The AICPA Just Told the IRS to Stop Making International Tax Compliance Impossible

The IRS loves vague compliance requirements. The AICPA is sick of it.

In a February 4 letter to Treasury and the IRS, the AICPA told regulators that the "determine and document" rule in Notice 2025-75 is "ambiguous and potentially onerous" — and needs to be scrapped, simplified, or replaced with something that actually makes sense.

Here's what's happening, and why it matters if you have clients with controlled foreign corporations (CFCs).

What Notice 2025-75 Requires

The notice deals with Section 951(a) inclusion shareholders — U.S. shareholders of CFCs who have to include their share of Subpart F income in their taxable income.

Under a new transition rule added by H.R. 1 (the "One Big Beautiful Bill Act"), certain dividends don't count as dividends for purposes of Section 951(a)(2). But there's a catch.

If a shareholder reduces their Subpart F income because of one of these dividends, they have to "determine and document that the dividend increased the taxable income of a United States person."

The AICPA's response? How?

The Problem: Nobody Knows What That Means

The notice doesn't explain:

• What level of analysis is required

• What kind of substantiation you need

• What third-party information you're supposed to obtain

• What "increased taxable income" even means in practice

Worse, many of the transactions covered by this rule already closed — some before the notice was even issued. So taxpayers are being asked to reconstruct documentation after the fact for deals that are already done.

"Requiring taxpayers to obtain or reconstruct such information after the fact may be impracticable or impossible," the AICPA wrote.

What the AICPA Wants Instead

The AICPA proposed two fixes:

1. Eliminate the requirement for transactions where the dividend is required by law to be included in gross income (like dividends to S corps or individuals), because the tax law already makes the result clear. Why document something that's mandatory?

2. Adopt a safe harbor that exempts certain U.S. persons (like S corps or individuals) from the "determine and document" rule. For everyone else, clarify what type of documentation is actually sufficient.

Translation: stop making CPAs document things the tax code already requires. It's busy season.

Why This Matters

If you have clients with CFCs — or if you advise U.S. shareholders with international operations — this affects you.

The current rule creates an "administrative burden without a corresponding compliance benefit," according to the AICPA. It also introduces uncertainty, because taxpayers don't know what level of documentation will satisfy the IRS.

And because many transactions are already closed, some taxpayers may not even be able to comply — which means penalties, audits, and disputes over deals that are long done.

What Happens Next

Treasury hasn't responded yet. The AICPA's letter is a formal recommendation, not a binding change.

But if you're working on Section 951(a) issues, keep an eye on this. If Treasury revises the rule, you'll want to know what the new standard is before you file.

For now? Document everything you can, and hope Treasury listens.