Treasury has proposed an election that switches section 987 currency gain off inside a controlled foreign corporation, and three tax years of that choice now fall due on one date in 2027

A calendar year taxpayer will settle three years of this on a single date.

Treasury and the Internal Revenue Service filed a notice of proposed rulemaking on Thursday morning, REG-103844-26, creating what the document calls a CFC exemption election. For a taxable year in which the election is in effect, a controlled foreign corporation generally would not compute or recognise section 987 gain or loss at all. Section 987 is the provision that makes a taxpayer book currency gain or loss when a qualified business unit whose functional currency is not the dollar remits property to its owner. One carve-out survives, and it runs inbound: the proposal keeps recognition of section 987 gain in connection with certain inbound nonrecognition transactions.

The election is not casual. It would normally be made by filing a statement before the taxable year begins, and it could not be revoked without the consent of the Commissioner.

Why the dates bunch

The 2024 final regulations under section 987 published in December 2024. Notice 2026-17, issued on February 25 this year, said an election of this kind was coming. By then calendar year taxpayers had largely finished preparing their 2025 returns, commenters told Treasury so, and two of them asked that the election be allowed on an amended return.

The proposal agrees, and it states the result plainly. Until October 15, 2027, a calendar year taxpayer would be permitted to make the election for the 2025, 2026 or 2027 taxable years, with 2025 available on an amended return filed by that date. Then the general rule resumes. The same taxpayer would be required to make the election for 2028 on or before December 31, 2027, which puts four years of the decision inside the last eleven weeks of that year.

Comments close 90 days after the proposal publishes. Taxpayers may rely on it before then, for years beginning after December 31, 2024 and ending before the date final regulations are filed, so long as they and every member of their consolidated group and section 987 electing group follow it consistently.