IRS proposes rule to exclude certain property sales from deduction-eligible income

The Internal Revenue Service issued a notice of proposed rulemaking (Regulation 117130-25, RIN 1545-BR85) to amend 26 CFR § 1.250(b)-1. The proposed regulations would exclude from the calculation of deduction-eligible income (DEI) any income or gain derived from the sale or other disposition of intangible property or other property subject to depreciation, amortization, or depletion. The exclusion applies to sales or dispositions occurring after June 16 2025.

Section 250(a)(1) permits a domestic corporation to deduct 33.34 percent of its foreign-derived deduction-eligible income (FDDEI) for taxable years beginning after December 31 2025. The One, Big, Beautiful Bill Act (Public Law 119-21) added the new exclusion category under § 250(b)(3)(A)(i)(VII) and reduced the allowable deduction percentage from 37.5 percent to 33.34 percent.

Under the proposed Sec. 1.250(b)-1(c)(15)(vii), gross DEI would be determined without regard to "excluded property sales income." Proposed Sec. 1.250(b)-1(h) defines this term to include (i) intangible property as defined in § 367(d)(4) (excluding copyrighted articles) and (ii) other property of a type that is subject to depreciation, amortization, or depletion in the hands of the seller. The rule also clarifies that the general definition of "sale" in § 250(b) does not apply to the transactions covered by the new exclusion.

Comments must be submitted electronically through regulations.gov by October 5 2026, referencing IRS and REG-117130-25. The Treasury Department and the IRS will make all comments publicly available. For technical questions, contact Stefan A. Pruessmann or Michelle L. Ng at (202) 317-6939; for comment-submission inquiries, contact the Publications and Regulations Section at the provided email address.