Treasury proposes tweaks to corporate property tax deductions.
Published Date: 8/20/2026
Proposed Rule
Summary
This document contains proposed regulations under section 250 of the Internal Revenue Code (Code) that provide guidance on certain income of a domestic corporation that is excluded in the determination of deduction eligible income. This category of income consists of income and gain from the sale or other disposition of intangible property and any other property of a type that is subject to depreciation, amortization, or depletion. The proposed regulations would affect domestic corporations with foreign-derived deduction eligible income.
Analyzed Economic Effects
5 provisions identified: 3 benefits, 2 costs, 0 mixed.
Sales of Depreciable or Intangible Assets Excluded
If you are a domestic corporation claiming foreign-derived deduction eligible income (FDDEI), income and gain from the sale or other disposition of intangible property and property that is of a type subject to depreciation, amortization, or depletion by the seller are excluded from deduction eligible income (DEI) for purposes of section 250. This exclusion applies to sales or other dispositions occurring after June 16, 2025.
Leases and Licenses Remain In DEI
The proposed regulations say a 'sale or other disposition' for the exclusion is determined under general federal income tax principles, so transactions characterized as a lease or license under those principles are not treated as a sale. Income from leases or licenses therefore would not be excluded from DEI under section 250(b)(3)(A)(i)(VII) and can remain part of FDDEI where it otherwise qualifies.
Copyrighted Articles Not Treated as Intangibles
For purposes of the exclusion, the proposed regulations clarify that intangible property does not include a 'copyrighted article' (as described in Sec. 1.861-18(c)(3)). That means sales of copies or articles embodying copyrighted content (for example, copies of software or digital media sold as articles) are not excluded from DEI solely because they embody copyrighted content.
No Remanufacturing Exception or Recapture Limit
The proposed regulations do not adopt a requested 'remanufacturing' exception or a depreciation recapture limitation. Property that was previously subject to depreciation in the hands of the seller remains characterized as property of a type subject to depreciation, so gain on later disposition (including after remanufacture or refurbishment) is within the exclusion. This rule applies to sales or dispositions occurring after June 16, 2025.
Timing, Reliance, and When Rules Apply
The Treasury and IRS propose that these regulations generally apply to sales or other dispositions occurring after June 16, 2025, that the amendment clarifying FDDEI is a subset of DEI would apply to taxable years beginning after December 31, 2025, and that the agencies expect to finalize the proposed regulations by January 4, 2027. Taxpayers may rely on the proposed regulations for applicable dispositions before final publication if they apply the proposed rules in their entirety and consistently (including related parties as defined).
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Key Dates
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