8991 Instructions for Form 8991

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Instructions for Form 8991

Department of the Treasury
Internal Revenue Service

(December 2018)

Tax on Base Erosion Payments of Taxpayers With Substantial Gross Receipts
Section references are to the Internal Revenue
Code unless otherwise noted.

• Determining the applicable taxpayer’s
modified taxable income.

securities dealer under section 15(a) of
the Securities Exchange Act of 1934, the
tax rate in effect for the taxable year for
the base erosion minimum tax amount is
increased by an additional 1%.

DRAFT AS OF
October 17, 2018

Future Developments

For the latest information about
developments related to Form 8991, its
schedules, and its instructions, such as
legislation enacted or guidance published
after the form and instructions were
issued, go to IRS.gov/Form8991.

Purpose of Form

Tax on Base Erosion Payments of Taxpayers With Substantial Gross Receipts. Public Law 115-97 was enacted
on December 22, 2017. P.L. 115-97
added section 59A, Tax on Base Erosion
Payments of Taxpayers With Substantial
Gross Receipts, to the Internal Revenue
Code of 1986. The new section 59A
imposes on each applicable taxpayer a
tax equal to the base erosion minimum tax
amount for the taxable year. Section 59A
applies to base erosion payments paid or
accrued in taxable years beginning after
December 31, 2017.

Reminder

If you file a Form 8991 that you later
determine is incomplete or incorrect, file a
corrected Form 8991 with an amended tax
return, using the amended return
instructions for the return with which you
originally filed Form 8991. Write
“corrected” at the top of the form and
attach a statement identifying the
changes.
Reporting requirements and penalties.
P.L. 115-97 also expanded the information
reporting requirements under section
6038A and increased the amount of the
penalty for failure to furnish information or
maintain records under section 6038A(d)
(1) and (2) from $10,000 to $25,000. See
Form 5472 and its instructions for further
details.

General Instructions
Purpose of Form

Use Form 8991 to determine an
applicable taxpayer’s tax on its base
erosion minimum tax amount for the year.

Use Schedule A to determine the
amount of base erosion payments and
base erosion tax benefits for purposes of:
• Determining the applicable taxpayer’s
base erosion percentage, and
Sep 18, 2018

Use Schedule B to determine the
credits that reduce regular tax liability in
computing the base erosion minimum tax
amount.

Definitions

Applicable taxpayer. An applicable
taxpayer is, with respect to any tax year, a
taxpayer which meets all of the following
three criteria.
• The taxpayer is a corporation other than
a regulated investment company, a real
estate investment trust, or an S
corporation.
• The taxpayer has average annual gross
receipts for the 3-tax-year period ending
with the preceding taxable year that are at
least $500 million (the “gross receipts
test”).
• The taxpayer has a base erosion
percentage for the tax year of 3% or
higher; 2% or higher for taxpayer who is a
member of an affiliated group which
includes a bank or a registered securities
dealer as defined in section 59A(b)(3)(B)
(the “base erosion percentage test”).
See section 59A(e) for more
information.
Base erosion minimum tax amount.
The base erosion minimum tax amount for
the tax year is the excess of 10% (5% in
the case of a tax year beginning in 2018)
of the modified taxable income of the
applicable taxpayer for the tax year over
the applicable taxpayer’s regular tax
liability under section 26(b), reduced (but
not below zero) by the excess, if any, of:
1. The credits allowed under
Chapter 1 against the applicable
taxpayer’s regular tax liability over
2. The sum of:
a. The credit allowed under section 38
which is properly allocable to the research
credit determined under section 41(a),
plus
b. The portion of the applicable
section 38 credits not in excess of 80% of
the lesser of the amount of the applicable
section 38 credits or the base erosion
minimum tax amount determined without
taking the applicable section 38 credits
into account.
If the applicable taxpayer is a member
of an affiliated group under section
1504(a)(1) which includes a bank (as
defined in section 581) or a registered
Cat. No. 71330Z

Base erosion payment. A base erosion
payment is any amount paid or accrued by
an applicable taxpayer to a foreign person
(as defined in section 6038A(c)(3)) that is
a related party with respect to which a
deduction is allowable under Chapter 1.
Base erosion payments include the
following.
• Amounts paid or accrued by an
applicable taxpayer to a foreign related
person in connection with the acquisition
of depreciable or amortizable property.
• Premiums or other consideration paid
or accrued by an applicable taxpayer to a
foreign related person for reinsurance
payments which are taken into account
under section 803(a)(1)(B) or section
832(b)(4)(A).
Base erosion payments also include
any amount paid or accrued by an
applicable taxpayer to a foreign related
person that is a surrogate foreign
corporation (if such foreign person first
became a surrogate foreign corporation
after November 9, 2017), or a foreign
person which is a member of the same
expanded affiliated group as the surrogate
foreign corporation (collectively,
“expatriated entities”), which result in a
reduction to gross receipts. See section
59A(d)(4) for more information.
Base erosion payments do not include
the following types of payments.
• Amounts paid or accrued for services if
such services are services that meet the
requirements for eligibility for use of the
services cost method under section 482
(determined without regard to the
requirement that the services not
contribute significantly to the fundamental
risks of business success or failure), and
that amount constitutes the total services
cost with no markup component.
• Qualified derivative payments. A
qualified derivative payment is a payment
made by an applicable taxpayer pursuant
to a derivative (as defined in section
59A(h)(4)) with respect to which the
applicable taxpayer: (a) recognizes gain or
loss as if the derivative were sold for its
fair market value on the last business day
of the tax year and any additional times
required by the taxpayer’s method of
accounting; (b) treats the recognized gain
or loss as ordinary; and (c) treats the

character of all payments made with
respect to the derivative as ordinary. A
qualified derivative payment will not be
excluded from being characterized as a
base erosion payment if the payment is
properly allocable to a non-derivative
component of a contract or if the payment
would be treated as a base erosion
payment if it were not made pursuant to a
derivative, such as an interest, royalty, or
services payment.

2. The aggregate amount of the
taxpayer’s denominator for the tax year.
The aggregate amount of the applicable
taxpayer’s denominator includes allowable
deductions and also includes the
taxpayer’s base erosion tax benefits but
excludes the following deductions:
a. Any deduction allowed under
sections 172, 245A, or 250 for the tax
year;
b. Any deduction for amounts paid or
accrued for services to which the
exception under section 59A(d)(5) for the
section 482 services cost method applies;
and
c. Any deduction for qualified
derivative payments which are not treated
as base erosion payments by reason of
section 59A(h).

in 1 or more of the 3 preceding tax years
ending with the preceding tax year, must
file Form 8991.
See Form 8991, Part I, lines 1a through
1g, and Specific Instructions below to
determine whether the corporation has
gross receipts of at least $500 million in 1
or more of the 3 preceding tax years.

DRAFT AS OF
October 17, 2018

Related party. A related party is:
• Any 25% owner of the applicable
taxpayer (as defined in section 59A(g)(2)),
• Any person who is related (within the
meaning of section 267(b) or 707(b)(1)) to
the applicable taxpayer or any 25% owner
of the applicable taxpayer, or
• Any other person who is related to the
applicable taxpayer within the meaning of
section 482 and the related regulations.
Section 318, with certain modifications,
shall apply in determining whether a
person is a related party. See section
59(g)(3) for additional rules relating to the
modification of section 318 for use in
determining a person’s relatedness.

Base erosion tax benefit. Generally, a
base erosion tax benefit is any deduction
that is allowed under Chapter 1 for the tax
year for any base erosion payment. Base
erosion tax benefits also include any
deductions allowed for the tax year for
depreciation or amortization with respect
to the property acquired with payments
described in section 59A(d)(2) (that are
paid or accrued in tax years beginning
after 2017). Base erosion tax benefits also
include certain reduction in the gross
amount of premiums and other
consideration on insurance and annuity
contracts, or any deduction from the
amount of gross premiums written on
insurance contracts during the tax year for
premiums paid for reinsurance, and
payments to expatriated entities (as
defined under Base erosion payment
above) that cause a reduction in gross
receipts in computing gross income of the
taxpayer for the tax year. See section
59A(c)(2)(A) for more information.
See the instructions for Schedule A for
special rules applicable in determining the
amount of the base erosion tax benefit
when taxes have been imposed by section
871 or 881 and withheld under section
1441 or 1442 on a base erosion payment;
or when the taxpayer has made an interest
payment that gives rise to a base erosion
tax benefit and section 163(j) applies for
the tax year.
Base erosion percentage. The base
erosion percentage is the percentage
determined by dividing:
1. The aggregate amount of base
erosion tax benefits of the taxpayer for the
tax year by

Modified taxable income. Modified
taxable income is the taxpayer’s taxable
income determined without regard to any
base erosion tax benefit with respect to
any base erosion payment or the base
erosion percentage of any net operating
loss deduction allowed under section 172
for the tax year.

Applicable section 38 credits.
Applicable section 38 credits are the
credits allowed under section 38 for the
tax year that are properly allocable to:
• The low-income housing credit
determined under section 42(a);
• The renewable electricity production
credit determined under section 45(a);
and
• The investment credit determined
under section 46, but only to the extent
properly allocable to the energy credit
determined under section 48.
See also Instructions for Schedule B,
below.
Aggregation rules. For purposes of the
gross receipts test and base erosion
percentage test, all persons treated as a
single employer under section 52(a) (a
controlled group of corporations) are
treated as 1 person (except that when
applying section 1563 the exception for
foreign corporations is disregarded).
Additionally, the term “controlled group of
corporations” has the meaning given by
section 1563(a) except that:
1. “More than 50%” is substituted for
“at least 80%” each place it appears in
section 1563(a), and
2. The determination of the controlled
group of corporations is made without
regard to sections 1563(a)(4) and (e)(3)
(C).

Who Must File

Any corporation, other than a regulated
investment company, a real estate
investment trust, or an S corporation, that
has gross receipts of at least $500 million
-2-

See also questions/items and related
instructions in the following forms.
• Question 22, Schedule K, Form 1120
• Item DD, Page 2, Form 1120-F
• Question 14, Schedule M, Form 1120-L
• Question 16, Schedule I, Form
1120-PC
• Question 16, Schedule K, Form 1120-C

When to File

Attach Form 8991 to your income tax
return (or, if applicable, exempt
organization business income tax return)
and file by the due date (including
extensions) for that return.

Specific Instructions
Note. Complete every applicable entry
space on Form 8991. Do not enter “See
Attached” or “Available Upon Request”
instead of completing the entry spaces. If
more space is needed on the forms or
schedules, attach separate sheets using
the same size and format as the printed
forms.
If there are supporting statements and
attachments, arrange them in the same
order as the schedules or forms they
support and attachments, arrange them in
the same order as the schedules or forms
they support and attach them last. Show
the totals on the printed forms. Enter the
filer’s name and EIN on each supporting
statement or attachment.

Part I—Applicable
Taxpayer
Average Annual Gross
Receipts for the 3-Tax-Year
Period Ending With the
Preceding Tax Year

A taxpayer that falls within the definition of
Who Must File above and is filing Form
8991 should complete lines 1a through 1g
to determine your average annual gross
receipts for the 3-tax-year period ending
with the preceding tax year.

Line 1a. Enter in column (a) your gross
receipts for the first preceding tax year.
Enter in column (b) your gross receipts for
the second preceding tax year. Enter in
column (c) your gross receipts for the third
preceding tax year.
Only include the gross receipts of the
filer on line 1a. Do not include on this line
the gross receipts of all other persons

treated as one person under the
aggregation rules of section 59A(e)(3)
which should be reported on line 1c. See
instructions for line 1c below.
For purposes of determining gross
receipts of an applicable taxpayer, a
foreign person’s gross receipts are
included only when such gross receipts
are taken into account when determining
the foreign person’s income effectively
connected with a U.S. trade or business
(“ECI”).

Base Erosion Percentage for
the Tax Year

Complete lines 2a through 2m to
determine your base erosion percentage
for the tax year.

Line 2b. Enter the aggregate amount of
deductions allowable under Chapter 1
(sections 1 through 1400) for the tax year.
The amount entered should be the
aggregate deductions allowable to all
persons that are treated as one person
under the aggregation rules.

8991 and the completed Schedule A to
your tax return.
An applicable taxpayer is subject to the
2% base erosion percentage threshold if it
is a member of an affiliated group (as
defined in section 1504(a)(1) that includes
a bank (as defined in section 581) or a
registered securities dealer under section
15(a) of the Securities Exchange Act of
1934.

DRAFT AS OF
October 17, 2018

Line 1b. Enter in column (a) gross
receipts from partnerships for the first
preceding tax year. Enter in column (b)
gross receipts from partnerships for the
second preceding tax year. Enter in
column (c) gross receipts from
partnerships for the third preceding tax
year.
An applicable taxpayer may report
gross receipts from Form 1065 (Sch K-1),
Box 20, Partner’s Share of Income,
Deductions, Credits, etc., received from
partnerships in which the applicable
taxpayer holds partnership interests.
Line 1c. Enter in column (a) gross
receipts of all other persons treated as 1
person under the aggregation rules of
section 59A(e)(3) (the “aggregate gross
receipts”) for the first preceding tax year.
Enter in column (b) the aggregate gross
receipts for the second preceding tax
year. Enter in column (c) the aggregate
gross receipts for the third preceding tax
year. Do not include on line 1c gross
receipts that have already been included
on line 1a.

Line 1g. If you check “No” on line 1g, you
are not subject to the section 59A tax on
base erosion payments of taxpayers with
substantial gross receipts. Do not
complete the remaining lines. Attach Form
8991 to your tax return.

Line 2c. Do not make an entry on this
line.

Line 2d. For reinsurance payments paid
or accrued that are base erosion
payments described in section 59A(d)(3),
enter the aggregate amount of:
• Any reduction under section 803(a)(1)
(B) in the gross amount of premiums and
other consideration on insurance and
annuity contracts for premiums and other
consideration arising out of indemnity
insurance, and
• Any deduction under section 832(b)(4)
(A) from the amount of gross premiums
written on insurance contracts during the
tax year for premiums paid for
reinsurance.

Line 2e. Enter the aggregate amount
paid or accrued with respect to expatriated
entities that results in a reduction of the
gross receipts of the applicable taxpayer.
Line 2g. Enter the amount from
Schedule A, line 5b.
Line 2h. Enter the amount from
Schedule A, line 9b.
Line 2m. If you check “No” for line 2m,
you are not subject to the tax on base
erosion payments of taxpayers with
substantial gross receipts. Do not
complete the remaining lines. Attach Form

-3-

Part II—Modified Taxable
Income

See section 59A(c) for further details.

Line 3a. Enter the amount of taxable
income.
Line 3b. Enter the amount of base
erosion tax benefits for the tax year with
respect to base erosion payments from
Schedule A, line 16.
Line 3c. Enter the amount of the base
erosion percentage of the net operating
loss deduction allowed under section 172
for the tax year.
Line 3d. Enter the amount of modified
taxable income computed pursuant to
section 59A(c)(1).

Part III—Regular Tax
Liability Adjusted for
Purposes of Computing
Base Erosion Minimum
Tax Amount
Line 4a. Enter the amount of regular tax
liability (as defined in section 26(b)) of the
applicable taxpayer for the tax year.
Consolidated groups. Affiliated
groups of corporations filing consolidated
returns please review any additional
information at IRS.gov/Form8991.

Part IV—Computation of
Base Erosion Minimum
Tax Amount
Line 5b. Enter the tax rate applicable for
the current tax year. For any tax year
beginning in 2018, the applicable rate is
5%. For any tax year beginning after 2018,
and before 2026, the applicable rate is
10%. For any tax year beginning after
December 31, 2025, the applicable rate is
12.5%. For fiscal tax years, please review
any additional information at IRS.gov/
Form8991.
The rates above are increased by 1% if
the applicable taxpayer is a member of an
affiliated group (as defined in section
1504(a)(1)) which includes either a bank
(as defined in section 581), or a registered
securities dealer under section 15(a) of
the Securities Exchange Act of 1934.

Columns a-1 and a-2. Columns a-1 and
a-2 are used to determine the base
erosion percentage as defined in section
59A(c)(4). Enter in columns a-1 and a-2
the amount of aggregate base erosion
payments and aggregate base erosion tax
benefit, respectively, that correspond to
each type of base erosion payments
specified on lines 3 through 11. The
aggregate base erosion tax benefit in
column a-2, lines 3 through 11, should be
an amount determined before applying the
exception in section 59A(c)(2)(B) (tax
benefits disregarded if tax withheld on
base erosion payment).
Aggregate base erosion payments
include the base erosion payments of all
persons treated as one person pursuant to
the aggregation rules (see the definition
“aggregation rules” above in the General
Instructions). Similarly, aggregate base
erosion tax benefits include the base
erosion tax benefits of all persons treated
as one person pursuant to the aggregation
rules.

right to use tangible or intangible property
resulting in rents, royalties, and/or license
fees.
Line 4, columns a-2 and b-2. Enter the
amount of deductions allowed under
Chapter 1 for the tax year for amounts
paid or accrued to a foreign person that is
a related party for the use or right to use
tangible or intangible property that results
in rents, royalties, and/or license fees.

DRAFT AS OF
October 17, 2018

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

Schedule A—Base Erosion
Payments and Base Erosion
Tax Benefits

Schedule A is required to be attached if a
corporation has average annual gross
receipts of $500 million or more for the
3-tax-year period ending the preceding tax
year. This schedule requires a taxpayer to
report all amounts that are base erosion
payments as defined in section 59A(d)
and base erosion tax benefits as defined
in section 59A(c)(2). This schedule also
requires a taxpayer to report any amounts
that qualify for certain exceptions
applicable to amounts that are not treated
as base erosion payments.
For lines 3 through 11, complete
columns a-1, a-2, b-1, and b-2 for each
type of payment made by the taxpayer to a
foreign person which is a related party of
the taxpayer during the tax year. For each
type of payment reported on lines 3
through 11 of column a-1, check all
applicable boxes in columns c, d, and e to
indicate the type of related party who
received the base erosion payment from
the taxpayer.
Consolidated groups. Affiliated groups
of corporations filing consolidated returns
please review any additional information
at IRS.gov/Form8991.

Columns b-1 and b-2. Columns b-1 and
b-2 are used to determine modified
taxable income as described in section
59A(c)(1). Enter in columns b-1 and b-2
the amount of base erosion payments and
base erosion tax benefit, respectively, that
correspond to the type of base erosion
payments specified in lines 3 through 11.
Enter in these columns the applicable
taxpayer’s base erosion payments and
base erosion tax benefit, without applying
the aggregation rules. The base erosion
tax benefit in column b-2, lines 3 through
11, should be an amount determined
before applying the exception in section
59A(c)(2)(B) (tax benefits disregarded if
tax withheld on base erosion payment).
Line 1 and line 2. These lines are
reserved and should not be used at this
time.
Line 3, columns a-1 and a-1. Enter the
amount paid or accrued to a foreign
person that is a related party (see the
definitions of “foreign person” and “related
party” above in the General Instructions) in
connection with the acquisition or creation
of intangible property rights (patents,
copyrights, trademarks, trade secrets,
etc.) that is subject to the allowance for
depreciation (or amortization in lieu of
depreciation).
Line 3, columns a-2 and a-2. Enter the
amount of deductions allowed under
Chapter 1 for the taxable year for
depreciation (or amortization in lieu of
depreciation) with respect to intangible
property rights acquired in the current or
prior years from a foreign person that is a
related party.
Line 4, columns a-1 and b-1. Enter the
amount paid or accrued to a foreign
person that is a related party for the use or
-4-

Line 5a, columns a-1 and b-1. Enter the
amount paid or accrued to a foreign
person that is a related party as
compensation or consideration for
services, but excluding any amount that
falls within the exception in section 59A(d)
(5).
Line 5a, columns a-2 and b-2. Enter the
amount of deductions allowed under
Chapter 1 for the tax year for amounts
paid or accrued to a foreign person that is
a related party as compensation or
consideration for services, but excluding
any deduction for amounts paid or
accrued that fall within the exception in
section 59A(d)(5).
Line 5b. Enter the amount paid or
accrued to a foreign person that is a
related party as compensation or
consideration for services that are defined
under the exception in section 59A(d)(5).
Determine the amount of compensation or
consideration eligible for this exception
after applying the aggregation rules.
Line 6, columns a-1 and b-1. Enter the
amount of all interest paid or accrued to a
foreign person that is a related party with
respect to which a deduction is allowable
in the tax year.
Line 6, columns a-2 and b-2. Enter the
amount of deductible interest expense
allowed under Chapter 1 for the tax year
with respect to amounts paid or accrued to
a foreign person that is a related party. For
purposes of completing line 6, column b-2,
any reduction in the amount of interest for
which a deduction is allowed for the tax
year under section 163(j) is treated as
allocable first to interest paid or accrued to
persons who are not related parties with
respect to the applicable taxpayer and
then to such related parties.
Line 7, columns a-1 and b-1. Enter the
amount paid or accrued to a foreign
person that is a related party for the
purchase of tangible personal property.
Line 7, columns a-2 and b-2. Enter the
amount of deductions allowed under
Chapter 1 for the tax year for amounts
paid or accrued to a foreign person that is
a related party for the purchase of tangible
property.
Line 8, columns a-1 and b-1. Enter the
amount of any premiums or other
consideration paid or accrued to a foreign

person that is a related party for insurance
and reinsurance that are taken into
account under sections 803(a)(1)(B)
(relating to return premiums and premiums
or other consideration arising out of
indemnity reinsurance that reduces life
insurance gross income) or section 832(b)
(4)(A) (relating to amounts deducted from
gross premiums written on insurance
contracts for return premiums and
premiums paid for reinsurance).

to a derivative contract provided that the
taxpayer recognizes gain or loss on the
derivative contract as if it were sold for its
fair market value on the last business day
of the tax year; treats the gain or loss as
ordinary; and treats the character of all
other items of income, deduction, gain, or
loss with respect to a payment pursuant to
the derivative as ordinary. A payment is
not a qualified derivative payment if the
payment would be treated as a base
erosion payment if it were not made
pursuant to a derivative (such as interest,
royalty, or services income). With respect
to a contract with both derivative and
non-derivative components, a payment is
not a qualified derivative payment if it is
properly allocable to the non-derivative
component.
Until guidance is published that
describes the information required to be
included on the separate sheet identifying
the reporting corporation’s qualified
derivative payments, no separate sheet
will be required to be attached to the Form
8991. Until guidance is published, a
reporting corporation will be treated as
meeting the reporting requirement of
section 59A(h)(2)(B) by entering the
amount on line 9b.

with respect to payments to expatriated
entities that were used to compute gross
income for the tax year.

Line 10, columns a-1 and b-1. Enter the
amount paid or accrued to certain
expatriated entities that result in a
reduction of the gross receipts of the
taxpayer. This amount includes payments
to a surrogate foreign corporation that is a
related party, but only if the entity first
became a surrogate foreign corporation
after November 9, 2017. The amount also
includes payments to a foreign person that
is a member of the same expanded
affiliated group, as defined in section
7874(c)(1), as the surrogate foreign
corporation. A surrogate foreign
corporation is as defined in section
7874(a)(2)(B), but does not include a
foreign corporation that is treated as a
domestic corporation under section
7874(b).

Line 12. For columns a-1, a-2, b-1, and
b-2, add lines 3 through line 11 and enter
the total amount.

Line 11, columns a-1 and b-1. Enter the
total amount of any other base erosion
payments that were paid or accrued to a
foreign person that is a related party and
for which a deduction is allowable under
Chapter 1. Only include those amounts
that have not otherwise been included in
Schedule A on lines 3 through 10.

DRAFT AS OF
October 17, 2018

Line 8, columns a-2 and b-2. Enter the
amount of any reduction under section
803(a)(1)(B) in gross premiums and other
consideration on insurance and annuity
contracts for premiums and other
consideration arising out of indemnity
insurance paid to a foreign person that is a
related party, and the amount of any
deduction under section 832(b)(4)(A) from
the amount of gross premiums written on
insurance contracts during the tax year for
premiums paid to a foreign person that is a
related party for reinsurance.
Line 9a, columns a-1 and b-1. Enter the
amount paid or accrued to a foreign
person that is a related party with respect
to any derivative contract that is not a
qualified derivative payment as defined in
section 59A(h). Do not include any
amount paid that is a qualified derivative
payment.
Line 9a, columns a-2 and b-2. Enter the
amount of deductions allowed under
Chapter 1 for the tax year for amounts
paid or accrued to a foreign person that is
a related party with respect to any
payment that is not a qualified derivative
payment. Do not include any deductions
allowed under Chapter 1 for the tax year if
the deductible amount is a qualified
derivative payment.
Line 9b. Enter the amount paid to a
foreign person that is a related party that is
a qualified derivative payment excepted
by section 59A(h). Determine the amount
of the qualified derivative payments after
applying the aggregation rules. Generally,
a qualified derivative payment is any
payment made by the taxpayer pursuant

Line 10, columns a-2 and b-2. Enter the
amount of the reduction to gross receipts

Line 11, columns a-2 and b-2. Enter the
amount of deductions allowed under
Chapter 1 for the tax year for other base
erosion payments paid or accrued to a
foreign person which is a related party.
Attach a statement for line 11. For
amounts reported on line 11, attach a
statement describing the type and amount
of other payments, using the same column
headings as specified in Schedule A:
“Aggregate Base Erosion Payments,”
“Aggregate Base Erosion Tax Benefits,”
“Base Erosion Payments,” and “Base
Erosion Tax Benefits.” For each type of
payment, the attachment must identify the
relationship of the recipients consistent
with the categories and instructions for
columns c, d, and e of Schedule A.

Line 13. Enter the aggregate amount of
base erosion tax benefits from columns
a-2 and b-2 of lines 3 through 11 on which
tax is imposed under section 871 or
section 881, and with respect to which tax
has been deducted and withheld under
section 1441 or section 1442 at a 30%
rate.
Line 14. Subtract line 13, column a-2
from line 12, column a-2, and enter the
difference on line 14, column a-2. Line 14,
column a-2, is the total amount of
aggregate base erosion tax benefits for
the tax year that is used for purposes of
determining the taxpayer’s base erosion
percentage.

Worksheet for Schedule A, Column b-2, Line 15
A
Type of base erosion
payment

B
Amount of base erosion tax
benefit

C

D

Treaty–reduced withholding
rate

Divide Column C by 30%
(round to four decimal
places)

%
%
%
%
%
Sum of all the amounts in column e (enter this amount on Schedule A, Column b-2, line 15)

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E
Multiply Column B by
Column D

Line 15, column b-2. Complete the
worksheet below to determine the portion
of the base erosion tax benefits from
column b-2 of lines 3 through 11 on which
tax is imposed under section 871 or
section 881, and with respect to which tax
has been deducted and withheld at a
reduced withholding rate (but not exempt
from tax) pursuant to a U.S. income tax
treaty. The amount to be entered on
line 15, column b-2, is the same proportion
of such base erosion tax benefits as the
reduced rate of tax specified by the
relevant treaty, bears to the rate of tax
imposed without regard to the treaty. Keep
a copy of the completed worksheet for
your records.

Column E. Multiple the amount in column
b by column d. The product is the portion
of base erosion tax benefits with respect
to the specific type of base erosion
payment and the specific treaty–reduced
rate of withholding that is not taken into
account in computing modified taxable
income. Sum up all the amounts in column
e and enter the total on Schedule A,
column b-2, line 15.

Line 5. Section 59A(b)(1)(B)(ii)(II) limits
the allowable adjustment for applicable
section 38 credits to 80% of the lesser of
applicable section 38 credits or the
BEMTA computed without the adjustment
for applicable section 38 credits computed
in Part III.

DRAFT AS OF
October 17, 2018

Line 16, column b-2. Subtract the sum
of line 13, column b-2, and line 15, column
b-2, from line 12, column b-2, and enter
the difference on line 16, column b-2.
Line 16, column c-2, is the total amount of
base erosion tax benefits for the tax year
that is used for purposes of determining
the taxpayer’s modified taxable income.

Instructions for Worksheet
for Schedule A, Column
b-2, Line 15
General

Use a separate row for each type of base
erosion payment and each treaty–reduced
withholding tax rate to which the
corresponding base erosion tax benefit is
subject.
Do not include a base erosion tax
benefit that is subject to the 30% statutory
withholding tax rate or a base erosion tax
benefit that is exempt from tax pursuant to
relevant income tax treaty provisions.
Do not combine the base erosion tax
benefits that are subject to different
withholding rates. Do not enter any
blended withholding tax rates.
Column A. Enter the type of base erosion
payment that corresponds to the type of
base erosion payment in Schedule A.
Column B. Enter the amount of base
erosion tax benefits that correspond to the
specific type of base erosion payment on
which tax is imposed under section 871 or
section 881, and with respect to which tax
is deducted and withheld at a reduced
withholding rate pursuant to a U.S. income
tax treaty.
Column C. Enter the treaty-reduced
withholding tax rate to which the base
erosion tax benefit is subject.
Column D. Divide the tax rate in column
c by 30%. Round to four decimal places.

Schedule B—Credits Reducing
Regular Tax Liability in
Computing Base Erosion
Minimum Tax Amount (BEMTA)
Part I–Credits Allowed Against
Regular Tax

Line 1. You must enter the total credits
allowed against your regular tax liability in
the tax year. Total credits include the sum
of Foreign Tax Credit from Form 1118;
Qualified Electric Vehicle Credit from
Form 8834; General Business Credit from
Form 3800; Credit for Prior Year Minimum
Tax from Form 8827; and Bond Credits
from Form 8912 shown on Form 1120,
Schedule J, Part I, line 6; or from the
applicable line of your return.

Line 2. Enter the total amount of credit for
increasing research activities reported on
line 1c, “Increasing research activities
(Form 6765)” of all Parts III, Form 3800,
with box A, B, C, or D checked. This total
equals the available credit for increasing
research activities in the tax year.
Line 3. Enter only the portion of the
available credit for increasing research
activities which was included on Form
3800, Part III, line 38, and used against
regular tax liability. You must apply the
general rules and the ordering rules for
use of general business credits from the
Instructions for Form 3800. The
Instructions for Form 3800 provide that
credits reported on Form 3800 are treated
as used on a first-in, first-out basis by
offsetting the earliest earned credits first.
Therefore, the order in which the credits
are used in any tax year is:
• Carryforwards to that year, the earliest
ones first;
• The general business credit earned in
that year; and
• The carryback to that year.
If your general business credits exceed
your tax liability limit, the credits are used
in the order as they are listed in section
38(b). Although general business credits
are aggregated on Form 3800, you should
have a separate record of each credit.

Part II–Applicable Section 38
Credits

Line 8. Enter the total amount of credit
shown on line 1d, “Low-income housing
(Form 8586, Part I only)” and line 4d,
“Low-income housing (Form 8586, Part II
only)” of all Parts III, Form 3800, with box
A, B, C, or D checked. This total equals
the available credit for “low-income
housing” in the tax year.
Line 9. Enter the total amount of credit
shown on lines 1f and 4e, “Renewable
electricity, refined coal, and Indian coal
production (Form 8835)” of all Parts III,
Form 3800, with box A, B, C, or D
checked. This total equals the available
credit for “Renewable electricity
production credit” in the tax year.
Line 10. Enter only the total amount of
investment credit allocable to the section
48 energy credit shown on line 4a,
“Investment (Form 3468, Part III)” of all
Parts III, Form 3800, with box A, B, C, or D
checked. The section 48 energy credit
portion of the amount in Part III, line 4a,
equals the sum of the amounts reported in
Form 3468, Part III, Energy credit, on lines
12a, 12b, 12e, 12h, 12k, 12n, 12p, 12q,
12r, 12s, 12t, and 12u. This total equals
the available credit for “investment credit”
in the tax year.
Line 11. Enter only the portion of the
available applicable credits which was
included on Form 3800, Part III, line 38,
and used against regular tax liability. This
represents the amount of applicable
credits allowed in the current year. Refer
to the ordering rules described in the
above Instructions for Schedule B, line 3.

Part III–BEMTA Determined
Without Adjustment for Applicable
Section 38 Credits
Line 16. You must compute the Base
Erosion Minimum Tax Amount without
adjustment for applicable section 38
credits to allow computation of the
limitation of applicable section 38 credits
on lines 4 and 5 of Part I.

Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the United
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figure and collect the right amount of tax.
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You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form
displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents
may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential,
as required by section 6103.
The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden for business
taxpayers filing this form is approved under OMB control number 1545-XXXX and is included in the estimates shown in the
instructions for their business income tax return.

DRAFT AS OF
October 17, 2018

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