SECTION 2. BACKGROUND

.01 Travel disruptions resulting from the COVID-19 Emergency. Restrictions and other measures in response to, and disruptions resulting from, the COVID-19 Emergency may significantly restrict the cross-border movement of an individual, including an individual who intended to return to the United States from a foreign country. See generally Rev. Proc. 2020-20, section 2.01 (discussing restrictions and disruptions that may restrict the ability of an individual to leave the United States). These travel disruptions (collectively, “COVID-19 Emergency Travel Disruptions”) may include transportation disruptions, shelter-in-place orders, quarantines, border closures, and recommendations to implement social distancing and limit exposure to public spaces.

.02 Dual consolidated loss rules . In general, the dual consolidated loss rules under section 1503(d) limit the ability of a domestic corporation to use a “dual consolidated loss,” which is defined to include a net loss attributable to a “foreign branch separate unit.” See §§1.1503(d)1(b)(4) and (5) and 1.1503(d)-4(b). A foreign branch separate unit generally means a business operation outside the United States that, if carried on by a U.S. person, would constitute a foreign branch as defined in §1.367(a)-6T(g)(1). See §1.1503(d)-1(b)(4)(i)(A).

.03 Form 8858. Form 8858 (“Information Return of U.S. Persons With Respect to Foreign Disregarded Entities (FDEs) and Foreign Branches (FBs)”) is used by certain U.S. persons that directly or indirectly operate a foreign branch. Form 8858 and related schedules are used to satisfy the reporting requirements of sections 6011, 6012, 6031, and 6038, and related regulations. For purposes of Form 8858, a foreign branch means a foreign branch as defined in §1.367(a)-6T(g)(1), as well as a qualified business unit as defined in §1.989(a)-1(b) (2)(ii) (generally providing that activities qualify as a qualified business unit if the activities constitute a trade or business and a separate set of books and records is maintained with respect to the activities). See Instructions for Form 8858.

.04 Foreign branch definition. Section 1.367(a)-6T(g)(1) defines a foreign branch as activities that, based on all the facts and circumstances, constitute an integral business operation carried on by a U.S. person outside the United States. For this purpose, evidence of the existence of a foreign branch includes, but is not limited to, the existence of a separate set of books and records and the existence of an office or other fixed place of business used by employees or officers of the U.S. person in carrying out business activities outside the United States. Id . Further, activities outside the United States are deemed to constitute a foreign branch if the activities constitute a permanent establishment under the terms of a treaty between the United States and the foreign country in which the activities are carried out. Id . Whether a taxpayer has a permanent establishment in a foreign country is determined under the rules of the relevant U.S. income tax treaty.

Bulletin No. 2020–22 873 May 26, 2020