United States · Administrative guidance
IRS accepts Siemens result on section 245A extraordinary-disposition rules
On 19 October 2026, the US Internal Revenue Service published Action on Decision 2026-2, accepting the result of the Tax Court's Siemens decision that the extraordinary-disposition rules in Temporary Treasury Regulation 1.245A-5T exceeded Treasury's rulemaking authority.
- Official document:
- Action on Decision 2026-2; Siemens Medical Solutions USA, Inc. v. Commissioner, 167 T.C. No. 5; Treasury Regulations 1.245A-5T and 1.245A-5
- Development date:
- 2026-10-19
The IRS will apply the result to other cases
Section 245A generally gives a domestic corporate US shareholder a deduction equal to the foreign-source portion of a dividend received from a specified 10%-owned foreign corporation, subject to the section's conditions. Treasury introduced the extraordinary-disposition rules in 2019 to address a transition-period mismatch between the effective dates of section 245A, the section 965 transition tax and the global intangible low-taxed income regime. The rules partially denied the section 245A deduction when specified earnings from certain related-party asset dispositions were later distributed.[1][4][5]
The Tax Court held on 15 July that the temporary rules conflicted with section 245A's unambiguous text. AOD 2026-2 says the IRS will treat the extraordinary-disposition rules as substantively invalid when disposing of other cases, whether the otherwise applicable version is the temporary regulation or the substantially similar final rules adopted in 2020.[1][3]
This is an acquiescence in the result only. The IRS continues to disagree with the court's reasoning, particularly any suggestion that the broadly worded delegations in sections 245A(g) and 7805(a) cannot authorise narrowly tailored anti-abuse rules designed to preserve congressional intent. An action on decision is not public guidance or taxpayer-citable precedent, but the Service says it will follow the accepted holding in cases with the same controlling facts.[1][2][4]
Other section 245A restrictions remain in force
The AOD does not withdraw Treasury Regulation 1.245A-5 or invalidate it in full. The IRS says it will continue to apply the extraordinary-reduction rules in paragraphs (e) and (f), and the anti-abuse rule in paragraph (h), where relevant. It will also continue defending the procedural validity of the temporary regulations.[1][5]
Transactions formerly within the extraordinary-disposition rules remain open to examination under other statutory rules and judicial doctrines, including economic substance and substance over form. The IRS also states that its acquiescence does not extend to other Tax Cuts and Jobs Act regulations affecting US shareholders of fiscal-year controlled foreign corporations, expressly citing Treasury Regulations 1.78-1(c) and 1.951A-2(c)(5).[1]
Practical consequence for groups
US-headed and foreign-headed groups with open returns, examinations or refund claims affected by the extraordinary-disposition rules should isolate the regulation's effect from the remaining section 245A eligibility conditions and anti-abuse provisions. The AOD records the IRS's litigation position; it is not a repeal of the regulation. Current eCFR text still includes both the extraordinary-disposition provisions and the unaffected extraordinary-reduction and anti-abuse rules.[1][2][4][5]
Official sources
- [1] Action on Decision 2026-2: Siemens Medical Solutions USA, Inc. v. Commissioner
Internal Revenue Service · Document date: 2026-10-19
Complete three-page AOD read and visually reviewed. Page 1 identifies 167 T.C. No. 5, docket 11432-25, the statutory-authority issue and the temporary/final extraordinary-disposition rules; page 2 states substantive invalidity for either version, preserves the extraordinary-reduction and anti-abuse rules, other doctrines and unrelated regulations; page 3 recommends acquiescence in result only.
- [2] Internal Revenue Bulletin 2026-43: Actions Relating to Court Decisions
Internal Revenue Service · Document date: 2026-10-19
Bulletin publication date and Actions Relating to Court Decisions section read. The section explains AOD status, same-controlling-facts treatment and non-precedential effect, and records acquiescence in result only for Siemens. Its case-number reference is qualified below.
- [3] Docket 11432-25: Siemens Medical Solutions USA, Inc. and Consolidated Subsidiaries v. Commissioner
United States Tax Court · Document date: 2026-07-15
Public docket read. Entry 26 identifies the reviewed opinion filed 15 July 2026 as 167 T.C. No. 5; entry 28 records the 17 July order granting the taxpayer summary judgment because the extraordinary-disposition rules conflict with the statute.
- [4] 26 USC 245A: Deduction for foreign-source portion of dividends received by domestic corporations
Office of the Law Revision Counsel, US House of Representatives · Document date: 2026-10-07
Official text current through Public Law 119-120 of 7 October 2026; subsections (a)-(c) and (g) read for the deduction, covered corporations, foreign-source portion and regulatory delegation.
- [5] 26 CFR 1.245A-5: Limitation of section 245A deduction and section 954(c)(6) exception
Office of the Federal Register / Government Publishing Office · Document date: 2020-08-27
Current eCFR title text up to date as of 19 October 2026 read. Selected paragraphs (a)-(c), (e), (f), (h) and (k), including the final extraordinary-disposition rules, extraordinary-reduction rules, anti-abuse rule, applicability date and source history for T.D. 9909, 85 FR 53083 (27 August 2020).