IRS Considers Extending Scope of Foreign Income ‘Overlap Rule’

The IRS is considering whether to extend the application of an “overlap rule” to foreign companies that fall under a new anti-abuse measure created by Republicans’ 2025 tax law.

Mallory Mendrala, acting deputy associate chief counsel at the IRS, said the agency is exploring whether the PFIC-CFC overlap rule should be extended to the new classifications of foreign corporations created under tax code Section 951B for tax purposes.

“We are thinking about with those changes to OB3, we have authority to make similar changes in the PFIC space too,” Mendrala said in remarks at a Boston event hosted by ...