Internal Revenue Bulletin No. 2025-52

IRS Bulletin 2025-52: The OBBBA Implementation Begins

This week's Internal Revenue Bulletin (IRB) 2025-52 signals the commencement of implementation for the One, Big, Beautiful Bill Act (OBBBA), landmark legislation passed earlier this year. While the bulletin touches on the 2025 Required Amendments List for qualified retirement plans under Section 401(a), the highlights are undoubtedly the initial guidance concerning the newly created "Trump Accounts" under Section 530A, and significant international tax changes. This bulletin provides practitioners with the first glimpse into how the Treasury and IRS will interpret and enforce the OBBBA's sweeping changes to Subpart F income inclusions under Section 951(a), foreign tax credits under Section 960(d), and the Foreign-Derived Intangible Income (FDII) regime under Section 250.

2025 Required Amendments List: RMDs and Attribution

Building upon the discussion of "Trump Accounts" under Section 530A and the significant international tax changes stemming from the OBBBA under Sections 951(a), 960(d), and 250, this Internal Revenue Bulletin (IRB) also addresses required amendments for qualified retirement plans. Notice 2025-60 provides the 2025 Required Amendments (RA) List, which outlines changes in qualification requirements under Section 401(a), covering plans that are individually designed, and Section 403(b) plans. These requirements also apply to pre-approved plans regarding interim amendments.

1. The Rule:

Notice 2025-60 detailed the 2025 RA List, applicable to individually designed plans qualified under Section 401(a), which defines the requirements for a trust forming part of a stock bonus, pension, or profit-sharing plan to qualify for tax benefits. It also encompasses individually designed plans that satisfy the requirements of Section 403(b), covering tax-sheltered annuity arrangements for employees of certain tax-exempt organizations and public schools. The notice identifies two primary areas necessitating plan amendments:

• Required Minimum Distribution (RMD) Modifications: These modifications stem from Sections 114 and 401 of the SECURE Act (Setting Every Community Up for Retirement Enhancement Act of 2019), which amended Section 401(a)(9). Section 401(a)(9) governs the required minimum distributions from qualified retirement plans, including individual retirement accounts (IRAs). The SECURE Act provisions primarily address changes to required beginning dates and requirements for beneficiaries of retirement accounts. The final regulations relating to Required Minimum Distributions were published at 89 Fed. Reg. 58886.
• Reform of Partnership and Trust Attribution Rules: This reform, detailed in regulations at 89 Fed. Reg. 106848, pertains to the determination of whether a parent-subsidiary controlled group exists under Section 414(c), which defines "employees of trades or businesses under common control." These changes affect how ownership is attributed in partnerships and trusts, influencing controlled group status.

2. The Context:

The issuance of the RA List is a recurring process, as outlined in Revenue Procedure 2022-40, which provides guidance on the remedial amendment period for qualified retirement plans. This process is intended to provide plan sponsors with sufficient time to amend their plans to comply with changes in the law. The SECURE Act and SECURE 2.0 Act brought about substantial modifications to retirement plan rules, necessitating these updates. The attribution rule changes reflect an ongoing effort by the IRS to address perceived loopholes in controlled group rules, particularly in the context of complex ownership structures. The expansion of these rules reflects a political and regulatory environment focused on preventing tax avoidance and ensuring fair application of benefit rules.

3. The Implication:

Tax practitioners need to be aware that individually designed plans generally have until December 31, 2027, to adopt amendments reflecting items on the 2025 RA List. Pre-approved plans have the same deadline for interim amendments. However, Section 501 of the SECURE 2.0 Act provides a general rule allowing amendments to be adopted as late as the last day of the first plan year beginning on or after January 1, 2025 (or later dates for collectively bargained and governmental plans). Plan sponsors should review their plan documents and operational procedures to ensure compliance with the RMD modifications and the revised attribution rules under Section 414(c).

It is critical to note that the Roth catch-up provisions under Section 603 of the SECURE 2.0 Act are not on this list. Section 603 mandates that catch-up contributions for those with compensation exceeding $145,000 (in 2023) be Roth contributions. These provisions are deferred to the 2027 RA List, as final regulations (90 Fed. Reg. 44527) are not applicable until taxable years beginning on or after January 1, 2027 (or later dates for collectively bargained and governmental plans). Practitioners should also consult Notice 2024-2, Q&A J-1, for amendment deadlines related to the SECURE Act, CARES Act, and other recent legislation.

New 'Trump Accounts': Strict Growth Rules and Pilot Funding

Notice 2025-68 addresses the implementation of Section 530A, a novel addition to the Internal Revenue Code (IRC) created by Section 70204 of the One, Big, Beautiful Bill Act (OBBBA), Public Law 119-21. This section introduces "Trump Accounts," a type of traditional individual retirement account (IRA) designed for eligible children. The notice signals the Treasury Department and the IRS's intent to issue regulations governing these accounts, with the forthcoming regulations expected to align with the guidance provided in the notice.

The Rule: Section 530A 'Trump Accounts'

Section 530A establishes a new framework for government-supported investment accounts for children. Key provisions include:

1. Eligible Individual Definition: An eligible individual is defined as someone for whom an election is made to establish a Trump account, who has not attained age 18 before the close of the calendar year of the election, and who possesses a Social Security number issued before the election date. The Secretary of the Treasury will create the initial Trump account.

2. The 'Growth Period': This period extends until January 1st of the year the account beneficiary turns 18. During this time, investment options are severely restricted to what are termed "eligible investments".

3. Eligible Investments: These are generally limited to mutual funds or exchange-traded funds (ETFs) that track a primarily U.S. stock market index (like the S&P 500), do not employ leverage, and have annual fees and expenses capped at 0.1% of the fund's balance. The Secretary determines additional criteria.

4. Contribution Limits: During the growth period, contributions are limited to (1) a $1,000 pilot program contribution from the Secretary for eligible children; (2) qualified general contributions (funded by states, the U.S., Indian tribal governments, or Section 501(c)(3) tax-exempt organizations) for members of a qualified class of account beneficiaries; (3) employer contributions that are not includible in the gross income of the employee under Section 128 (Section 128 employer contributions); (4) qualified rollover contributions; and (5) contributions from other sources. While pilot program contributions, qualified general contributions, and qualified rollover contributions are not subject to an annual contribution limit, all other contributions (Section 128 employer contributions and contributions from other sources) are subject to an aggregate annual limit of $5,000 (subject to cost-of-living adjustments after 2027). Section 128 allows an exclusion from income for amounts paid to a dependent care assistance program by an employer.

5. Pilot Program: The Secretary will contribute $1,000 to the Trump account of an eligible child upon an election. An eligible child must be a qualifying child as defined in Section 152(c), born after December 31, 2024, and before January 1, 2029, a U.S. citizen, and for whom no prior pilot program election has been made. Section 152(c) defines a "qualifying child" using a complex set of tests relating to residence, age, and support.

6. Distribution Restrictions: Distributions are generally prohibited during the growth period.

7. Reporting Requirements: Trustees of Trump accounts face reporting requirements that differ from those applicable to traditional IRAs during the growth period.

The Context: Politics, Policy, and the OBBBA

The creation of Trump Accounts reflects a significant policy shift toward government-seeded investment accounts. It represents an attempt to promote financial literacy and wealth building among younger generations, particularly those from lower-income backgrounds. The OBBBA's architects aimed to provide a foundation for future financial security through early investment, albeit with restrictions on investment choices and access during the account's growth phase. This initiative occurs amidst ongoing debates about wealth inequality and the role of government in fostering economic opportunity.

The Implication: Guidance for Tax Practitioners

Tax practitioners need to familiarize themselves with the intricacies of Section 530A and Notice 2025-68 to advise clients effectively. Key considerations include:

1. Account Establishment: Practitioners should guide clients on the eligibility requirements and procedures for establishing Trump accounts, particularly the election process and the necessary documentation (e.g., Social Security numbers).

2. Contribution Rules: A deep understanding of the contribution limits and permissible sources is crucial. Practitioners must advise on the distinction between contributions subject to the $5,000 annual limit and those that are not (e.g., qualified rollovers). They must also consider the implications for employers contributing under Section 128.

3. Investment Restrictions: Practitioners must emphasize the limited investment options during the growth period and ensure that clients understand the rationale behind these restrictions. The definition of "eligible investments" should be thoroughly explained.

4. Distribution Limitations: Clients must be made aware of the restrictions on distributions during the growth period.

5. Reporting Requirements: Practitioners should stay abreast of the evolving reporting requirements for Trump accounts, which differ from those of traditional IRAs.

6. Pilot Program Enrollment: Taxpayers must use IRS Form 4547 to elect into the program. Litigation is anticipated regarding "missed election" relief and the definition of "authorized individuals" (parents/guardians) in complex custody scenarios.

The advent of Trump Accounts presents both opportunities and challenges for tax practitioners. Staying informed about the forthcoming regulations and providing clear, comprehensive guidance to clients will be essential for navigating this new landscape.

OBBBA International Tax: Limiting Dividend Reductions

Following the introduction of "Trump Accounts" and their associated complexities, the IRB addresses significant changes to international tax rules enacted under the One Big Beautiful Bill Act (OBBBA). Notice 2025-75 provides guidance on the transition rule affecting Section 951(a)(2)(B), which concerns the treatment of dividends in calculating a U.S. shareholder's pro rata share of a Controlled Foreign Corporation's (CFC) Subpart F income.

1. The Rule: The IRS is updating the application of Section 951(a)(2)(B) due to the OBBBA. Section 951(a)(2)(B), prior to the OBBBA amendments, generally allowed a U.S. shareholder of a CFC to reduce their pro rata share of Subpart F income by the amount of dividends received by a previous owner of the CFC's stock during the tax year. This applied when the U.S. shareholder acquired the stock during the CFC's tax year. However, Section 70354(c)(2) of the OBBBA introduces a transition rule that modifies this treatment for certain tax years before the OBBBA amendments to Section 951(a) take full effect (tax years of foreign corporations beginning after December 31, 2025). Notice 2025-75 states that the Treasury Department and the IRS intend to issue proposed regulations regarding this transition rule. Specifically, dividends paid or deemed paid (1) on or before June 28, 2025, during a CFC taxable year including that date, where the Section 951(a) shareholder did not own the stock before June 29, 2025, or (2) after June 28, 2025, but before the CFC's first taxable year beginning after December 31, 2025, will not be treated as dividends for Section 951(a)(2)(B) purposes if the dividend does not increase the taxable income of a U.S. person subject to federal income tax.

2. The Context: Prior to the OBBBA, Section 951(a)(2)(B) could be used to reduce a U.S. shareholder's Subpart F income, potentially leading to tax base erosion. The OBBBA amendments to Section 951 were designed to prevent this type of "extraordinary reduction" planning by more closely aligning Subpart F inclusions with the period of ownership. The transition rule in Notice 2025-75 is intended to further prevent tax avoidance during the shift to the new law. The reference to dividends not increasing the "taxable income of a United States person" is crucial. This targets situations where a dividend might be paid to a U.S. person who then benefits from a dividends received deduction (DRD) under, for example, Section 243 (for dividends from certain domestic corporations) or an exclusion from gross income, or an exclusion from Subpart F income – thereby not actually increasing taxable income. The recent case of Eaton Corporation and Subsidiaries v. Commissioner (164 T.C. No. 4, Feb 2025) underscores the importance of understanding who ultimately benefits from the income inclusion, as the Tax Court denied deemed-paid credits where a U.S. partnership, rather than the U.S. parent corporation, took the Section 951(a) inclusion into account.

3. The Implication: Tax practitioners need to carefully analyze dividend payments made by CFCs during this transition period. They must determine whether such dividends, if treated as reductions under Section 951(a)(2)(B), would actually increase the taxable income of a U.S. person. The Notice indicates this determination requires a "look-through" approach. If the dividend is paid to a partnership or S corporation, practitioners must trace the ultimate allocation of the dividend income to the partners or shareholders to determine if it increases their taxable income. For example, if a dividend is paid to a U.S. partnership, and a portion of that dividend is allocated to a partner who is a foreign person or a tax-exempt entity, that portion of the dividend would not be considered to increase the taxable income of a U.S. person. This would then reduce the amount of the Section 951(a)(2)(B) reduction available to the acquiring U.S. shareholder. The OBBBA also reduced the "haircut" on deemed-paid foreign tax credits, from 20% to 10%, under section 960(d).

Foreign Tax Credits: New 10% Disallowance on PTEP

As noted in the previous section, the OBBBA also reduced the "haircut" on deemed-paid foreign tax credits, from 20% to 10%, under section 960(d). Notice 2025-77 addresses a related, and potentially confusing, aspect of foreign tax credit (FTC) utilization in the context of global intangible low-taxed income (GILTI), now officially renamed Net CFC Tested Income (NCTI).

The Rule

Notice 2025-77 announces that the Treasury Department and the IRS intend to issue proposed regulations regarding Section 960(d)(4). Section 960(d)(4), added by the OBBBA, disallows a foreign tax credit for 10 percent of any foreign income taxes paid or accrued (or deemed paid under Section 960(b)(1)) with respect to any amount excluded from gross income under Section 959(a) by reason of an inclusion in gross income under Section 951A(a).

To unpack this: Section 951A(a) requires U.S. shareholders of controlled foreign corporations (CFCs) to include their GILTI in gross income. Section 959(a) generally allows U.S. shareholders to exclude previously taxed earnings and profits (PTEP) of a CFC from their gross income when those earnings are distributed. Section 960(b)(1) allows a U.S. shareholder to deem paid foreign taxes associated with PTEP distributions.

In essence, when PTEP, which originated from a GILTI inclusion, is distributed, a 10% disallowance applies to the associated foreign tax credits. This effectively means that even though the OBBBA reduced the overall GILTI haircut to 10%, a further 10% of FTCs are disallowed when the PTEP is repatriated.

To manage the effective date, Notice 2025-77 splits the “Section 951A PTEP” group, originally defined in §1.960-3(c)(2)(viii), into two distinct categories:

1. Pre-06/29/25 Section 951A PTEP: PTEP resulting from Section 951A inclusions in a taxable year of a U.S. shareholder ending on or before June 28, 2025.
2. Post-06/28/25 Section 951A PTEP: PTEP resulting from Section 951A inclusions in a taxable year of a U.S. shareholder ending after June 28, 2025.

The 10% disallowance under Section 960(d)(4) applies only to foreign income taxes associated with distributions of "post-06/28/25 section 951A PTEP." Similar rules will also apply to “reclassified section 951A PTEP” under §1.960-3(c)(2)(iv).

The Context

This change is a direct consequence of the OBBBA's modifications to the international tax landscape. While the headline might be a reduced GILTI haircut, the introduction of Section 960(d)(4) adds complexity. It appears to be a revenue-raising measure designed to offset some of the perceived benefits of the reduced GILTI haircut. The splitting of PTEP into pre- and post-June 28, 2025 categories is a practical necessity to implement the effective date mandated by the OBBBA. The reference to the 2024 proposed PTEP regulations (89 FR 95362) signals the IRS's intention to integrate these changes into existing guidance.

The Implication

Tax practitioners must carefully track the source of PTEP distributions to determine whether the 10% disallowance applies. This requires maintaining detailed records of Section 951A inclusions and associated foreign taxes.

The effective date, tied to the U.S. shareholder's taxable year-end, introduces nuances. Even if a CFC's taxable year ends before June 29, 2025, if the U.S. shareholder's year ends after that date and includes a Section 951A inclusion, the associated PTEP, when distributed, will be subject to the 10% haircut. Practitioners should also be aware of the interaction with §1.861-20, which governs the allocation and apportionment of foreign income taxes to PTEP groups. Proper allocation is crucial for accurately determining the amount of foreign taxes subject to the disallowance.

FDII Tightening: Excluding Asset Sale Gains

...nuances. Even if a CFC's taxable year ends before June 29, 2025, if the U.S. shareholder's year ends after that date and includes a Section 951A inclusion, the associated PTEP, when distributed, will be subject to the 10% haircut. Practitioners should also be aware of the interaction with §1.861-20, which governs the allocation and apportionment of foreign income taxes to PTEP groups. Proper allocation is crucial for accurately determining the amount of foreign taxes subject to the disallowance.

Notice 2025-78 addresses a significant change to the Foreign-Derived Intangible Income (FDII) regime enacted as part of the One Big Beautiful Bill Act (OBBBA). Specifically, the notice clarifies the scope of the new rule under Section 250(b)(3)(A)(i)(VII), which excludes income and gain from the sale or other disposition of certain property from the determination of Deduction Eligible Income (DEI).

1. The Rule

The IRS is updating the rules regarding the calculation of Deduction Eligible Income (DEI) under Section 250, which allows a domestic corporation a deduction for a portion of its foreign-derived deduction eligible income (FDDEI). The OBBBA amended Section 250(b)(3)(A)(i) to add Section 250(b)(3)(A)(i)(VII), which excludes from DEI any income and gain derived from the sale or other disposition of intangible property (as defined in Section 367(d)(4)) and any other property subject to depreciation, amortization, or depletion by the seller. Section 367(d)(4) generally defines intangible property broadly, including items such as patents, inventions, formulas, processes, designs, patterns, know-how, trademarks, trade names, brand names, and franchises. Notice 2025-78 clarifies that a "sale or other disposition" is determined under general tax principles, including deemed sales and transactions subject to Section 367(d), but excluding transactions characterized as leases or licenses. The notice further specifies that a copyrighted article, as defined in §1.861-18(c)(3), is not considered intangible property for these purposes. Additionally, Notice 2025-78 introduces a related-party anti-abuse rule. Under this rule, property that was depreciable, amortizable, or depletable in the hands of a related party is still treated as such in the hands of the seller if the seller acquired the property in a transaction where basis is determined by reference to the related party's basis, and a principal purpose of the acquisition was to avoid the application of Section 250(b)(3)(A)(i)(VII)(bb). For this anti-abuse rule, a modified affiliated group is defined using an 80% control threshold, referencing both §1.250(b)-1(c)(17) and Section 954(d)(3).

2. The Context

This change, effective for sales or dispositions occurring after June 16, 2025, reflects a Congressional intent to limit the FDII deduction for income derived from asset sales. The FDII regime, introduced in the Tax Cuts and Jobs Act of 2017, was intended to incentivize U.S. companies to locate their intangible assets and related operations within the United States. However, the original rules arguably allowed companies to generate FDII from sales of tangible property, including depreciable assets, potentially diluting the incentive for true intangible property development within the U.S. This amendment under the OBBBA appears to be a targeted effort to refine the FDII regime to better align with its original policy goals, focusing the benefit on income more directly attributable to intangible property. The change also arrives after increased scrutiny and debate over the effectiveness and economic impact of the FDII regime, with some critics arguing that it primarily benefits large multinational corporations without significantly boosting domestic innovation or investment.

3. The Implication

Tax practitioners must carefully analyze the nature of income derived from sales or other dispositions of property to determine whether it qualifies as DEI. Specifically, gains from the sale of intangible property, as broadly defined by Section 367(d)(4), and gains from the sale of depreciable property will now be excluded from the DEI calculation, reducing the FDII deduction. The "anti-abuse" rule necessitates increased diligence in related-party transactions. Practitioners need to examine the transfer history of assets within a modified affiliated group, particularly where the assets were previously depreciable, amortizable, or depletable. If a transfer to a related party occurred with the principal purpose of circumventing the new FDII rules, the exclusion will still apply. This requires a thorough understanding of the client's business operations and tax planning strategies, as well as careful documentation of the business purpose for intercompany transfers. Moreover, the regulations' clarification that "sales or other dispositions" include deemed sales and Section 367(d) transfers necessitates careful planning for cross-border transactions involving intangible property, particularly those involving cost-sharing arrangements or transfers of intangibles to foreign subsidiaries.