1120, enter this amount on Schedule J, line 3. For an applicable taxpayer filing Form 1120-F, enter this amount on Section II, Schedule J, line 3. For an applicable taxpayer filing Form 1120-L, enter this amount on Schedule K, line 3. For an applicable taxpayer filing Form 1120-PC, enter this amount on page 1, line 6.

Line 6.

If the taxpayer is electing to use financial statements per Regulations section 1.59A-3(b)(4)(i)(D) for purposes of calculating interest expense allocable to a foreign corporation's effectively connected income, check “Yes”; otherwise, check “No.”

Line 7.

Indicate if in the current year, the taxpayer capitalized to inventory, or included in cost of goods sold (COGS), any cost incurred for any payment to a related foreign party that the taxpayer treated as a deduction in any prior tax year starting on or after January 1, 2018. If the answer is yes, check “Yes” and complete line 8.

Line 8, column (i).

Indicate the amount capitalized or included in COGS for the current year.

Line 8, column (ii).

Indicate a detailed description of the item(s) capitalized or included in COGS such as sales-based royalties, production-based royalties, trademarks, tradenames, section 482 adjustments, transportation costs, etc.

Line 8, column (iii).

Indicate the line item(s) where the deduction was claimed on a prior year return, for example, line 26, 27, or other line(s) on Form 1120-F, Form 1120, etc.

Line 8, column (iv).

If an accounting method change was filed on Form 3115 regarding items in column (i), indicate the tax year in which the filing(s) was made. If no Form 3115 was filed, indicate in an attachment the reason(s) why. Attach additional sheets, if necessary, to report multiple row items starting with d, e, etc.

Consolidated groups.

Affiliated groups of corporations filing consolidated returns, please review any additional information at IRS.gov/Form8991.

Columns (a-1) and (a-2).

Columns (a-1) and (a-2) are used to determine the base erosion percentage, as defined in Regulations section 1.59A-2(e). Enter in columns (a-1) and (a-2) the amount of aggregate base erosion payments and aggregate base erosion tax benefits, respectively, that correspond to each type of base erosion payment specified on lines 3 through 11. The aggregate base erosion payment entered in these lines should include only those base erosion payments paid or accrued in the current year. The aggregate base erosion tax benefit entered in these lines should only include those base erosion tax benefits allowed in the current year, which may relate to a base erosion payment paid or accrued in the current year or a prior year. The aggregate base erosion tax benefits in column (a-2), lines 3 through 11, should be the amounts determined before applying the exception in Regulations section 1.59A-3(c)(3) (base erosion tax benefits disregarded if tax withheld on base erosion payment).

Aggregate base erosion payments include the base erosion payments of all persons treated as 1 person pursuant to the aggregation rules (see the definition of aggregation rules, earlier). Similarly, aggregate base erosion tax benefits include the base erosion tax benefits of all persons treated as 1 person pursuant to the aggregation rules.

However, if the taxpayer is not a member of an aggregate group, the taxpayer will enter in columns (a-1) and (a-2) the amount of its own base erosion payments and base erosion tax benefits, respectively, that correspond to each type of base erosion payment specified on lines 3 through 11, determined before applying the exception in Regulations section 1.59A-3(c)(3).

Columns (b-1) and (b-2).

Columns (b-1) and (b-2) are used to determine modified taxable income, as described in Regulations section 1.59A-4, of the applicable taxpayer. Enter in columns (b-1) and (b-2) the amount of base erosion payments and base erosion tax benefits, respectively, that correspond to the type of base erosion payments specified in lines 3 through 11. Enter in these columns the applicable taxpayer’s own base erosion payments and base erosion tax benefits, without applying the aggregation rules. The base erosion tax benefit in column (b-2), lines 3 through 11, should be an amount determined before applying the exception in Regulations section 1.59A-3(c)(3) (tax benefits disregarded if tax withheld on base erosion payment).

Line 1 and line 2.

These lines are reserved and should not be used at this time.

Line 3, columns (a-1) and (b-1).

Enter the amount paid or accrued to a foreign related party in connection with the acquisition or creation of intangible property rights (patents, copyrights, trademarks, trade secrets, etc.) that is subject to the allowance for depreciation (or amortization in lieu of depreciation).

Line 3, columns (a-2) and (b-2).

Enter the amount of deductions allowed under chapter 1 for the tax year for depreciation (or amortization in lieu of depreciation) with respect to intangible property rights acquired in the current or prior years from a foreign related party.

Line 4, columns (a-1) and (b-1).

Enter the amount paid or accrued to a foreign related party for the use or right to use tangible or intangible property resulting in rents, royalties, and/or license fees.

Line 4, columns (a-2) and (b-2).

Enter the amount of deductions allowed under chapter 1 for the tax year for amounts paid or accrued to a foreign related party for the use or right to use tangible or intangible property that results in rents, royalties, and/or license fees.

Line 5a, columns (a-1) and (b-1).

Enter the amount paid or accrued to a foreign related party as compensation or consideration for services, but excluding any amount that falls within the exception in Regulations section 1.59A-3(b)(3)(i). Enter amounts paid or accrued in excess of the total services cost of the services eligible for the services cost method exception (or the mark-up component). Also, enter amounts paid or accrued for services ineligible for the services cost method exception.

Line 5a, columns (a-2) and (b-2).

Enter the amount of deductions allowed under chapter 1 for the tax year for amounts paid or accrued to a foreign related party as compensation or consideration for services, but excluding any deduction for amounts paid or accrued that fall within the exception in Regulations section 1.59A-3(b)(3)(i). Enter amounts of deductions allowed under chapter 1 for the tax year for amounts paid or accrued in excess of the total services cost of the services eligible for the services cost method exception (or the mark-up component). Also, enter amounts of deductions for services ineligible for the services cost method exception.

Line 5b.

Enter the amount paid or accrued to a foreign related party as compensation or consideration for services that are defined under the exception in Regulations section 1.59A-3(b)(3)(i). Determine the amount of compensation or consideration eligible for this exception after applying the aggregation rules.

Line 6, columns (a-1) and (b-1).

Enter the amount of all interest paid or accrued to a foreign related party with respect to which a deduction is allowable in the tax year.

Line 6, columns (a-2) and (b-2).

Enter the amount of deductible interest expense allowed under chapter 1 for the tax year with respect to amounts paid or accrued to a foreign related party. For purposes of completing line 6, columns (a-2) and (b-2), any reduction in the amount of interest for which a deduction is allowed for the tax year under section 163(j) is treated as allocable first to interest paid or accrued to persons who are not related parties with respect to the taxpayer and then to such related parties.

Line 7, columns (a-1) and (b-1).

Enter the amount paid or accrued to a foreign related party for the purchase of tangible personal property.

Line 7, columns (a-2) and (b-2).

Enter the amount of deductions allowed under chapter 1 for the tax year for amounts paid or accrued to a foreign related party for the purchase of tangible personal property.

Line 8, columns (a-1) and (b-1).

Enter the amount of any premiums or other consideration paid or accrued to a foreign related party for insurance and reinsurance that are taken into account under section 803(a)(1)(B) (relating to return premiums and premiums or other consideration arising out of indemnity reinsurance that reduces life insurance gross income) or section 832(b)(4)(A) (relating to amounts deducted from gross premiums written on insurance contracts for return premiums and premiums paid for reinsurance). See Regulations section 1.59A-3(b)(1)(iii).

Line 8, columns (a-2) and (b-2).

Enter the amount of any reduction under section 803(a)(1)(B) in gross premiums and other consideration on insurance and annuity contracts for premiums and other consideration arising out of indemnity insurance paid to a foreign related party, and the amount of any deduction under section 832(b)(4)(A) from the amount of gross premiums written on insurance contracts during the tax year for premiums paid to a foreign related party for reinsurance.

Line 9a, columns (a-1) and (b-1).

Enter the amount paid or accrued to a foreign related party with respect to any derivative contract that is not a qualified derivative payment as defined in Regulations section 1.59A-6. Do not include any amount paid that is a qualified derivative payment.

Line 9a, columns (a-2) and (b-2).

Enter the amount of deductions allowed under chapter 1 for the tax year for amounts paid or accrued to a foreign related party with respect to any payment that is not a qualified derivative payment. Do not include any deductions allowed under chapter 1 for the tax year if the deductible amount is a qualified derivative payment.

Line 9b.

Enter the amount paid to a foreign related party that is a qualified derivative payment excepted by Regulations section 1.59A-6(b). Determine the amount of the qualified derivative payments after applying the aggregation rules. Generally, a qualified derivative payment is any payment made by the taxpayer pursuant to a derivative contract provided that the taxpayer recognizes gain or loss on the derivative contract as if it were sold for its fair market value on the last business day of the tax year; treats the gain or loss as ordinary; and treats the character of all other items of income, deduction, gain, or loss with respect to a payment pursuant to the derivative as ordinary. A payment is not a qualified derivative payment if the payment would be treated as a base erosion payment if it were not made pursuant to a derivative (such as interest, royalty, or services income). With respect to a contract with both derivative and non-derivative components, a payment is not a qualified derivative payment if it is properly allocable to the non-derivative component.

A taxpayer meets the reporting requirement of Regulations sections 1.59A-6(b)(2) and 1.6038A-2(b)(7)(ix) by entering the amount on line 9b. Pursuant to Notice 2022-30, for tax years beginning on or after January 1, 2025, a taxpayer will also need to provide a representation that all payments satisfy the requirements of Regulations section 1.59A-6(b)(2) and meet the reporting requirement of Regulations sections 1.59A-6(b)(2) and 1.6038A-2(b)(7)(ix).

Line 10, columns (a-1) and (b-1).

Enter the amount paid or accrued to certain expatriated entities that results in a reduction of the gross receipts of the taxpayer. This amount includes payments to a surrogate foreign corporation that is a related party, but only if the entity first became a surrogate foreign corporation after November 9, 2017. The amount also includes payments to a foreign person that is a member of the same expanded affiliated group, as defined in section 7874(c)(1), as the surrogate foreign corporation. A surrogate foreign corporation is defined in section 7874(a)(2)(B), but does not include a foreign corporation that is treated as a domestic corporation under section 7874(b).

Line 10, columns (a-2) and (b-2).

Enter the amount of the reduction to gross receipts with respect to payments to expatriated entities that were used to compute gross income for the tax year.

Line 11, columns (a-1) and (b-1).

Enter the total amount of any other base erosion payments that were paid or accrued to a foreign related party and for which a deduction is allowable under chapter 1. Only include those amounts that have not otherwise been included in Schedule A on lines 3 through 10.

Line 11, columns (a-2) and (b-2).

Enter the amount of deductions allowed under chapter 1 for the tax year for other base erosion payments paid or accrued to a foreign related party. Only include those amounts that have not otherwise been included in Schedule A on lines 3 through 10.

Attach a statement for line 11.

For amounts reported on line 11, attach a statement describing the type and amount of other payments, using the same column headings as specified in Schedule A: “Aggregate Group's Base Erosion Payments,” “Aggregate Group's Base Erosion Tax Benefits,” “Taxpayer's Base Erosion Payments,” and “Taxpayer's Base Erosion Tax Benefits.” For each type of payment, the attachment must identify the relationship of the recipients consistent with the categories and instructions for columns (c), (d), and (e) of Schedule A.

Line 12.

For columns (a-1), (a-2), (b-1), and (b-2), add lines 3 through 11 and enter the total amount.

Line 13.

Enter the aggregate amount of base erosion tax benefits from columns (a-2) and (b-2) of lines 3 through 11 on which tax is imposed under section 871(a) or section 881, and with respect to which tax has been deducted and withheld under section 1442 at a 30% rate.

Line 14.

Line 15.

Subtract the sum of line 13 and line 14 from line 12, and enter the amount on line 15. Line 15, column (a-2), is the total amount of aggregate base erosion tax benefits for the tax year that is used for purposes of determining the taxpayer's base erosion percentage. Line 15, column (b-2), is the total amount of base erosion tax benefits for the tax year that is used for purposes of determining the taxpayer's modified taxable income. Line 15, column (b-2), is also the total amount of base erosion tax benefits for the tax year that is used for purposes of determining the taxpayer's base erosion percentage when the taxpayer is not a member of an aggregate group.

Column (a).

Enter a brief description of the item or property to which the deduction relates to; for example, debt instrument, intangible property (such as patent, trademark, or license), personal property, real property, etc.

Column (b).

Enter the date on which, or the time period which the waived deduction was paid or accrued.

Column (c).

Enter the provision of the Code (and regulations, as applicable) that allows the deduction for the item or property to which the election relates.

Column (d).

Enter the schedule and line number of the controlled group's federal income tax return where the deduction is reflected (or would have been reflected).

Column (e).

Enter the name of the foreign related party that is or will be the recipient of the payment that generates the deduction.

Column (f).

Enter the tax identification number of the foreign related party payee that was entered in column (e). This can be an EIN, ITIN, or Foreign Tax Identification Number (FTIN).

Column (g).

Enter the country of organization of the foreign related party that was entered in column (e).

Column (h).

For each item or property reported under columns (a) through (g), enter the amount of the deduction claimed on the tax return (after the waiver indicated in column (i)).

Column (i).

For each item or property reported under columns (a) through (g), enter the amount of the deduction being waived.

Line 14.

If additional space is necessary, complete and attach a separate worksheet with the same information as shown under columns (a) through (i) for each additional item or property. Enter the total of deductions claimed for the tax year on line 14, column (h) and the total of deductions waived on line 14, column (i).

Also include on this line the total of deductions being claimed (column (h)) and waived (column (i)) from other taxpayers that are members of your aggregate group, if applicable.