Navigating the New Digital Content and Cloud Regulations

On January 14, 2025, Treasury and the IRS released long-awaited final regulations addressing the characterization of digital content and cloud transactions, along with proposed regulations providing guidance on the source of income from cloud transactions. These regulations come nearly six years after the issuance of the initial proposed regulations in 2019 that aimed to bring the rules for characterizing digital transactions into the 21st century. 

In this episode, we explore the technical nuances and the practical implications of the new final and proposed rules. Do the rules change how existing transactions are characterized? How do the rules modify the process for characterizing digital content and cloud transactions? Are there varying tax implications under the rules based on different operating model choices? How are companies that are engaged in the resale of digital content and cloud services affected? How does the formulaic approach for the new proposed sourcing rule work? What are the implications of the IP factor to companies developing cloud offerings for sale to third parties or for internal delivery? 

Join us as our hosts Gary Scanlon and Kristen Gamboa are joined by Matt McNeill from the KPMG Value Chain Management practice, as well as David de Ruig and Marissa Rensen from the KPMG WNT International Tax group, to explore these issues and more.