Notice 2025-72: Allocation of Foreign Income Taxes Resulting from the Repeal of Section 898(c)(2); Recognition of Pretransition Gain or Loss under Section 987

Notice 2025-72 announces that the Department of the Treasury and the Internal Revenue Service intend to issue regulations that allocate foreign taxes paid or accrued by a foreign corporation affected by the repeal of the one-month deferral election between its short year and its succeeding taxable year. The notice also announces amendments that the Department of the Treasury and the IRS intend to propose to the regulations under section 987 to accommodate short taxable years.

Section 70352(c)(1)(C) of the One Big Beautiful Bill Act repealed the one-month deferral election under section 898(c)(2). Foreign corporations with a one-month deferral election in place are required to have a one-month short year in order to transition to the taxable year of their majority U.S. shareholder.

Notice 2025-72 will be in IRB: 2025-51, dated: December 15, 2025.

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