# Bulletin No. 2024–21

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/agency%3Airs%3Aac24fea60d13fe77

## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

HIGHLIGHTS
OF THIS ISSUE




Bulletin No. 2024–21
May 20, 2024

These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.

ADMINISTRATIVE
Announcement 2024-18, page 1234.

The Office of Professional Responsibility (OPR) announces
recent disciplinary sanctions involving attorneys, certified
public accountants, enrolled agents, enrolled actuaries,
enrolled retirement plan agents, and appraisers. These individuals are subject to the regulations governing practice
before the Internal Revenue Service (IRS), which are set out in
Title 31, Code of Federal Regulations, Part 10, and which are
published in pamphlet form as Treasury Department Circular
No. 230. The regulations prescribe the duties and restrictions relating to such practice and prescribe the disciplinary
sanctions for violating the regulations.

EXCISE TAX, INCOME TAX
Notice 2024-37, page 1191.

Notice 2024-37 discusses the new 40BSAF-GREET 2024
model as a qualifying method under section 40B(e)(2) and
provides a safe harbor for calculating emissions reduction
using the 40BSAF-GREET 2024 model and a safe harbor for
the related certification requirements. Notice 2024-37 also
provides a safe harbor for using the United States Department of Agriculture Climate Smart Agriculture Pilot Program
to further reduce the emissions reduction calculated using
40BSAF-GREET 2024 for domestic soybean and domestic
corn feedstocks, as well as a safe harbor for the related
certification requirements for that program.

EXEMPT ORGANIZATIONS
Announcement 2024-21, page 1236.

Revocation of IRC 501(c)(3) Organizations for failure to meet
the code section requirements. Contributions made to the

Finding Lists begin on page ii.

organizations by individual donors are no longer deductible
under IRC 170(b)(1)(A).

INCOME TAX
Notice 2024-38, page 1211.

This notice accompanies Rev. Proc. 2024-24, which provides procedures for requesting private letter rulings from
the IRS regarding certain matters pertaining to section 355
transactions. Specifically, this notice requests public feedback on the provisions set forth in Rev. Proc. 2024-24 and
describes the Treasury Department’s and IRS’s views and
concerns relating to certain matters addressed in the revenue procedure.

REG-117631-23, page 1237.

This document supplements the notice of proposed rulemaking issued by the Treasury Department and the IRS on
December 26, 2023, relating to the Section 45V credit
for the production of clean hydrogen and the Section 48(a)
(15) election to treat clean hydrogen production facilities as
energy property. This document contains supplemental information for taxpayers to request an emissions value from the
Department of Energy to petition the Secretary of the Treasury for a provisional emissions rate as described in Section
45V(c)(2)(C) and proposed § 1.45V-4.

Rev. Proc. 2024-24, page 1214.

This revenue procedure provides updated procedures for taxpayers requesting private letter rulings from the IRS regarding certain matters pertaining to section 355 transactions,
including representations, information, and analysis to be
submitted with those requests. This revenue procedure modifies Rev. Proc. 2017-52, 2017-41 I.R.B. 283, and supersedes Rev. Proc. 2018-53, 2018-43 I.R.B. 667.

T.D. 9992, page 1175.

This document contains final regulations that address the
determination of whether a qualified investment entity is
domestically controlled, including the treatment of qualified
foreign pension funds for this purpose. In particular, these
final regulations provide guidance as to when foreign per-

sons are considered to hold directly or indirectly stock in
a qualified investment entity. The final regulations primarily
affect foreign persons that own stock in a qualified investment entity that would be a United States real property interest if the qualified investment entity were not domestically
controlled.

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and
enforce the law with integrity and fairness to all.

Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

May 20, 2024 

Bulletin No. 2024–21

Part I
T.D. 9992
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Guidance on the Definition
of Domestically Controlled
Qualified Investment
Entities
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final regulations.
SUMMARY: This document contains
final regulations that address the determination of whether a qualified investment
entity is domestically controlled, including the treatment of qualified foreign pension funds for this purpose. In particular,
these final regulations provide guidance as
to when foreign persons are considered to
hold directly or indirectly stock in a qualified investment entity. The final regulations primarily affect foreign persons that
own stock in a qualified investment entity
that would be a United States real property
interest if the qualified investment entity
were not domestically controlled.
DATES: Effective date: These regulations
are effective on April 25, 2024.
Applicability date: For the date of
applicability, see §§1.897-1(a)(2) and
1.1445- 2(e).
FOR FURTHER INFORMATION
CONTACT: Milton Cahn at (202) 3174934 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
On December 29, 2022, the Treasury
Department and the IRS published proposed regulations (REG-100442-22),
relating to the treatment of certain enti-

Bulletin No. 2024–21

ties, including qualified foreign pension
funds (“QFPFs”), for purposes of the
exemption from taxation afforded to foreign governments under section 892 of
the Internal Revenue Code (the “Code”),
and the determination of whether a qualified investment entity (“QIE”) is domestically controlled under section 897(h)(4)
(B) of the Code, in the Federal Register
(87 FR 80097) (the “proposed regulations”). This Treasury decision finalizes
the proposed regulations, other than
those portions addressing the section
892 exemption (which will be addressed
in a separate rulemaking), after taking
into account and addressing comments
with respect to the proposed regulations.
Terms used but not defined in this preamble have the meaning provided in the
final regulations.
Comments outside the scope of this
rulemaking are generally not addressed
but may be considered in connection
with future regulations. All written comments received in response to the proposed regulations are available at www.
regulations.gov or upon request. A public
hearing on the proposed regulations was
not held because there were no requests
to speak.
Summary of Comments and
Explanation of Revisions
The final regulations retain the general
approach and structure of the proposed
regulations, with certain revisions. This
section of the preamble discusses the
comments received in response to the proposed regulations and explains the revisions reflected in the final regulations.
I. Domestic Corporation Look-Through
Rule
A. Background
The proposed regulations set forth proposed rules for determining whether stock
of a QIE is considered “held directly or
indirectly” by foreign persons for purposes of defining a domestically controlled QIE under section 897(h)(4)(B).
The proposed regulations defined stock in

1175

a QIE that is held “indirectly” by taking
into account stock of the QIE held through
certain entities under a limited “lookthrough” approach. As described in the
preamble to the proposed regulations, this
approach gives effect to both the policy of
the exception for domestically controlled
QIEs in section 897(h)(2) (“DC-QIE
exception”), which is limited to QIEs controlled by United States persons, and the
requirement in section 897(h)(4)(B) to
take into account “indirect” ownership of
QIE stock by foreign persons in determining whether a QIE is domestically controlled. 87 FR 80100. The preamble to the
proposed regulations also explained that
this approach prevents the use of intermediary entities to achieve results contrary to
the purposes of the DC-QIE exception. Id.
at 80100-01.
The proposed regulations addressed the
meaning of direct or indirect ownership
by setting forth two categories of potential QIE owners, “look-through persons”
and “non-look-through persons.” Proposed §1.897-1(c)(3)(ii). The proposed
regulations generally treated a “domestic
C corporation,” defined as any domestic
corporation other than a regulated investment company (“RIC”) under section 851,
a real estate investment trust (“REIT”)
under section 856, or an S corporation under section 1361, as a non-lookthrough person. Proposed §1.897-1(c)(3)
(v)(A) and (D). However, the proposed
regulations treated non-publicly traded
domestic C corporations as look-through
persons if foreign persons hold a 25 percent or greater interest (by value) in the
stock of the corporation (the “domestic
corporation look-through rule”). Proposed
§1.897-1(c)(3)(iii)(B) and (c)(3)(v)(B).
Comments generally did not raise
concerns with the general look-through
approach for determining domestic control
of a QIE as it applied to most entities (for
example, the treatment of partnerships)
but asserted that the domestic corporation
look-through rule raises significant issues
and should be withdrawn or, if retained,
modified to reduce its scope. These comments are addressed in turn in parts I.B.
and I.C. of this Summary of Comments
and Explanation of Revisions.

May 20, 2024

B. Comments recommending withdrawal
of the domestic corporation look-through
rule
Comments generally recommended
that the domestic corporation lookthrough rule be withdrawn on three related
grounds: first, that the rule is based on an
incorrect reading of the Code, which for
this purpose does not permit look-through
treatment for domestic C corporations,
including because there are no explicit
rules providing for constructive ownership (such as those in section 318) under
section 897(h)(4)(B); second, that the
enactment of other related legislation (or
consideration of legislation) demonstrates
the rule is inconsistent with congressional
intent; and third, that the rule is not necessary because domestic C corporations are
subject to U.S. tax. Certain comments also
based their recommendation to withdraw
the domestic corporation look-through
rule on the contention that the rule would
negatively impact the U.S. real estate market or otherwise harm the broader U.S.
economy.
The Treasury Department and the IRS
have determined that it is necessary and
appropriate to provide guidance regarding
the meaning of “indirect” for determining whether foreign persons are considered to hold less than 50 percent of the
value of the stock of a QIE. Every word
in a statute must be given effect, and both
the proposed and final regulations give
effect to the term “indirectly” as used in
section 897(h)(4)(B) by adopting a limited look-through approach that includes
the domestic corporation look-through
rule (as modified in the final regulations).
The domestic corporation look-through
rule does not apply specific constructive ownership rules like those in section
318. Rather, the guidance gives meaning to indirect ownership under section
897(h)(4)(B) in light of the purpose of the
DC-QIE exception. Because the final regulations carry out the statute’s mandate to
determine indirect ownership rather than
constructive ownership, the fact that other
parts of section 897 refer to section 318 is

irrelevant to the determination of whether
a QIE is domestically controlled.
The Treasury Department and the IRS
do not agree that the enactment of section
897(h)(4)(E) in section 322(b)(1)(A) of
the Protecting Americans from Tax Hikes
Act of 2015, Public Law 114-113, div. Q
(the “PATH Act”), informs whether the
domestic corporation look-through rule
should be applied under section 897(h)(4)
(B). The rules added in section 897(h)(4)
(E) do not prescribe how to interpret the
meaning of “indirectly” in section 897(h)
(4)(B), nor do they suggest that Congress
intended for that provision to set out the
only rules for QIE stock held by domestic corporations. Although section 897(h)
(4)(E) provides certain rules for looking
through QIE stock held by another QIE
for purposes of the DC-QIE exception,
the absence of other specific rules in the
statute on whether domestic C corporations (or any other type of entity) should
be looked through does not mean that all
other entities should be non-look-through
persons.
The Treasury Department and the
IRS also disagree with the observation in
comments that Congress sanctioned the
approach taken by a 2009 private letter
ruling (the “2009 PLR”) that treated QIE
stock held by a domestic C corporation as
owned by a domestic person.1 The brief
citation to that ruling in a report by the
Joint Committee on Taxation is neutral
and merely restates the holding in the ruling in its description of the then current
law. See STAFF OF THE JOINT COMM.
ON TAX’N, General Explanation of Tax
Legislation Enacted in 2015 (JCS–1–16)
279 (2016) (the “JCT Report”).2 The JCT
Report did not express any view regarding
the effect of the 2009 PLR or indicate that
Congress endorsed a rule that precludes
looking through domestic C corporations
in all cases, and it caveated that a private
letter ruling may only be relied on by the
specific taxpayer to which it was issued and
only provided “some indication of administrative practice.” See section 6110(k)
(3). This is in contrast to other instances
where Congress has explicitly endorsed

an approach taken by the IRS. See, for
example, H.R. Rep. No. 103-111, at 72729 (1993) (in enacting section 7701(l),
citing Rev. Rul. 84-152, 1984-2 C.B. 381,
Rev. Rul. 84-153 1984-2 C.B. 1, and Rev.
Rul. 87-89, 1987-2 C.B. 195, in stating the
“committee believes that the above-cited
IRS rulings appropriately ignore conduit
entities and properly recharacterize the
transactions described therein.”); S. Rep.
No. 95-762, at 8 (1978) (stating that the
IRS’s “ruling position is correct” in enacting rules consistent with private letter rulings indicating that certain income earned
by exempt organizations was not taxable
as debt-financed income). Accordingly,
the Treasury Department and the IRS have
concluded that the JCT Report’s reference
to the 2009 PLR does not affect the application of the domestic corporation lookthrough rule.
Likewise, the Treasury Department
and the IRS disagree with comments that
emphasized the discussion draft released
by the Senate Committee on Finance in
2013 (the “2013 Discussion Draft”) and
the absence of any related changes to section 897 in the PATH Act. The relevant
provision in the 2013 Discussion Draft
would have replaced the “held directly or
indirectly” language in section 897(h)(4)
(B) with specific constructive ownership
rules in section 318 (not just those applicable to corporations) to address uncertainty in the determination of indirect
ownership. See STAFF OF THE JOINT
COMM. ON TAX’N, Technical Explanation of the Senate Committee on Finance
Chairman’s Staff Discussion Draft of
Provisions to Reform International Business Taxation (JCX-15-13) 84 (2013).
The 2013 Discussion Draft, however, is
not authoritative and has no relevance
because it was neither introduced as a bill
nor enacted into law. Moreover, Congress
did not provide any explanation as to why
constructive ownership rules under section 318, as proposed in the 2013 Discussion Draft, were not adopted in the PATH
Act nor did it provide any indication as
to its interpretation of “indirectly” under
the statute, and nothing in the legislative

PLR 200923001 (February 26, 2009).
See also STAFF OF THE JOINT COMM. ON TAX’N, Technical Explanation of the Revenue Provisions of the Protecting Americans from Tax Hikes Act of 2015, House Amendment #2 to
the Senate Amendment to H.R. 2029 (JCX-144-15) 186-87 (2015). As noted in the JCT Report, a Senate Committee on Finance report on an earlier, separate bill referenced the 2009 PLR in
the same manner in describing provisions similar to those in section 322 of the PATH Act. See JCT Report at 277, note 943; S. Rep. No. 114-25, 6 (2015).
1
2

May 20, 2024

1176

Bulletin No. 2024–21

history of the PATH Act or otherwise suggests draft legislation from more than two
years earlier during a different Congress
informed what was ultimately enacted in
the PATH Act. See United States v. Wise,
370 U.S. 405, 411 (1962) (“[S]tatutes are
construed by the courts with reference
to the circumstances existing at the time
of the passage. The interpretation placed
upon an existing statute by a subsequent
group of Congressmen who are promoting
legislation and who are unsuccessful has
no persuasive significance here.”).
The Treasury Department and the IRS
also disagree with one comment’s assertion that the legislative re-enactment
doctrine bears on whether to issue the
domestic corporation look-through rule.
See Helvering v. Reynolds, 313 U.S. 428,
432 (1941) (“[The doctrine of legislative
reenactment] does not mean that the prior
construction has become so imbedded
in the law that only Congress can effect
a change.”).3 Accordingly, the Treasury
Department and the IRS have determined
that no changes to section 897 made in,
or contemplated in connection with, the
PATH Act, or any explanation of those
changes, preclude, or otherwise affect,
adoption of the domestic corporation
look-through rule.
Finally, the Treasury Department and
the IRS have determined that the domestic
corporation look-through rule is the appropriate interpretation of the term “indirectly” in section 897(h)(4)(B) irrespective of whether the domestic C corporation
is subject to U.S. tax on income derived
from its QIE stock. As expressed through
the statutory text, the policy underlying
the DC-QIE exception looks to whether
control of the QIE is held directly or indirectly by United States or foreign persons,
which does not depend on whether United
States persons are subject to U.S. tax with
respect to income derived from their QIE
stock. The determination of domestic control is likewise not affected by whether
a foreign shareholder of the domestic C
corporation is subject to tax on a disposition of its stock in the corporation under
section 897. The purpose of the inquiry is

to determine control, and the status of an
entity as taxable is not determinative for
this purpose.
Accordingly, the Treasury Department
and the IRS do not adopt the recommendation to withdraw the domestic corporation look-through rule. However, the final
regulations modify the domestic corporation look-through rule as discussed in part
I.C of this Summary of Comments and
Explanation of Revisions.
C. Comments recommending
modifications to the domestic corporation
look-through rule; explanation of revision
Comments recommended that, if the
final regulations retain a rule similar to the
domestic corporation look-through rule,
then the approach should be narrowed
from what was proposed so that the final
rule more directly addresses potentially
inappropriate planning and is easier to
comply with and administer.
One comment suggested a variety
of potential approaches to narrow the
domestic corporation look-through rule.
Under one such approach, a non-public domestic C corporation that owns
10 percent or less of a QIE (determined
after applying constructive ownership
rules under section 318, so as to prevent
circumvention of the threshold) would
be treated as a non-look-through person.
The comment asserted that this approach
would be less burdensome on taxpayers
and the IRS than the proposed regulations
and is premised on the view that a foreign
person would not structure an investment
through a taxable domestic C corporation
so that an unrelated foreign person may
apply the DC-QIE exception. The comment described an alternative approach,
also intended to reduce compliance and
administrative burdens, that would treat
a non-public domestic C corporation as
a look-through person only if there is at
least one foreign person that is a non-lookthrough person that holds, directly or indirectly (using constructive ownership rules
under section 318), 25 percent or more of
the value of the corporation’s stock. Under

this alternative, look-through treatment
would also apply only as to those foreign
non-look-through persons. As another
alternative, the comment suggested a
look-through rule that would apply only if
a foreign person or a foreign related party
holds both a direct interest in the QIE and
a substantial indirect interest in the QIE
through a non-public domestic C corporation.
A different comment also recommended
an approach that focused on commonality
of substantial ownership by a foreign person of the QIE and the domestic C corporation. Specifically, a domestic C corporation would be treated as a foreign person
for purposes of section 897(h)(4)(B) (but
not for section 897(h)(4)(C)), if more than
50 percent of its stock is owned, by voting power or value, by foreign persons
that also hold stock of the QIE directly,
or indirectly through one or more partnerships, grantor trusts, or QIEs. Under this
comment’s recommended approach, a foreign person would be included in the more
than 50 percent control test if the domestic
C corporation had actual knowledge that
the foreign person has cross-ownership
of the QIE after inquiry with any person
that is at least a 5-percent shareholder of
the domestic C corporation (after applying
the rules of section 318(a)). The comment
reasoned that foreign investors should be
considered incidental and thus should not
be counted when measuring direct or indirect foreign control of the QIE when they
invest through a domestic C corporation
and do not have cross-ownership of the
QIE directly or through related parties,
or do hold interests in both entities but do
not individually or collectively control the
domestic C corporation.
Finally, one comment advocated that
a look-through approach to a domestic C
corporation should not apply when that
corporation has material business activities unrelated to its investment in a QIE’s
stock with potential safe harbors such as
where the corporation is registered as an
investment adviser under the Investment
Company Act of 1940 or the foreign owner
of the domestic C corporation is actively

3
See also Helvering v. Wilshire Oil Co., 308 U.S. 90, 100 (1939) (holding that the legislative reenactment doctrine applies where “it does not appear that the rule or practice has been changed
by the administrative agency through exercise of its continuing rule-making power”); McCoy v. United States, 802 F.2d 762 (4th Cir. 1986); Interstate Drop Forge Co. v. Comm’r, 326 F2d
743 (7th Cir. 1964).

Bulletin No. 2024–21

1177

May 20, 2024

traded on an established securities market
outside of the United States. The comment reasoned that such cases are unlikely
to be structured transactions of the type
identified by the proposed regulations.
Similarly, another comment also proposed
that the look-through approach should not
apply if a domestic C corporation would
be treated as engaged in a U.S. trade or
business if it had been a foreign corporation (such that the corporation is not a
mere shell), and this exception could be
further limited by ensuring that the value
of the QIE stock held by the domestic C
corporation is less than a certain threshold
of the affiliated group’s total assets.
The final regulations do not adopt any
of the recommended modifications to the
domestic corporation look-through rule.
Several suggested modifications would
limit the application of the rule to situations that indicate that foreign persons are
using a domestic C corporation to establish domestic control of a QIE so that
their direct investments in the QIE benefit
from the DC-QIE exception. However,
as discussed in part I.A of this Summary
of Comments and Explanation of Revisions, the proposed and final regulations
serve a broader purpose by interpreting the meaning of “indirect” ownership
under section 897(h)(4)(B) to effectuate
the policy of the DC-QIE exception by
ensuring that the exception is available
only when a QIE is controlled by United
States persons. The comments also proposed various modifications intended to
limit or alter the application of the rule;
the Treasury Department and the IRS are
of the view that these would introduce
additional complexity, such as requiring
an examination of the business activities
of a domestic C corporation. Furthermore,
a modification that would treat domestic
C corporations that own less than 10 percent of a QIE as a non-look-through person would not alleviate concerns regarding the ability to identify shareholders
through multiple tiers of ownership, and
could result in disparate and inconsistent
results as to which foreign owners are
taken into account in measuring domestic control of a QIE (for example, a foreign non-look-through person that wholly
owns a domestic C corporation that owns
9 percent of a QIE would not be taken into
account, while a foreign non-look-through

May 20, 2024

person that owns 50 percent of a domestic C corporation that owns 10 percent of
the QIE would be taken into account). The
Treasury Department and the IRS also do
not agree that the domestic corporation
look-through rule should only apply if
25 percent or more of the corporation’s
stock is owned by a single foreign nonlook-through person (taking into account
section 318 constructive ownership rules),
as the DC-QIE exception looks to any
measure of foreign ownership of a QIE
and such a high threshold would inappropriately exempt foreign persons owning
significant indirect interests in QIEs from
look-through treatment.
Although the final regulations do not
adopt any of the specific recommendations to the domestic corporation lookthrough rule, the Treasury Department
and the IRS agree that the scope of the rule
should be narrowed to address compliance
concerns and to ensure the rule is more
appropriately limited to situations where
significant indirect ownership by foreign
persons indicative of foreign control is
present. After considering the various suggestions raised in comments, the Treasury
Department and the IRS have determined
that this is best achieved by increasing the
amount of foreign ownership required to
look through a non-public domestic C corporation from 25 percent or more to more
than 50 percent. Increasing the threshold
to more than 50 percent significantly narrows the scope of look-through treatment
to non-public domestic C corporations
that are controlled by foreign persons,
and is consistent with the measurement of
control for purposes of the domestically
controlled QIE test. This change is also
consistent with the policy of the DC-QIE
exception and other provisions in section
897 that are based on a 50-percent threshold. See, for example, section 897(c)(2)
(providing that a corporation is a United
States real property holding corporation if
the fair market value of its United States
real property interests (“USRPIs”) meets
a 50 percent or greater threshold). Thus,
rather than a “foreign-owned domestic
corporation,” the final regulations apply
look-through treatment with respect to
a “foreign-controlled domestic corporation,” which is defined as any non-public
domestic C corporation if foreign persons
hold directly or indirectly more than 50

1178

percent of the fair market value of that
corporation’s outstanding stock (the “final
domestic corporation look-through rule”).
§1.897-1(c)(3)(v)(B). In addition, the
final regulations adopt a transition rule
for existing QIE structures, as discussed
in part IV of this Summary of Comments
and Explanation of Revisions.
II. Effect of Section 897(l) on the DC-QIE
Exception
A. Background on section 897(l) and
interaction with the DC-QIE exception
Section 897(l) provides an exception
to the application of section 897(a) for
certain foreign pension funds and their
wholly owned subsidiaries. As originally
enacted in the PATH Act, section 897(l)(1)
provided that section 897 does not apply
to any USRPI held directly (or indirectly
through one or more partnerships) by, or
to any distribution received from a REIT
by, a QFPF or any entity all of the interests of which are held by a QFPF. Congress later made several technical amendments to section 897(l) in section 101(q)
of the Tax Technical Corrections Act of
2018, Public Law 115-141, div. U (the
“2018 technical correction”). As amended
by the 2018 technical correction, section
897(l) provides that neither a QFPF nor an
entity all the interests of which are held by
a QFPF is treated as a nonresident alien
individual or foreign corporation for purposes of section 897.
The proposed regulations addressed
uncertainty as to whether QFPFs and entities wholly owned by one or more QFPFs
(“QCEs”), which are treated as not “nonresident alien individuals or foreign corporations” for purposes of section 897, are
treated as foreign persons for purposes of
the DC-QIE exception. Specifically, proposed §1.897-1(c)(3)(iv)(A) provided that
a QFPF, including any part of a QFPF, or
a QCE is a foreign person for purposes
of the DC-QIE exception (the “QFPF
DC-QIE rule”).
B. Comments regarding authority to issue
the QFPF DC-QIE rule
Although one comment stated that
it was generally in agreement with the
QFPF DC-QIE rule, other comments rec-

Bulletin No. 2024–21

ommended that the rule be withdrawn
because it is an incorrect reading of the
statute and contrary to congressional
intent. One comment contended that the
preamble to the proposed regulations
failed to consider the existing definition of
“foreign person” in §1.897-9T(c) (which
includes a foreign corporation, a foreign
partnership, a foreign trust, or a nonresident alien individual) and noted that Congress is presumed to have knowledge of
that regulatory definition. The comment
also contended that the text of section
897(l) is clear and that, without any textual ambiguity, the Treasury Department
and the IRS lack the authority to issue the
QPFF DC-QIE rule.
Another comment submitted that the
legislative history and policy of section
897, including the DC-QIE exception and
the section 897(l) exception for QFPFs,
indicate that 50 percent or more ownership of a QIE by a QFPF results in the
DC-QIE exception being available to
other foreign investors. The comment’s
overall recommendation was to clarify
the definition of foreign person in section
897(h)(4)(B) and (C) to have the same
meaning as “a nonresident alien individual or a foreign corporation” in section
897(a). The comment included several
reasons for its recommendation. First,
section 897(l) refers generally to section
897, rather than solely to section 897(a),
which the comment argued indicates that
section 897(l) is intended to be given
effect for all purposes under section 897.
According to the comment, the effect of
section 897(l) on the DC-QIE exception
can be analogized to a special election in
section 897(i) for a foreign corporation to
be treated as a domestic corporation for
purposes of section 897 because, when
that election applies, it has effect for
all of section 897 and can benefit other
investors in QIEs even though they are
not party to the election. The comment
also noted that the 2018 technical correction should be presumed to be a more
accurate reflection of the original intent
of Congress, which was to align QFPFs
with exempt U.S. pension funds. Finally,
the comment noted that because a QFPF
is not taxed under section 897(h)(1), there
is no policy reason to treat it as a foreign
person for other rules such as the DC-QIE
exception, the foreign ownership percent-

Bulletin No. 2024–21

age rule in section 897(h)(3) or the wash
sale rule in section 897(h)(5).
The Treasury Department and the IRS
have determined that the QFPF DC-QIE
rule reflects the proper interpretation of
the statute and congressional intent. The
term “nonresident alien individuals or
foreign corporations” in section 897(l)
(introduced only in the 2018 technical
correction) differs from “foreign persons”
in section 897(h)(4)(B), and the purposes
of the two provisions also differ. Congress
provided no indication that it intended for
the definition of foreign person in §1.8979T(c) to apply to confer non-foreign person status on QFPFs for purposes of the
DC-QIE exception. Instead, the term
“nonresident alien individuals or foreign
corporations” appears in section 897(a)
and similar provisions to refer to the persons that are directly subject to tax under
FIRPTA. The Treasury Department and
the IRS also do not agree that a QFPF is
analogous to a foreign corporation that
has elected to be treated as a domestic
corporation under section 897(i) because
that election explicitly treats a foreign
corporation as a domestic corporation and
therefore not a foreign person. In contrast,
section 897(l) treats a QFPF as not a nonresident alien individual or a foreign corporation but does not address whether a
QFPF is also not a foreign person.
The Treasury Department and the IRS
agree that it is reasonable to presume that
the changes made in the 2018 technical
correction are a more accurate reflection
of original congressional intent, which
the preamble to the proposed regulations
described (allowing a QFPF and QCE
to jointly own a USRPI and qualify for
section 897(l) with respect to their partial USRPI interests, as well as clarifying
that the section 897(l) exception applies
to distributions from all QIEs and not
just REITs). 87 FR 80100. However, the
Treasury Department and the IRS disagree
with the assertion that the 2018 technical
correction should be interpreted to bestow
the benefit of the DC-QIE exception on
foreign investors that cannot claim the
section 897(l) exception. Such an interpretation would be inconsistent with
the intent of section 897(l) as originally
enacted in the PATH Act, which was to
provide an exception from section 897 to
QFPFs (and QCEs). Where possible, as in

1179

this case, the technical correction should
be viewed in a manner consistent with a
core principle of the original legislation.
See Fed. Nat’l Mortgage Assoc. v. United
States, 56 Fed. Cl. 228, 234, 237 (2003),
rev’d and remanded on other grounds,
379 F.3d 1303 (Fed. Cir. 2004) (‘‘Congress turns to technical corrections when
it wishes to clarify existing law or repair a
scrivener’s error, rather than to change the
substantive meaning of the statute. . . . [A]
technical correction that merely restores
the rule Congress intended to enact cannot
be construed as a fundamental change in
the operation of the statute.’’); STAFF OF
THE JOINT COMM. ON TAX’N, Overview of Revenue Estimating Procedures
and Methodologies Used by the Staff of
the Joint Committee on Taxation (JCX–
1–05) 33 (2005) (describing a technical
correction as ‘‘legislation that is designed
to correct errors in existing law in order
to fully implement the intended policies
of previously enacted legislation’’ and a
change that ‘‘conforms to and does not
alter the intent’’ of the underlying legislation).
The comment discussed above asserts
that there is no policy reason to treat a
QFPF as a foreign person for other provisions in section 897(h) such as the
DC-QIE exception, given that the QFPF
is not taxed under section 897(h)(1). The
Treasury Department and the IRS disagree based on the statute and its policy.
As described earlier in this preamble, the
policy of the DC-QIE exception looks to
foreign control, not control by taxable persons. The presence or absence of taxation
of the controlling persons is not determinative. Additionally, Congress expressed
in section 897(l) an intent to provide a tax
benefit specifically for QFPFs, and not for
other owners of a DC-QIE that would benefit from the QFPF’s treatment. Therefore,
the Treasury Department and the IRS have
determined that the appropriate interpretation of the statute is one that only gives
effect to the purpose of section 897(l) to
provide an exception from section 897
for QFPFs, rather than a construction
that would give non-QFPF investors the
ability to rely on section 897(l) to benefit under the DC-QIE exception. The
DC-QIE exception is a separate provision with underlying policies that focus
on foreign control rather than taxability

May 20, 2024

of controlling persons, and these policies
are inconsistent with treating a QFPF as
a United States person for purposes of the
DC-QIE exception. Accordingly, the final
regulations do not adopt the comments’
recommendations.
III. Other Comments and Revisions
A. Certain registered investment vehicles
One comment noted that there are a
large number of investment vehicles that
are publicly registered with the Securities
and Exchange Commission (“SEC”) that
own QIEs but are not regularly traded and
asserted that the final regulations should
treat these investment vehicles offered to
retail investors (for example, non-traded
publicly registered REITs, non-traded
publicly registered RICs, or publicly registered open-ended funds) as non-lookthrough persons. The comment noted that
the same reasoning for applying non-lookthrough treatment to public domestic C
corporations and publicly traded partnerships – that is, difficulty in looking through
to the entity’s owners and the unlikelihood
for use as an intermediary entity to establish domestic control – applied equally to
those investment vehicles.
The final regulations do not adopt
this comment with respect to registered
investment vehicles that are QIEs because
section 897(h)(4)(E) already provides specific rules with respect to QIE ownership
by other QIEs that are incorporated in the
final regulations. In particular, under section 897(h)(4)(E)(ii), stock in a QIE held
by certain public QIEs is treated as held
by a foreign or United States person based
on whether the public QIE is itself domestically controlled. §1.897-1(c)(3)(iii)(C).
Section 897(h)(4)(E)(iii) provides that
stock of a QIE held by a QIE that is not
a public QIE is only treated as held by a
United States person in proportion to the
stock of the non-public QIE that is held
by a United States person. Section 897(h)
(4)(E)(iii) thus contemplates look-through
treatment for non-public QIEs, even if
such QIEs are publicly registered with the
SEC, and this treatment is reflected in the
final regulations. §1.897-1(c)(3)(v)(C).
However, the Treasury Department and
the IRS are of the view that the treatment
of certain RICs that are not QIEs should

May 20, 2024

be aligned with the treatment of other publicly held entities that are not QIEs. The
proposed regulations provided that any
RIC that is not a QIE, and thus not subject to the rules that apply to public QIEs,
is treated as a look-through person. With
respect to RICs whose shares are publicly
traded or otherwise widely held, this treatment may be viewed as inconsistent with
the treatment of publicly traded partnerships and public domestic C corporations,
neither of which is subject to look-through
treatment under the proposed regulations
primarily due to compliance and administrability concerns. The final regulations
therefore provide that a public RIC, generally defined as a RIC that is not a QIE
and whose shares are (i) regularly traded
on an established securities market or
(ii) common stock that is continuously
offered pursuant to a public offering and
held by at least 500 shareholders, is generally treated as a non-look-through person.
§1.897-1(c)(3)(v)(D) and (I). However,
for reasons similar to those discussed in
part I.C of this Summary of Comments
and Explanation of Revisions (regarding
foreign-controlled domestic corporations,
which are treated as look-through persons), a RIC will not be a public RIC,
and thus will be a look-through person,
if the QIE being tested for domestically
controlled status under §1.897-1(c)(3) has
actual knowledge that the RIC is foreign
controlled, which is determined by treating the RIC as a non-public domestic C
corporation and applying §1.897-1(c)(3)
(v)(B). §1.897-1(c)(3)(v)(I).
B. Public entities
The proposed regulations provided that
a person holding less than five percent
of U.S. publicly traded stock of a QIE at
all times during the testing period, determined without regard to proposed §1.8971(c)(3)(ii)(A), is treated as a United States
person that is a non-look-through person
with respect to that stock, unless the QIE
has actual knowledge that such person is
not a United States person. Section 897(h)
(4)(E)(i); proposed §1.897-1(c)(3)(iii)(A).
To prevent the avoidance of the actual
knowledge exception to this rule, the final
regulations modify the rule to provide that
it will also not apply if the QIE has actual
knowledge that such person is foreign

1180

controlled (treating any person that is not
a non-public domestic C corporation as
a non-public domestic C corporation for
this purpose). §1.897-1(c)(3)(iii)(A).
The proposed regulations also provided
non-look-through treatment for public
domestic C corporations and publicly
traded partnerships, which were generally
defined to include entities with a class of
stock or interests regularly traded on an
established securities market. Proposed
§1.897-1(c)(3)(v)(D), (G) and (I). In the
final regulations, these definitions exclude
domestic entities that are known to be foreign controlled. Thus, consistent with the
treatment of public RICs and for reasons
similar to those discussed in part I.C of this
Summary of Comments and Explanation
of Revisions (regarding foreign-controlled
domestic corporations, which are treated
as look-through persons), a domestic C
corporation or a domestic partnership will
not be a public domestic C corporation or
a publicly traded partnership, respectively,
if the QIE being tested for domestically
controlled status under §1.897-1(c)(3) has
actual knowledge that the corporation or
partnership is foreign controlled (treating
the entity as a non-public domestic C corporation for this purpose). §1.897-1(c)(3)
(v)(G) and (J). In such case, the domestic C corporation or domestic partnership
will therefore be a look-through person.
§1.897-1(c)(3)(v)(B) through (E).
C. Certification by domestic C
corporation
One comment recommended that the
final regulations provide guidance on how
a domestic C corporation may certify to a
QIE that it is not a foreign-owned domestic corporation. The comment suggested
that the regulations provide a model certification to confirm that a domestic C corporation is not foreign owned, such as a
revised Form W-9.
The final regulations do not provide
guidance regarding the procedures for
determining whether a domestic C corporation is a foreign-controlled domestic corporation, nor do they provide any
procedures generally for a QIE to identify its non-look-through person owners
for purposes of determining whether the
QIE is domestically controlled. A QIE
must take appropriate measures to deter-

Bulletin No. 2024–21

mine the identity of its direct and indirect
shareholders in determining whether it is
domestically controlled, and the final regulations do not prescribe a specific form
or method as to how it solicits or receives
information from its shareholders. Guidance with respect to the manner in which a
QIE determines the identity of its relevant
shareholders for purposes of establishing
domestic control is beyond the scope of
this rulemaking but may be considered in
a separate guidance project.
D. Section 1445 withholding on
dispositions of USRPI
Current regulations under section
1445 (imposing withholding of tax on
dispositions of USRPI) provide the circumstances under which a transferee of
property can ascertain that there is no
duty to withhold under section 1445(a)
because the transferor is not a foreign person, the property acquired is not a USRPI,
or an exception to withholding applies.
§1.1445-2. Section 1.1445-2(c)(3) provides that no withholding is required with
respect to an acquisition of an interest in
a domestic corporation if the transferor
provides the transferee with a copy of a
statement, issued by the corporation pursuant to §1.897-2(h), certifying that the
interest in the corporation is not a USRPI.
The transferor must request the statement
before the transfer, which may be relied
on if the statement is dated not more than
30 days before the date of the transfer. A
transferee may also rely on a corporation’s
statement that is voluntarily provided by
the domestic corporation in response to a
request from the transferee, if that statement otherwise complies with the requirements of §§1.1445-2(c)(3) and 1.897-2(h).
Under §1.897-2(h)(1), a foreign person holding an interest in a domestic
corporation may request that the corporation inform the person whether the
interest constitutes a USRPI, which the
corporation is required to provide within
a reasonable period after receipt of such
a request. A statement must be provided
by the domestic corporation to the foreign
person indicating the corporation’s determination, and notice must be provided to
the IRS in accordance with §1.897-2(h)
(2). Section 1.897-2(h)(3), however, provides that the requirements of §1.897-2(h)

Bulletin No. 2024–21

do not apply to “domestically-controlled
REITs, as defined in section 897(h)(4)
(B),” although a corporation not otherwise required to comply with the requirements of §1.897-2(h) may voluntarily
choose to comply with the requirements
of §1.897-2(h)(4) and attach a statement
to its income tax return informing the IRS
that it is not a United States real property
holding corporation.
The availability of the procedures in
§1.1445-2(c)(3) to holders of stock in a
domestically controlled QIE is unclear
given its reference to a statement provided
under §1.897-2(h), which is explicitly
inapplicable to domestically controlled
QIEs under §1.897-2(h)(3). Although
§1.897-2(h) generally does not apply to
domestically controlled QIEs pursuant to
§1.897-2(h)(3) (and, therefore, the corporation is not required, upon request, to
provide a statement to a person holding
an interest in the corporation), this should
not preclude the availability of the rules in
§1.1445-2(c)(3) to transferors of interests
seeking to avoid withholding under section 1445 when the corporation voluntarily
provides a statement to an interest holder
that otherwise complies with §1.897-2(h).
Absent the availability of these procedures, the transferor would not be able to
establish that it is transferring an interest
in a domestically controlled QIE and is
thus not subject to withholding under section 1445(a). The final regulations thus
revise the rules in §§1.897-2(h)(3) and
1.1445-2(c)(3) to clarify the procedures
available to a transferor to certify to a
transferee that no withholding is required
because the DC-QIE exception applies.
As revised, the final regulations confirm
that a domestic corporation may voluntarily provide a statement in response to a
request from a transferor certifying that an
interest in the corporation is not a USRPI
because the corporation is a domestically
controlled QIE, which the transferor may
furnish to the transferee, provided the
statement issued by the corporation otherwise complies with the requirements of
§1.897-2(h).
E. Revisions to examples
A comment observed that proposed
§1.897-1(c)(3)(vi)(D) (Example 4) contained a mathematical error. The final ver-

1181

sion of this example corrects that error,
which does not otherwise affect the overall conclusion that the entity at issue does
not qualify as a domestically controlled
QIE. §1.897-1(c)(3)(vii)(D) (Example 4).
The final regulations make other revisions
to the examples in proposed §1.897-1(c)
(3)(vi) to clarify the operation of certain
rules, but which are not intended to alter
the conclusions or substance of those
examples.
IV. Applicability Date and Transition
Rules
The proposed regulations generally
were proposed to apply to transactions
occurring on or after the date that those
regulations are published as final regulations in the Federal Register (“the finalization date”). The preamble to the proposed regulations noted, however, that the
rules applicable for determining whether
a QIE is domestically controlled may be
relevant for determining QIE ownership
during periods before the finalization date
to the extent the testing period related to
a transaction that occurs on or after the
finalization date includes periods before
that date.
Comments raised concerns with the
proposed applicability date; in particular,
they noted that it would have a retroactive
effect because of the testing period element of the DC-QIE exception and argued
that, if adopted, the domestic corporation
look-through rule should apply on a fully
prospective basis with no application to
any portion of a testing period before the
finalization date. Further, these comments
characterized the proposed regulations as
a change from existing law and asserted
that applying the rules to existing structures would be inappropriate because
restructuring to comply with the rules
would be difficult and costly, and buyers
may be less inclined to invest in a structure that may be “tainted” as failing to
qualify for the DC-QIE exception.
Comments generally advocated for
the following types of transition relief:
(i) for QIEs in existence on the date the
proposed regulations were issued, provide
an exception (subject to termination rules
like those in §301.7701-2(d)) such that
a foreign-owned domestic corporation
is not treated as a look-through person;

May 20, 2024

(ii) exempt foreign investors in existing
QIEs from the domestic corporation lookthrough rule to the extent of existing ownership and capital commitments as of the
date the proposed regulations were issued;
(iii) only apply the domestic corporation
look-through rule to QIE stock acquired
by a foreign-owned domestic corporation
after the finalization date; or (iv) delay
application of the domestic corporation
look-through rule to existing QIEs for
some period ranging from at least 120
days after the finalization date to tax years
beginning on or after January 1, 2028
(drawing from the general five-year testing period standard).
The final regulations do not adopt the
suggestion to delay application of the final
domestic corporation look-through rule,
which would exempt both existing and
new QIE structures from the rule. However, the Treasury Department and the
IRS have determined that, although the
final domestic corporation look-through
rule represents the appropriate application
of section 897(h)(4)(B), its effect should
be limited with respect to investors that
may have entered into structures with
the expectation that domestic control of a
QIE would be determined without regard
to that rule. Thus, consistent with the first
three types of comments noted above, the
final regulations include a transition rule
that, for a ten-year period, exempts existing structures from the final domestic corporation look-through rule, provided they
meet certain requirements. §1.897-1(c)(3)
(vi). These requirements are intended to
ensure that the final domestic corporation
look-through rule does not apply to preexisting business arrangements, but only
to the extent the QIE does not acquire a
significant amount of new USRPIs and
does not undergo a significant change in
its ownership (subject to an exception for
acquisitions of a USRPI or QIE interest
pursuant to a previous binding commitment). §1.897-1(c)(3)(vi)(A) and (E). If
either of these two thresholds is exceeded,
the QIE at that time becomes subject to the
final domestic corporation look-through
rule like any other QIE. §1.897-1(c)(3)
(vi)(B).
A QIE is considered to have acquired
a significant amount of new USRPIs if
the total fair market value of the USRPIs
it acquires directly and indirectly exceeds

May 20, 2024

20 percent of the fair market value of the
USRPIs held directly and indirectly by the
QIE as of April 24, 2024. §1.897-1(c)(3)
(vi)(A)(2). The final regulations provide
that the value of the USRPIs held directly
and indirectly by a QIE on April 24, 2024
is determined as of that date and that, for
this purpose, taxpayers may use the most
recently calculated amounts under the
quarterly tests described in section 851(b)
(3) or 856(c)(4), as applicable. §1.8971(c)(3)(vi)(D). By using these existing
rules the final regulations minimize the
need to make additional or complex valuations.
In determining whether there has been
a significant change in the ownership of a
QIE, the final regulations consider whether
the direct or indirect ownership of the QIE
by non-look-through persons (determined
by applying the final domestic corporation
look-through rule) has increased by more
than 50 percentage points in the aggregate
relative to the QIE stock owned by such
non-look-through persons on April 24,
2024. §1.897-1(c)(3)(vi)(A)(3). Because
this rule applies on a percentage basis, a
non-pro-rata issuance or redemption of
stock is counted towards the 50 percentage point amount. To simplify the determination of changes in ownership of stock
of a QIE that is publicly traded, the final
regulations disregard transfers by any person (regardless of whether they are a nonlook-through person) that owns a less than
five-percent interest in the stock of the
QIE, unless the QIE has actual knowledge
of that person’s ownership. §1.897-1(c)(3)
(vi)(G).
The transition rule applies until April
24, 2034, or, if earlier, until the requirements precluding significant acquisitions of USRPIs and changes in ownership are not met, at which time the final
domestic corporation look-through rule
applies in determining whether a QIE is
domestically controlled. §1.897-1(c)(3)
(vi)(B). The ten-year period is intended
to provide sufficient time to mitigate the
impact of the final domestic corporation
look-through rule on existing QIEs and
their investors, but ensures that all QIEs
are eventually subject to the same rules.
However, even after the transition rule no
longer applies, the final domestic corporation look-through rule is prospective only
and thus does not apply to any portion of

1182

a testing period during which the transition rule applied to a QIE. §1.897-1(c)
(3)(vi)(C). Thus, for example, if the transition rule ceases to apply to a QIE due
to a change in its ownership but, at such
time, the QIE is a domestically controlled
QIE notwithstanding the final domestic
corporation look-through rule, the determination of domestic control for the testing period of a subsequent disposition of
QIE stock may disregard the final domestic corporation look-through rule to the
extent the transition rule applied.
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 OMB before collecting
information from the public, whether such
collection of information is mandatory,
voluntary, or required to obtain or retain
a benefit. The collection of information in
§1.1445-2(c)(3) is a statement provided
by a domestic corporation that certifies
that an interest in such corporation is
not a U.S. real property interest. Section
1.1445-2(c)(3) clarifies that the existing
procedure may also be used by a domestic
corporation to certify that it is a domestically controlled QIE (as determined under
§1.897-1(c)(3)), as long as the certification is voluntarily issued and otherwise
complies with the existing requirements
in §1.897-2(h).
This modification to §1.1445-2(c)(3)
clarifies the existing scope of the collection of information. For purposes of the
PRA, the reporting burden associated with
the collections of information in §1.14452(c)(3) will be reflected in the Paperwork
Reduction Act Submissions associated

Bulletin No. 2024–21

with the section 1445 regulations (OMB
control number 1545–0902).
III. Regulatory Flexibility Act
A. Succinct Statement of the Need for,
and Objectives of, the Final Regulations
As discussed in the preamble to the
proposed regulations, there may be some
uncertainty as to whether QFPFs and
QCEs, which are treated as not “nonresident alien individuals or foreign corporations” for purposes of section 897, are
treated as foreign persons for purposes of
the DC-QIE exception. Treating QFPFs
and QCEs as non-foreign investors for
purposes of the DC-QIE exception has the
potential to expand the effect of section
897(l) to foreign investors who are neither QFPFs nor QCEs (by exempting such
investors from tax under section 897(a)).
These regulations eliminate any uncertainty that taxpayers may have as to the
proper classification of QFPFs and QCEs
for purposes of the DC-QIE exception
by providing that QFPFs and QCEs are
treated as foreign persons for purposes of
the DC-QIE exception.
Also as discussed in the preamble to
the proposed regulations, there is uncertainty regarding the determination of
whether stock of a QIE is held “directly
or indirectly” by foreign persons for purposes of the DC-QIE exception. These
regulations provide rules to clarify this
determination.
Because there was a possibility of significant economic impact on a substantial
number of small entities as a result of the
rules relating to the treatment of QFPFs
and QCEs for purposes of the DC-QIE
exception and the definition of a domestically controlled QIE, the proposed regulations provided an initial regulatory
flexibility analysis and requested comments from the public on the number of
small entities that may be impacted and
whether that impact will be economically
significant. No comments were received.
B. Small Entities to Which These
Regulations Will Apply
The regulation relating to the treatment of QFPFs and QCEs for purposes
of the DC-QIE exception affects other

Bulletin No. 2024–21

foreign investors in QIEs. The regulation
defining a domestically controlled QIE
also affects foreign investors in QIEs.
Because an estimate of the number of
small businesses affected is not currently
feasible, this final regulatory flexibility
analysis assumes that a substantial number of small businesses will be affected.
The Treasury Department and the IRS
do not expect that these regulations will
affect a substantial number of small nonprofit organizations or small governmental jurisdictions.
C. Projected Reporting, Recordkeeping,
and Other Compliance Requirements
These regulations do not impose additional reporting or recordkeeping obligations. However, see Part II of this Special
Analysis describing certain voluntary
reporting that these regulations clarify is
available in §1.1445-2(c)(3) by a domestic
corporation to certify that it is a domestically controlled QIE.
D. Steps Taken to Minimize Significant
Economic Impact, Legal Reasons, and
Alternatives Considered
The final regulations address potential uncertainty under current law and do
not impose an additional economic burden. Consequently, the rules represent the
approach with the least economic impact.
These regulations clarify the treatment of QFPFs and QCEs for purposes
of the DC-QIE exception. The rules are
intended to ensure that the exemption
under section 897(l) does not inappropriately inure to non-QFPFs or non-QCEs
by treating QFPFs and QCEs as domestic investors for purposes of the DC-QIE
exception. These regulations also clarify
whether stock of a QIE is held “directly
or indirectly” by foreign persons in determining whether the DC-QIE exception
applies. The legal basis for these regulations is contained in sections 897(l) and
7805.
Section 897(a) applies to nonresident
alien individuals and foreign corporations, and neither the statute nor prior regulations establish different rules for small
entities. Moreover, the DC-QIE exception
is measured based on the ownership interests in a QIE, regardless of the size of the

1183

investor. Because the DC-QIE exception
takes into account all investors, regardless of size, the Treasury Department and
the IRS have concluded that the DC-QIE
exception should apply uniformly to large
and small business entities. The Treasury
Department and the IRS did not consider
any significant alternative to the rule that
provides for the treatment of QFPFs and
QCEs under the DC-QIE exception.
The Treasury Department and the IRS
did consider alternatives for the rule that
defines a domestically controlled QIE,
including one alternative that generally
would treat all domestic C corporations
as non-look-through persons (that is,
without the special rule for foreign-controlled domestic corporations discussed in
part I of the Summary of Comments and
Explanation of Revisions section of this
preamble). However, the Treasury Department and the IRS concluded that the lookthrough approach in the final regulations
best serves the purposes of the DC-QIE
exception while also taking into account
“indirect” ownership of QIE stock by
foreign persons in determining whether a
QIE is domestically controlled under section 897(h)(4)(B).
IV. Section 7805(f)
Pursuant to section 7805(f) of the Code,
the proposed regulations (REG-10044222) preceding these final regulations were
submitted to the Chief Counsel for Advocacy of the Small Business Administration
for comment on the impact on small businesses and no comments were received.
V. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates
Reform Act of 1995 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 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.
The final regulations do 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.

May 20, 2024

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. The final regulations
do not have federalism implications, do
not impose substantial direct compliance
costs on State and local governments, and
do not preempt State law within the meaning of the Executive order.
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.
Drafting Information
The principal author of these final regulations is Arielle Borsos, Office of Associate Chief Counsel (International). However, other personnel from the Treasury
Department and the IRS participated in
their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is amended
as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by adding entries in
numerical order for §§1.897-1, 1.897-2,
and 1.1445-2 to read in part as follows:

May 20, 2024

Authority: 26 U.S.C. 7805 * * *
*****
Section 1.897-1 also issued under 26
U.S.C. 897 and 897(l)(3).
Section 1.897-2 also issued under 26
U.S.C. 897.
*****
Section 1.1445-2 also issued under 26
U.S.C. 1445.
*****
Par. 2. Section 1.897-1 is amended by:
1. Revising paragraph (a)(2);
2. Removing and reserving paragraph
(c)(2)(i);
3. Adding paragraphs (c)(3) and (4) and
(k);
4. Revising and republishing paragraph
(l); and
5. Adding paragraph (n).
The revisions and additions read as follows:
§1.897-1 Taxation of foreign investment
in United States real property interests,
definition of terms.
(a) * * *
(2) Applicability date. Except as otherwise provided in this paragraph (a)(2),
the regulations set forth in this section
and §§1.897-2 through 1.897-4 apply to
transactions occurring after June 18, 1980.
Except as otherwise provided in paragraph
(c)(3)(vi) of this section, paragraphs (c)(3)
and (4), (k), and (l) of this section apply to
transactions occurring on or after April 25,
2024, and transactions occurring before
April 25, 2024, resulting from an entity
classification election under §301.7701-3
of this chapter that was effective on or
before April 25, 2024, but was filed on
or after April 25, 2024. For transactions
occurring before April 25, 2024, see paragraphs (c)(2)(i) and (l) of this section and
§1.897-9T(c) contained in 26 CFR part 1,
as revised April 1, 2024.
*****
(c) * * *
(3) Domestically controlled QIE—(i)
In general. An interest in a domestically
controlled qualified investment entity
(QIE) is not a United States real property interest. A QIE is domestically controlled if foreign persons hold directly or
indirectly less than 50 percent of the fair
market value of the QIE’s outstanding
stock at all times during the testing period.

1184

For rules that apply to distributions by a
QIE (including a domestically controlled
QIE) attributable to gain from the sale or
exchange of a United States real property
interest, see section 897(h)(1).
(ii) Look-through approach for determining QIE stock held directly or indirectly. The following rules apply for purposes of determining whether a QIE is
domestically controlled:
(A) Non-look-through persons considered holders. Only a non-look-through
person is considered to hold directly or
indirectly stock of the QIE.
(B) Attribution from look-through
persons. Stock of a QIE that, but for the
application of paragraph (c)(3)(ii)(A) of
this section, would be considered directly
or indirectly held by a look-through person, is instead considered held directly or
indirectly by the look-through person’s
shareholders, partners, or beneficiaries,
as applicable, that are non-look-through
persons based on the non-look-through
person’s proportionate interest in the
look-through person. To the extent the
shareholders, partners, or beneficiaries, as
applicable, of the look-through person are
also look-through persons, this paragraph
(c)(3)(ii)(B) applies to such shareholders,
partners, or beneficiaries as if they directly
or indirectly held, but for the application
of paragraph (c)(3)(ii)(A) of this section,
their proportionate share of the stock of
the QIE.
(C) No attribution from non-lookthrough persons. Stock of a QIE considered held directly or indirectly by a nonlook-through person is not considered
held directly or indirectly by any other
person.
(iii) Special rules for applying lookthrough approach. The following additional special rules apply for purposes of
determining whether a QIE is domestically controlled:
(A) Certain holders of U.S. publicly
traded QIE stock. Notwithstanding any
other provision of this paragraph (c)(3),
a person holding less than five percent
of U.S. publicly traded stock of a QIE at
all times during the testing period, determined without regard to paragraph (c)
(3)(ii)(A) of this section, is treated as a
United States person that is a non-lookthrough person with respect to that stock,
unless the QIE has actual knowledge that

Bulletin No. 2024–21

such person is not a United States person
or has actual knowledge that such person
is foreign controlled as determined under
paragraph (c)(3)(v)(B) of this section
(treating any person that is not a non-public domestic C corporation as if it were
a non-public domestic C corporation for
this purpose). For an example illustrating
the application of this paragraph (c)(3)(iii)
(A), see paragraph (c)(3)(vii)(C) of this
section (Example 3).
(B) Certain foreign-controlled domestic C corporations. A non-public domestic
C corporation is treated as a look-throughperson if it is a foreign-controlled domestic corporation. For an example illustrating the application of this paragraph (c)
(3)(iii)(B), see paragraph (c)(3)(vii)(B) of
this section (Example 2).
(C) Public QIEs. A public QIE is
treated as a foreign person that is a nonlook-through person. The preceding sentence does not apply, however, if the public QIE is a domestically controlled QIE
as defined in this paragraph (c)(3), determined after the application of this paragraph (c)(3)(iii), in which case the public
QIE is treated as a United States person
that is a non-look-through person. For an
example illustrating the application of this
paragraph (c)(3)(iii)(C), see paragraph (c)
(3)(vii)(C) of this section (Example 3).
(iv) Treatment of certain persons as
foreign persons—(A) Qualified foreign
pension fund or qualified controlled entity.
For purposes of this paragraph (c)(3), a
qualified foreign pension fund (including
any part of a qualified foreign pension
fund) or a qualified controlled entity is
treated as a foreign person, irrespective
of whether the fund or entity qualifies for
the exception from section 897 provided
in §1.897(l)-1(b)(1). For an example illustrating the application of this paragraph
(c)(3)(iv)(A), see paragraph (c)(3)(vii)(A)
of this section (Example 1). See also paragraph (k) of this section for a definition of
foreign person that applies for purposes of
sections 897, 1445, and 6039C.
(B) International organization. For
purposes of this paragraph (c)(3), an international organization (as defined in section
7701(a)(18)) is treated as a foreign person.
See §1.897-9T(e) (regarding the treatment
of international organizations under sections 897, 1445, and 6039C), which provides that an international organization is

Bulletin No. 2024–21

not a foreign person with respect to United
States real property interests, and is not
subject to sections 897, 1445, and 6039C
on the disposition of a United States real
property interest.
(v) Definitions. The following definitions apply for purposes of this paragraph
(c)(3):
(A) A domestic C corporation is any
domestic corporation other than a regulated investment company (RIC) as
defined in section 851, a real estate investment trust (REIT) as defined in section
856, or an S corporation as defined in section 1361.
(B) A foreign-controlled domestic
corporation is any non-public domestic C corporation if foreign persons hold
directly or indirectly more than 50 percent
of the fair market value of the non-public domestic C corporation’s outstanding stock. For purposes of determining
whether a non-public domestic C corporation is a foreign-controlled domestic corporation, the rules of paragraphs (c)(3)(ii)
(A) through (C) and (c)(3)(iii)(C) of this
section apply with the following modifications—
(1) In paragraphs (c)(3)(ii)(A) through
(C) of this section, treating references to
QIE as references to non-public domestic
C corporation; and
(2) A non-public domestic C corporation that is a foreign-controlled domestic
corporation under this paragraph (c)(3)
(v)(B) is treated as a look-through person
for purposes of determining whether any
other non-public domestic C corporation
is a foreign-controlled domestic corporation.
(C) A look-through person is any person other than a non-look-through person.
Thus, for example, a look-through person
includes a REIT that is not a public QIE,
an S corporation, a partnership (domestic
or foreign) that is not a publicly traded
partnership, a RIC that is not a public RIC,
and a trust (domestic or foreign, whether
or not the trust is described in sections 671
through 679). For a special rule that treats
certain non-public domestic C corporations as look-through persons, see paragraph (c)(3)(iii)(B) of this section.
(D) A non-look-through person is an
individual, a domestic C corporation
(other than a foreign-controlled domestic
corporation), a nontaxable holder, a for-

1185

eign corporation (including a foreign government pursuant to section 892(a)(3)), a
publicly traded partnership (domestic or
foreign), a public RIC, an estate (domestic
or foreign), an international organization
(as defined in section 7701(a)(18)), a qualified foreign pension fund (including any
part of a qualified foreign pension fund),
or a qualified controlled entity. For special rules that treat certain holders of QIE
stock as non-look-through persons, see
paragraphs (c)(3)(iii)(A) and (C) of this
section.
(E) A non-public domestic C corporation is any domestic C corporation that is
not a public domestic C corporation.
(F) A nontaxable holder is—
(1) Any organization that is exempt
from taxation by reason of section 501(a);
(2) The United States, any State (as
defined in section 7701(a)(10)), any territory of the United States, or a political
subdivision of any State or any territory of
the United States; or
(3) Any Indian Tribal government (as
defined in section 7701(a)(40)) or its subdivision (determined in accordance with
section 7871(d)).
(G) A public domestic C corporation
is a domestic C corporation any class of
stock of which is regularly traded on an
established securities market within the
meaning of §§1.897-1(m) and 1.8979T(d). A domestic C corporation is not a
public domestic C corporation, however,
if the QIE whose status as domestically
controlled is being determined under this
paragraph (c)(3) has actual knowledge
that the domestic C corporation is foreign
controlled as determined under paragraph
(c)(3)(v)(B) of this section (treating the
domestic C corporation for this purpose as
if it were a non-public domestic C corporation).
(H) A public QIE is a QIE any class
of stock of which is regularly traded on
an established securities market within
the meaning of §§1.897-1(m) and 1.8979T(d), or that is a RIC that issues redeemable securities within the meaning of section 2 of the Investment Company Act of
1940.
(I) A public RIC is a RIC that is not
a QIE and any class of stock of which is
either regularly traded on an established
securities market within the meaning of
§§1.897-1(m) and 1.897-9T(d), or com-

May 20, 2024

mon stock that is continuously offered
pursuant to a public offering (within the
meaning of section 4 of the Securities Act
of 1933, as amended (15 U.S.C. 77a to
77aa)) and held by or for no fewer than 500
persons. A RIC is not a public RIC, however, if the QIE whose status as domestically controlled is being determined under
this paragraph (c)(3) has actual knowledge that the RIC is foreign controlled as
determined under paragraph (c)(3)(v)(B)
of this section (treating the RIC for this
purpose as if it were a non-public domestic C corporation).
(J) A publicly traded partnership is a
partnership any class of interest of which
is regularly traded on an established
securities market within the meaning of
§§1.897-1(m) and 1.897-9T(d). A domestic partnership is not a publicly traded
partnership, however, if the QIE whose
status as domestically controlled is being
determined under this paragraph (c)(3)
has actual knowledge that the domestic
partnership is foreign controlled as determined under paragraph (c)(3)(v)(B) of
this section (treating the partnership for
this purpose as if it were a non-public
domestic C corporation).
(K) A qualified controlled entity has the
meaning set forth in §1.897(l)-1(e)(9).
(L) A qualified foreign pension fund has
the meaning set forth in §1.897(l)-1(c).
(M) A QIE is a qualified investment
entity, as defined in section 897(h)(4)(A).
(N) Testing period has the meaning set
forth in section 897(h)(4)(D).
(O) U.S. publicly traded QIE stock is
any class of stock of a QIE that is regularly
traded on an established securities market
within the meaning of §§1.897-1(m) and
1.897-9T(d), but only if the established
securities market is in the United States.
(vi) Transition rule for certain QIEs
owned by foreign-controlled domestic
corporations—(A) General rule. Except
as provided in paragraph (c)(3)(vi)(B) of
this section, paragraph (c)(3)(iii)(B) of
this section does not apply with respect to
a QIE that is in existence as of April 24,
2024, and satisfies the following requirements at all times on and after April 24,
2024—
(1) The QIE is domestically controlled
(as determined under this paragraph (c)
(3), but without regard to paragraph (c)(3)
(iii)(B) of this section);

May 20, 2024

(2) The aggregate fair market value of
any United States real property interests
acquired by the QIE directly and indirectly
after April 24, 2024, is no more than 20
percent of the aggregate fair market value
of the United States real property interests
held directly and indirectly by the QIE as
of April 24, 2024 (determined in accordance with paragraph (c)(3)(vi)(D) of this
section); and
(3) The percentage of the stock of the
QIE held directly or indirectly by one or
more non-look-through persons (determined based on fair market value and
under the rules of paragraphs (c)(3)(ii)
through (v) of this section and this paragraph (c)(3)(vi), including paragraph (c)
(3)(iii)(B) of this section) does not increase
by more than 50 percentage points in the
aggregate over the percentage of stock of
the QIE owned directly or indirectly by
such non-look-through persons on April
24, 2024.
(B) Termination of transition rule. The
transition rule described in paragraph (c)
(3)(vi)(A) of this section will cease to
apply, and the rule in paragraph (c)(3)(iii)
(B) of this section will apply for purposes
of determining whether a QIE is domestically controlled, with respect to transactions occurring on or after the earlier of:
(1) The date immediately following the
date on which the QIE fails to meet any of
the requirements described in paragraph
(c)(3)(vi)(A) of this section; and
(2) April 24, 2034. For an example
illustrating the application of paragraph
(c)(3)(vi)(A) of this section and this paragraph (c)(3)(vi)(B), see paragraph (c)(3)
(vii)(E) of this section (Example 5).
(C) Effect of transition rule on testing
period. If the transition rule described in
paragraph (c)(3)(vi)(A) of this section
ceases to apply to a QIE under paragraph
(c)(3)(vi)(B) of this section, the rule in
paragraph (c)(3)(iii)(B) of this section will
not apply to the QIE with respect to the
portion of any testing period during which
the transition rule in this paragraph (c)(3)
(vi) applied.
(D) Determination of fair market value
of United States real property interests.
For purposes of paragraph (c)(3)(vi)(A)
(2) of this section, the fair market value
of the United States real property interests
held directly and indirectly by a QIE on
April 24, 2024, is the value of such prop-

1186

erty interests as calculated under section
851(b)(3) or 856(c)(4) as of the close
of the most recent quarter of the QIE’s
taxable year before April 24, 2024. For
purposes of paragraph (c)(3)(vi)(A)(2)
of this section, the fair market value of
any property acquired after the close of
the most recent quarter of the QIE’s taxable year before April 24, 2024, whether
acquired before or after April 24, 2024, is
determined on the date of such acquisition
using a reasonable method, provided the
QIE consistently uses the same method
with respect to all of its United States
real property interests when applying this
paragraph (c)(3)(vi).
(E) Binding commitments. For purposes
of paragraphs (c)(3)(vi)(A)(2) and (3) of
this section, a direct or indirect acquisition
of a United States real property interest
or of stock of a QIE pursuant to a written
agreement that was (subject to customary
conditions) binding before April 24, 2024,
and all times thereafter, or pursuant to a
tender offer announced before April 24,
2024, that is subject to section 14(e) of
the Securities and Exchange Act of 1934
(15 U.S.C. 78n(e)) and 17 CFR 240.14e–1
through 240.14e–8 (Regulation 14E), is
treated as occurring on April 24, 2024.
(F) Ownership by certain successors
under section 368(a)(1)(F). For purposes of paragraph (c)(3)(vi)(A)(3) of
this section, the transferor corporation
and the resulting corporation (as defined
in §1.368‑2(m)(1)) in a reorganization
described under section 368(a)(1)(F)
(whether engaged in by the QIE or by
another corporation) are treated as the
same corporation.
(G) Ownership by less than five-percent public shareholders. For purposes of
paragraph (c)(3)(vi)(A)(3) of this section,
in the case of any class of stock of a QIE
that is regularly traded on an established
securities market within the meaning of
§§1.897-1(m) and 1.897-9T(d), all such
stock owned by persons holding less than
5 percent of that class of stock, determined without regard to paragraph (c)(3)
(ii)(A) of this section, is treated as stock
owned by a single non-look-through person except to the extent that the QIE has
actual knowledge regarding the ownership
of any person.
(vii) Examples. The rules of this paragraph (c)(3) are illustrated by the fol-

Bulletin No. 2024–21

lowing examples. It is assumed that each
entity has a single class of stock or other
ownership interests, that the ownership
described existed throughout the relevant testing period and that, unless otherwise stated, a QIE is not a public QIE as
defined under paragraph (c)(3)(v)(H) of
this section.

(A) Example 1: QIE stock held by public domestic C corporation—(1) Facts. USR is a REIT, 51
percent of the stock of which is held by X, a public
domestic C corporation as defined in paragraph (c)
(3)(v)(G) of this section, and 49 percent of the stock
of which is held by nonresident alien individuals,
which are foreign persons as defined in paragraph
(k) of this section.
(2) Analysis. Under paragraph (c)(3)(v)(M) of
this section, USR is a QIE. Because X is a public
domestic C corporation, it cannot be a foreign-controlled domestic corporation and, therefore, is a nonlook-through person as defined under paragraph (c)
(3)(v)(D) of this section. Thus, under paragraph (c)
(3)(ii)(A) of this section X is considered as holding
directly or indirectly stock of USR for purposes of
determining whether USR is a domestically controlled QIE. Under paragraph (c)(3)(ii)(C) of this
section, the USR stock held directly or indirectly
by X is not considered held directly or indirectly
by any other person, including the shareholders of
X. Because X is not a foreign person as defined in
paragraph (k) of this section and holds directly or
indirectly 51 percent of the single class of outstanding stock of USR, foreign persons hold directly or
indirectly less than 50 percent of the fair market
value of the stock of USR, and USR therefore is a
domestically controlled QIE under paragraph (c)(3)
(i) of this section.
(3) Alternative facts: QIE stock held by domestic
partnership. The facts are the same as in paragraph
(c)(3)(vii)(A)(1) of this section (Example 1), except
that, instead of being a public domestic C corporation, X is a domestic partnership that is not a publicly traded partnership as defined in paragraph (c)
(3)(v)(J) of this section. In addition, FC1, a foreign
corporation, holds a 50 percent interest in X, and the
remaining interests in X are held by U.S. citizens. X
is not a non-look-through person as defined in paragraph (c)(3)(v)(D) of this section and, therefore, is a
look-through person as defined in paragraph (c)(3)
(v)(C) of this section. Accordingly, under paragraph
(c)(3)(ii)(A) of this section, X is not considered as
holding directly or indirectly stock of USR for purposes of determining whether USR is a domestically
controlled QIE. Under paragraph (c)(3)(ii)(B) of this
section, the stock of USR that, but for paragraph (c)
(3)(ii)(A) of this section, is considered held by X,
a look-through person, is instead considered held
proportionately by X’s partners that are non-lookthrough persons. Accordingly, because FC1 and
the U.S. citizen partners in X are non-look-through
persons as defined in paragraph (c)(3)(v)(D) of this
section, 25.5 percent of the stock of USR is considered as held directly or indirectly by FC1 (50% x
51%), a foreign person as defined in paragraph (k)
of this section, and 25.5 percent (in the aggregate)
of the stock of USR is considered as held directly
or indirectly by the U.S. citizen partners in X (50%

Bulletin No. 2024–21

x 51%), who are not foreign persons as defined in
paragraph (k) of this section. Foreign persons therefore hold directly or indirectly 74.5 percent of the
stock of USR (49 percent of the stock of USR held
directly or indirectly by nonresident alien individuals, who are non-look-through persons as defined in
paragraph (c)(3)(v)(D) of this section, plus the 25.5
percent held directly or indirectly by FC1), and USR
is not a domestically controlled QIE under paragraph
(c)(3)(i) of this section. The result described in this
paragraph (c)(3)(vii)(A)(3) would be the same if,
instead of being a domestic partnership, X were a
foreign partnership.
(4) Alternative facts: QIE stock held by a qualified foreign pension fund. The facts are the same as in
paragraph (c)(3)(vii)(A)(3) of this section (Example
1), except that, instead of being a foreign corporation, FC1 is a qualified foreign pension fund. The
analysis is the same as in paragraph (c)(3)(vii)(A)
(3) (Example 1) regarding the treatment of X as a
look-through person as defined in paragraph (c)(3)
(v)(C) of this section. In addition, FC1, a foreign person under paragraph (c)(3)(iv)(A) of this section, is a
non-look-through person as defined in paragraph (c)
(3)(v)(D) of this section. Because FC1 and the U.S.
citizen partners in X are non-look-through persons,
25.5 percent of the stock of USR is considered as
held directly or indirectly by FC1 (50% x 51%), and
25.5 percent (in the aggregate) of the stock of USR
is considered as held directly or indirectly by the
U.S. citizen partners in X (50% x 51%). Thus, for
the same reasons described in paragraph (c)(3)(vii)
(A)(3) (Example 1), foreign persons hold directly or
indirectly 74.5 percent of the stock of USR, and USR
is not a domestically controlled QIE under paragraph
(c)(3)(i) of this section.
(B) Example 2: QIE stock held by non-public
domestic C corporation that is a foreign-controlled
domestic corporation—(1) Facts. USR is a REIT,
51 percent of the stock of which is held by X, a
non-public domestic C corporation as defined in
paragraph (c)(3)(v)(E) of this section, and 49 percent
of the stock of which is held by nonresident alien
individuals, which are foreign persons as defined in
paragraph (k) of this section. FC1, a foreign corporation, holds 40 percent of the stock of X, and Y, a
nonresident alien individual, holds 15 percent of the
stock of X. The remaining 45 percent of the stock of
X is held by U.S. citizens.
(2) Analysis. Under paragraph (c)(3)(v)(M) of
this section, USR is a QIE. X, a non-public domestic C corporation, is a non-look-through person as
defined under paragraph (c)(3)(v)(D) of this section, unless paragraph (c)(3)(iii)(B) of this section
applies to treat X as a look-through person because
X is a foreign-controlled domestic corporation. FC1,
Y, and the U.S. citizen shareholders of X are nonlook-through persons as defined under paragraph (c)
(3)(v)(D). Under paragraph (c)(3)(v)(B)(1) of this
section, FC1, Y, and the U.S. citizen shareholders
are all considered as holding directly or indirectly
stock of X for purposes of determining whether X
is a foreign-controlled domestic corporation. Under
paragraph (c)(3)(v)(B)(1) of this section, the stock
held directly or indirectly by FC1, Y, and the U.S.
citizen shareholders is not considered held directly
or indirectly by any other person. Because FC1 and
Y, both foreign persons as defined in paragraph (k)

1187

of this section, hold directly or indirectly 40 percent
and 15 percent of the stock of X, respectively, foreign persons hold directly or indirectly more than 50
percent of the fair market value of the stock of X, and
X is a foreign-controlled domestic corporation under
paragraph (c)(3)(v)(B) of this section. Accordingly,
under paragraph (c)(3)(iii)(B) of this section, X is a
look-through person as defined in paragraph (c)(3)
(v)(C) of this section and, therefore, under paragraph
(c)(3)(ii)(A) of this section is not considered as holding directly or indirectly stock of USR for purposes
of determining whether USR is a domestically controlled QIE. Under paragraph (c)(3)(ii)(B) of this
section, the stock of USR that, but for paragraph (c)
(3)(ii)(A), is considered held by X, a look-through
person, is instead considered held proportionately by
X’s shareholders that are non-look-through persons.
Accordingly, because FC1, Y, and the U.S. citizen
shareholders of X are non-look-through persons,
20.4 percent of the stock of USR is considered as
held directly or indirectly by FC1 (40% x 51%), 7.65
percent of the stock of USR is considered as held
directly or indirectly by Y (15% x 51%), and 22.95
percent (in the aggregate) of the stock of USR is
considered as held directly or indirectly by the U.S.
citizen shareholders (45% x 51%). Foreign persons
therefore hold directly or indirectly 77.05 percent of
the stock of USR (49 percent of the stock of USR
held directly by nonresident alien individuals, who
are foreign persons and non-look-through persons
as defined in paragraph (c)(3)(v)(D), plus the 20.4
percent and 7.65 percent held indirectly by FC1 and
Y, respectively), and USR is not a domestically controlled QIE under paragraph (c)(3)(i) of this section.
The result described in this paragraph (c)(3)(vii)(B)
(2) would be different if Y were a U.S. citizen instead
of a nonresident alien individual, in which case X
would be a non-look-through person because it is
not a foreign-controlled domestic corporation under
paragraph (c)(3)(v)(B) (the only foreign non-lookthrough person to hold directly or indirectly stock in
X is FC1, which holds a 40-percent interest). Consequently, USR would be a domestically controlled
QIE under paragraph (c)(3)(i) of this section because
foreign persons hold directly or indirectly less than
50 percent of the stock of USR.
(C) Example 3: QIE stock held by public QIE
that is a domestically controlled QIE—(1) Facts.
USR2 is a REIT, 51 percent of the stock of which
is held by USR1, a REIT that is a public QIE as
defined in paragraph (c)(3)(v)(H) of this section,
and 49 percent of the stock of which is held by nonresident alien individuals, which are foreign persons as defined in paragraph (k) of this section. The
stock of USR1 is U.S. publicly traded QIE stock
as defined in paragraph (c)(3)(v)(O) of this section.
FC1 and FC2, both foreign corporations, each hold
20 percent of the stock of USR1. The remaining 60
percent of the stock of USR1 is held by persons that
each hold less than 5 percent of the stock of USR1
and with respect to which USR1 has no actual
knowledge that such person is not a United States
person or is foreign controlled (as determined under
paragraph (c)(3)(v)(B) of this section by treating
any person that is not a non-public domestic C corporation as if it were a non-public domestic C corporation for this purpose) (USR1 less than five-percent public shareholders).

May 20, 2024

(2) Analysis. Under paragraph (c)(3)(v)(M) of
this section, USR2 and USR1 are QIEs. Under paragraph (c)(3)(iii)(A) of this section, each of the USR1
less than five-percent public shareholders is treated
as a United States person that is a non-look-through
person. Consequently, under paragraph (c)(3)(i) of
this section USR1 is a domestically controlled QIE
because FC1 and FC2, each a foreign person as
defined in paragraph (k) of this section that is a nonlook-through person under paragraph (c)(3)(v)(D) of
this section, together hold directly or indirectly only
40 percent of the stock of USR1 and, thus, foreign
persons hold directly or indirectly less than 50 percent of the fair market value of the stock of USR1.
In addition, the USR2 stock held by USR1 is treated
as held directly or indirectly by a United States person that is a non-look-through person under paragraph (c)(3)(iii)(C) of this section. Because USR1
holds directly or indirectly 51 percent of the stock
of USR2, foreign persons hold directly or indirectly
less than 50 percent of the fair market value of the
stock of USR2, and USR2 is a domestically controlled QIE under paragraph (c)(3)(i) of this section.
(3) Alternative facts: QIE stock held by public
QIE that is not a domestically controlled QIE. The
facts are the same as in paragraph (c)(3)(vii)(C)(1)
of this section (Example 3), except that 25 percent
of the stock of USR1 is held by each of FC1 and
FC2, with the remaining 50 percent of the stock of
USR1 held by the USR1 less than five-percent public shareholders. Regardless of the treatment of the
USR1 less than five-percent public shareholders,
USR1 is not a domestically controlled QIE under
paragraph (c)(3)(i) of this section because FC1 and
FC2, each a foreign person as defined in paragraph
(k) of this section that is a non-look-through person
under paragraph (c)(3)(v)(D) of this section, together
hold directly or indirectly 50 percent of the stock of
USR1 and, thus, foreign persons do not hold directly
or indirectly less than 50 percent of the fair market
value of the stock of USR1. In addition, the USR2
stock held by USR1 is treated as held by a foreign
person that is a non-look-through person under paragraph (c)(3)(iii)(C) of this section. Because USR1
holds directly or indirectly 51 percent of the stock of
USR2, foreign persons do not hold directly or indirectly less than 50 percent of the fair market value of
the stock of USR2, and USR2 is not a domestically
controlled QIE under paragraph (c)(3)(i) of this section.
(D) Example 4: QIE stock held by non-public
QIE—(1) Facts. USR2 is a REIT, 49 percent of the
stock of which is held by nonresident alien individuals, and 51 percent of the stock of which is held by
USR1, a REIT. USR1 is not a public QIE as defined
in paragraph (c)(3)(v)(H) of this section. U.S. citizens hold 50 percent of the stock of USR1. The
remaining 50 percent of the stock of USR1 is held
by PRS, a domestic partnership, 50 percent of the
interests in which are held by DC, a public domestic
C corporation as defined in paragraph (c)(3)(v)(G) of
this section, and 50 percent of the interests in which
are held by nonresident alien individuals.
(2) Analysis. Under paragraph (c)(3)(v)(M) of
this section, USR2 and USR1 are QIEs. USR1 is
not treated as a non-look-through person under
paragraph (c)(3)(iii)(C) of this section because
USR1 is not a public QIE as defined in paragraph

May 20, 2024

(c)(3)(v)(H) of this section. Each of USR1 and
PRS is a look-through person as defined in paragraph (c)(3)(v)(C) of this section that is not treated
as holding directly or indirectly stock in USR2
for purposes of determining whether USR2 is a
domestically controlled QIE under paragraph (c)
(3)(ii)(A) of this section. Because the U.S. citizens who hold USR1 stock are non-look-through
persons as defined in paragraph (c)(3)(v)(D) of
this section, those U.S. citizens are treated under
paragraph (c)(3)(ii)(B) of this section as holding
directly or indirectly 25.5 percent of the stock of
USR2 through their USR1 stock interest (50% x
51%) in accordance with paragraph (c)(3)(ii)(A) of
this section. Similarly, because DC and the nonresident alien partners in PRS are non-look-through
persons, each is treated under paragraph (c)(3)(ii)
(B) of this section as holding directly or indirectly
the stock of USR2 through its interest in PRS
and PRS’s interest in USR1. Thus, DC is treated
as holding directly or indirectly 12.75 percent of
the stock of USR2 (50% x 50% x 51%) and the
nonresident alien individual partners, which are
foreign persons as defined in paragraph (k) of this
section, are treated as directly or indirectly holding
a 12.75 percent aggregate interest in the stock of
USR2 (50% x 50% x 51%). Foreign persons therefore hold directly or indirectly 61.75 percent of
the stock of USR2 (the 49 percent stock in USR2
directly held by nonresident alien individuals, who
are foreign persons and non-look-through persons
as defined in paragraph (c)(3)(v)(D), plus the 12.75
percent in stock indirectly held by the nonresident
alien individual partners in PRS), and USR2 is not
a domestically controlled QIE under paragraph (c)
(3)(i) of this section.
(E) Example 5: Transition rule asset requirement—(1) Facts. USR is a REIT formed on January
1, 2018. From formation, 51 percent of the stock of
USR is held by X, a non-public domestic C corporation as defined in paragraph (c)(3)(v)(E) of this section, 25 percent of the stock of USR is held by FC1,
a foreign corporation, and 24 percent of the stock of
USR is held by nonresident alien individuals. FC2, a
foreign corporation, and FC3, also a foreign corporation, each hold 50 percent of the stock of X. On April
24, 2024, USR’s only property is Asset 1, a United
States real property interest. The value of Asset 1,
calculated under section 856(c)(4) as of the most
recent quarter of USR’s taxable year before April 24,
2024, is $100x. On January 1, 2026, USR borrows
$30x and acquires Asset 2, a United States real property interest, for $30x.
(2) Analysis. As of April 24, 2024, USR is a
domestically controlled QIE under paragraph (c)(3)
(i) of this section, because, as determined without
regard to paragraph (c)(3)(iii)(B) of this section, X
is a non-look-through person and, consequently, foreign persons hold directly or indirectly less than 50
percent of the stock of USR. Accordingly, USR satisfies the requirement under paragraph (c)(3)(vi)(A)(1)
of this section. USR also satisfies the requirements
under paragraphs (c)(3)(vi)(A)(2) and (3) of this
section, respectively, as of such date, because USR
has not acquired directly or indirectly any United
States real property interests, and the ownership of
stock of USR has not changed. Thus, as of April 24,
2024, USR qualifies for the transition relief under

1188

paragraph (c)(3)(vi)(A) of this section. However, on
January 1, 2026, USR no longer meets the requirement for transition relief in paragraph (c)(3)(vi)(A)
(2) of this section because the fair market value of
Asset 2, $30x, is 30 percent (which is more than 20
percent) of $100x, which (as calculated in accordance with paragraphs (c)(3)(vi)(A)(2) and (c)(3)(vi)
(D) of this section) is the fair market value of USR’s
United States real property interests, namely Asset 1,
as of April 24, 2024. Therefore, under paragraph (c)
(3)(vi)(B)(1) of this section the transition rule ceases
to apply to USR and, thus, paragraph (c)(3)(iii)(B)
applies for purposes of determining whether USR is
domestically controlled with respect to transactions
occurring after January 1, 2026. Because FC2 and
FC3 are non-look-through persons that hold more
than 50 percent of the stock of X, X is a foreign-controlled domestic corporation under paragraph (c)(3)
(iii)(B), and USR will not be a domestically controlled QIE under paragraph (c)(3)(i) of this section
as of January 2, 2026, because foreign non-lookthrough persons (FC1, 25 percent, FC2, 25.5 percent, FC3, 25.5 percent, and the nonresident alien
individuals, 24 percent) directly or indirectly hold
more than 50 percent of the stock of USR.
(3) Alternative facts: transition rule ownership
requirement. The facts are the same as in paragraph
(c)(3)(vii)(E)(1) of this section (Example 5), except
that instead of USR borrowing funds and acquiring
Asset 2, FC3 sells its 50-percent stock interest in X
to FC2 on June 1, 2024, and, on January 1, 2026,
FC1 sells its 25-percent stock interest in USR to
FC4, a foreign corporation. Following FC3’s sale
of its X stock to FC2 on June 1, 2024, FC2’s stock
interest in USR has increased by 25.5 percentage
points, from 25.5 percent on April 24, 2024 (which
is 50 percent of 51 percent), to 51 percent. Following FC1’s sale of its USR stock to FC4 on January
1, 2026, FC4’s stock interest in USR has increased
by 25 percentage points, from zero percent on April
24, 2024, to 25 percent. Accordingly, in the aggregate, non-look-through persons have increased their
ownership in USR by 50.5 percentage points (25.5
percent and 25 percent for FC2 and FC4, respectively), and USR no longer meets the requirement
for transition relief in paragraph (c)(3)(vi)(A)(3) of
this section as of January 1, 2026. Therefore, under
paragraph (c)(3)(vi)(B)(1) of this section the transition rule ceases to apply to USR and, thus, paragraph
(c)(3)(iii)(B) of this section applies for purposes of
determining whether USR is domestically controlled
with respect to transactions occurring after January
1, 2026. Because FC2, a non-look-through person,
holds more than 50 percent of the stock of X, X is a
foreign-controlled domestic corporation under paragraph (c)(3)(iii)(B) of this section, and USR will not
be a domestically controlled QIE under paragraph
(c)(3)(i) of this section because foreign non-lookthrough persons (FC2, 51 percent, FC4, 25 percent,
and the nonresident alien individuals, 24 percent)
directly or indirectly hold more than 50 percent of
the stock of USR.

(4) Foreign ownership percentage. For
purposes of calculating the foreign ownership percentage under section 897(h)(4)
(C), the determination of the QIE stock
that was held directly or indirectly by for-

Bulletin No. 2024–21

eign persons is made under the rules of
paragraphs (c)(3)(ii) through (vii) of this
section.
*****
(k) Foreign person. The term foreign
person means a nonresident alien individual (including an individual subject to
the provisions of section 877), a foreign
corporation as defined in paragraph (l)
of this section, a foreign partnership, a
foreign trust or a foreign estate, as such
persons are defined by section 7701 and
the regulations in this chapter under section 7701. A resident alien individual,
including a nonresident alien individual
with respect to whom there is in effect an
election under section 6013(g) or (h) to be
treated as United States resident, is not a
foreign person. With respect to the status
of foreign governments and international
organizations, see §1.897-9T(e). See paragraph (c)(3)(iv)(A) of this section regarding the treatment of qualified foreign pension funds and qualified controlled entities
as foreign persons for purposes of section
897(h)(4)(B).
(l) Foreign corporation. The term foreign corporation has the meaning ascribed
to such term in section 7701(a)(3) and (5)
and § 301.7701-5. For purposes of sections 897 and 6039C, however, the term
does not include a foreign corporation
with respect to which there is in effect an
election under section 897(i) and §1.897-3
to be treated as a domestic corporation.
For purposes of section 897, the term does
not include a qualified holder described in
§1.897(l)-1(d); see paragraph (c)(3)(iv)
(A) of this section regarding the treatment
of qualified foreign pension funds and
qualified controlled entities as foreign persons for purposes of section 897(h)(4)(B).
*****
(n) Regularly traded cross-reference.
See §1.897-9T(d) for a definition of regularly traded for purposes of sections 897,
1445, and 6039C.
*****
Par. 3. Section 1.897-2 is amended by
revising paragraph (h)(3) to read as follows:
§1.897-2 United States real property
holding corporations.
*****
(h) * * *

Bulletin No. 2024–21

(3) Requirements not applicable. The
requirements of this paragraph (h) do not
apply to domestically-controlled qualified
investment entities, as defined in section
897(h)(4)(B). But see §1.1445-2(c)(3)
for rules providing that no withholding
is required under section 1445(a) in certain cases when a statement is voluntarily
issued by the corporation and otherwise
complies with the requirements of this
paragraph (h). The requirements of this
paragraph (h) also do not apply to a corporation any class of stock in which is
regularly traded on an established securities market at any time during the calendar year. However, such a corporation
may voluntarily choose to comply with
the requirements of paragraph (h)(4) of
this section.
*****
Par. 4. Section 1.897-9T is amended
by:
1. Removing and reserving paragraph
(c); and
2. Revising and republishing paragraph
(e).
The revision reads as follows:
§1.897-9T Treatment of certain interest
in publicly traded corporations,
definition of foreign person, and
foreign governments and international
organizations (temporary).
*****
(e) Foreign governments and international organizations. A foreign government shall be treated as a foreign person
with respect to U.S. real property interests, and shall be subject to sections 897,
1445, and 6039C on the disposition of a
U.S. real property interest except to the
extent specifically otherwise provided
in the regulations in this chapter issued
under section 892. An international organization (as defined in section 7701(a)
(18)) is not a foreign person with respect
to U.S. real property interests, and is not
subject to sections 897, 1445, and 6039C
on the disposition of a U.S. real property
interest. See §1.897-1(c)(3)(iv)(B) regarding the treatment of international organizations as foreign persons for purposes of
section 897(h)(4)(B). Buildings or parts
of buildings and the land ancillary thereto
(including the residence of the head of the
diplomatic mission) used by the foreign

1189

government for a diplomatic mission shall
not be a U.S. real property interest in the
hands of the respective foreign government.
*****
Par. 5. Section 1.1445-2 is amended
by:
1. Revising paragraph (c)(3)(i); and
2. Adding two sentences at the end of
paragraph (e).
The revision and additions read as follows:
§1.1445-2 Situations in which
withholding is not required under
section 1445(a).
*****
(c) * * *
(3) * * *
(i) In general. No withholding is
required under section 1445(a) upon the
acquisition of an interest in a domestic
corporation, if the transferor provides
the transferee with a copy of a statement,
issued by the corporation pursuant to
§1.897–2(h), certifying that the interest
is not a U.S. real property interest, or if
the transferor provides the transferee with
a statement certifying that the corporation is a domestically controlled qualified
investment entity (as determined under
§1.897-1(c)(3)) that is voluntarily issued
by the corporation but otherwise complies with the requirements of §1.8972(h). In general, a corporation may issue
such a statement only if the corporation
was not a U.S. real property holding corporation at any time during the previous
five years (or the period in which the
interest was held by its present holder, if
shorter), the corporation is a domestically
controlled qualified investment entity (as
determined under §1.897–1(c)(3)), or if
interests in the corporation ceased to be
United States real property interests under
section 897(c)(1)(B). (A corporation may
not provide such a statement based on its
determination that the interest in question
is an interest solely as a creditor.) See
§1.897–2(f) and (h). The corporation may
provide such a statement directly to the
transferee at the transferor’s request. The
transferor must request such a statement
before the transfer, and shall, to the extent
possible, specify the anticipated date of
the transfer. A corporation’s statement

May 20, 2024

may be relied upon for purposes of this
paragraph (c)(3) only if the statement is
dated not more than 30 days before the
date of the transfer. A transferee may also
rely upon a corporation’s statement that is
voluntarily provided by the corporation in
response to a request from the transferee,
if that statement otherwise complies with
the requirements of this paragraph (c)(3)
and §1.897-2(h).
*****

May 20, 2024

(e) * * * Paragraph (c)(3)(i) of this
section applies with respect to dispositions of U.S. real property interests, and
distributions described in section 897(h),
occurring on or after April 25, 2024. For
dispositions of U.S. real property interests, and distributions described in section 897(h), occurring before April 25,
2024, see §1.1445-2(c)(3)(i), as contained in 26 CFR part 1, revised as of
April 1, 2024.

1190

Douglas W. O’Donnell,
Deputy Commissioner.
Approved: April 2, 2024.
Aviva Aron-Dine,
Acting Assistant Secretary of
the Treasury (Tax Policy).
(Filed by the Office of the Federal Register April 24,
2024, 8:45 a.m., and published in the issue of the
Federal Register for April 25, 2024, 89 FR 31618)

Bulletin No. 2024–21

Part III
Sustainable Aviation
Fuel Credit; Lifecycle
Greenhouse Gas Emissions
Reduction Percentage
and Certification of
Requirements Related to
the Clean Air Act; Climate
Smart Agriculture; Safe
Harbors
Notice 2024-37
SECTION 1. PURPOSE
This notice provides additional guidance and safe harbors regarding the sustainable aviation fuel (SAF) credits under
§§ 40B and 6426(k) of the Internal Revenue Code (collectively, SAF credit or SAF
credits).1 The Department of the Treasury
(Treasury Department) and the Internal
Revenue Service (IRS) issued prior guidance regarding SAF credits in Notice
2023-6, 2023-2 I.R.B. 328, and Notice
2024-6, 2024-2 I.R.B. 34. The Treasury
Department and the IRS developed the
guidance in this notice in consultation with
the Environmental Protection Agency
(EPA), the Department of Energy (DOE),
the Department of Agriculture (USDA),
and the Federal Aviation Administration
(FAA) of the Department of Transportation (DOT).
SECTION 2. BACKGROUND
.01 Overview. This section provides
an overview of this notice and relevant
background. Section 3 of this notice
provides a safe harbor for calculating
the lifecycle greenhouse gas emissions
reduction percentage under § 40B(e)(2)
using the modified version of the Argonne

National Laboratory’s Greenhouse gases,
Regulated Emissions, and Energy use in
Technologies (R&D GREET)2 model that
satisfies the requirements of § 40B(e)(2)
(40BSAF-GREET 2024). Section 3 of
this notice also provides a safe harbor for
certifying the related requirements under
§ 40B(f)(2)(A)(ii) for purposes of the
40BSAF-GREET 2024 model by using
the California Air Resources Board’s
(CARB) Low Carbon Fuel Standard program (LCFS) accredited verifiers (CARB
LCFS verifiers).
Section 4 of this notice provides a
safe harbor for an additional reduction in
calculating the lifecycle greenhouse gas
emissions reduction percentage under
§ 40B(e)(2) using the 40BSAF-GREET
2024 model in conjunction with the
USDA Climate Smart Agriculture Pilot
Program (USDA CSA Pilot Program).
The USDA CSA Pilot Program establishes
climate smart agriculture (CSA) practices
for cultivating domestic corn (CSA corn)
and domestic soybeans (CSA soybean)
(collectively, CSA crops) for use as SAF
feedstocks. Section 4 of this notice also
provides a safe harbor for certifying the
related requirements under § 40B(f)(2)(A)
(ii) for purposes of the USDA CSA Pilot
Program by using an unrelated party certifier that meets the USDA CSA Pilot Program requirements for Eligible Unrelated
Party Certification Bodies (CSA certifier).
Section 5 of this notice provides information about registration. Section 5 of
this notice also provides guidance regarding claims for SAF credits that rely on
the 40BSAF-GREET 2024 model and the
USDA CSA Pilot Program to calculate the
lifecycle greenhouse gas emissions reduction percentage.
.02 Applicable law. Section 13203
of Public Law 117-169, 136 Stat. 1818
(August 16, 2022), commonly known as
the Inflation Reduction Act of 2022, added

§ 40B and amended §§ 38(b), 40A, 87,
4101(a), 6426, and 6427(e)(1), to establish the SAF credits, effective for certain
fuel mixtures containing SAF sold or used
after December 31, 2022, and before January 1, 2025. The SAF credit is equal to
the product of (1) the number of gallons
of SAF in a qualified mixture and (2) the
sum of (A) $1.25 and (B) the “applicable
supplementary amount” with respect to
such SAF. In general, the applicable supplementary amount increases the $1.25
base credit by $0.01 for each percentage
point by which the lifecycle greenhouse
gas emissions reduction percentage of the
SAF exceeds 50 percent, for a maximum
increase of $0.50.3 See §§ 40B(b) and
6426(k).
In addition to other requirements, under
§ 40B(d)(1)(D), SAF must be certified to
have a lifecycle greenhouse gas emissions
reduction percentage of at least 50 percent.
Section 40B(e) defines the term “lifecycle
greenhouse gas emissions reduction percentage” (emissions reduction percentage)
to mean, with respect to any SAF, the percentage reduction in lifecycle greenhouse
gas emissions achieved by such fuel, as
compared with petroleum-based jet fuel,
as defined in accordance with (1) the most
recent Carbon Offsetting and Reduction
Scheme for International Aviation (CORSIA) that has been adopted by the International Civil Aviation Organization (ICAO)
with the agreement of the United States or
(2) any similar methodology that satisfies
the criteria under § 211(o)(1)(H) of the
Clean Air Act (42 U.S.C. 7545(o)(1)(H)),
as in effect on August 16, 2022 (CAA).
Section 40B(f)(2)(A) requires a producer or importer of SAF to provide
certification (in the form and manner
prescribed by the Secretary of the Treasury or her delegate (Secretary)) from an
unrelated party demonstrating compliance
with (i) any general requirements, sup-

Unless otherwise specified, all references to “section” or “§” are references to sections of the Internal Revenue Code.
As of the date of publication of this notice in the Internal Revenue Bulletin, the term “R&D GREET model” refers to the following lifecycle analysis model: Wang, Michael, et al. (2023).
Greenhouse gases, Regulated Emissions, and Energy use in Technologies Model ® (2023 Excel). Computer Software. USDOE Office of Energy Efficiency and Renewable Energy (EERE).
09 Oct. 2023. Web. https://www.osti.gov/doecode/biblio/113174. Notice 2024-6 uses the term “ANL-GREET” and defines it in footnote 2. DOE has since renamed ANL-GREET as R&D
GREET. Argonne National Laboratory made this change on its website beginning in December 2023, to better distinguish between the different models and to draw a clear distinction between
R&D GREET and the versions used for tax credit purposes. All references to R&D GREET in this notice are referring to the same model, including any subsequent updates, as references to
ANL-GREET in Notice 2024-6.
3
See sections 4.05 and 4.06 of Notice 2023-6 for instructions and an example of how to calculate the applicable supplementary amount for purposes of §§ 40B(b) and 6426(k).
1
2

Bulletin No. 2024–21

1191

May 20, 2024

ply chain traceability requirements, and
information transmission requirements
established under CORSIA as described
in § 40B(e)(1), or (ii) in the case of any
similar methodology established under
§ 40B(e)(2), requirements similar to the
requirements described in § 40B(f)(2)(A)
(i). Section 40B(f)(2)(B) requires SAF
producers or importers to provide such
other information with respect to such fuel
as the Secretary may require for purposes
of carrying out § 40B.
.03 Notice 2023-6. Notice 2023-6 provides guidance on the SAF credits and
related credit and payment rules under
§§ 34(a)(3), 38, 87, 6426(k), and 6427(e)
(1), and procedures for claiming the SAF
credit. Notice 2023-6 also provides guidance related to the registration requirements under § 4101 for persons producing or importing SAF synthetic blending
component, a type of SAF. See section
3.01 of Notice 2023-6 for the definition of
SAF synthetic blending component, and
see Notice 2023-6 generally for definitions of other terms used in this notice and
Notice 2024-6. Sections 4.04 and 5.01(4)
of Notice 2023-6 include CORSIA-based
safe harbors for determining the emissions
reduction percentage under § 40B(e)(1)
and for providing an unrelated party certification for demonstrating compliance
with the requirements under § 40B(f)(2)
(A)(i).
.04 Notice 2024-6. Section 3 of Notice
2024-6 provides safe harbors for using the
EPA’s Renewable Fuel Standard (RFS)
program to calculate the emissions reduction percentage under § 40B(e)(2), and
for using RFS guidance to certify the corresponding unrelated party certification
requirements under § 40B(f)(2)(A)(ii).
Section 4 of Notice 2024-6 provides an
updated Model Certificate for SAF Synthetic Blending Component to be used
when submitting a claim for a SAF credit.
Section 5 of Notice 2024-6 informs the

public that the existing R&D GREET4
model and any other existing versions
of GREET (for

[Text truncated at 120,000 characters. The full text is on the page linked above.]

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3Aac24fea60d13fe77. Public record. Not legal advice.