On September 3, the Department of the Treasury issued final regulations regarding the base erosion and anti-abuse tax (“BEAT”) imposed on certain large corporate taxpayers with respect to certain payments made to foreign related parties.^[1] The final regulations provide guidance on a number of areas, an important section of the regulations pertains to the election to waive deductions for purposes of the BEAT.

In this article, we will outline the reasons for, and the mechanics of, this election, as well as how this election, while a taxpayer-friendly inclusion in the regulations, can come at a significant cost for taxpayers. Additionally, the final regulations contained a relaxed anti-abuse provision that makes the effects of the anti-abuse provision less dramatic.

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