KPMG report: Notice 2026-17 guidance on taxable income or loss and foreign currency gain or loss with respect to a QBU

KPMG analysis and observations on Notice 2026-17

The IRS on February 25, 2026, released Notice 2026-17, announcing the U.S. Treasury Department’s intention to modify certain provisions of the 2024 final regulations under section 987 and provide additional elections to simplify the application of section 987. Specifically, Treasury expects the forthcoming proposed regulations will include:

An election to use an equity and basis pool method based on the regulations proposed on September 25, 1991
An election to not recognize section 987 gain or loss with respect to qualified business units (QBUs) owned by a controlled foreign corporation (a “CFC” and the “CFC election”)
Modifications to when section 987 losses will be suspended and recognized
Modifications to the recognition groupings for purposes of recognizing suspended section 987 losses
Modifications to when section 987 gain or loss on the termination of a QBU will be deferred
Modifications to the definition of a section 987 hedging transaction

Read a February 2026 report prepared by KPMG LLP that provides analysis and observations on Notice 2026-17.

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KPMG report: Notice 2026-17 guidance on taxable income or loss and foreign currency gain or loss with respect to a QBU

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