The BEAT generally is calculated as 10 percent of modified taxable income less the regular tax liability (generally reduced by certain tax credits). Finally, a de minimis exception is provided for companies whose foreign related party payments are very low, relative to overall deductions. The BEAT also does not apply to individuals, S corporations, regulated investment companies or real estate investment trusts.

The BEAT, however, does not apply to corporations whose annual gross receipts for the 3-taxable-year period ending with the preceding taxable year are less than $500 million. The BEAT generally applies to domestic corporations and to foreign corporations with income effectively connected with a US trade or business. This new tax is described as a base erosion and anti-abuse tax, or “BEAT.” The additional tax is generally calculated after adding back to taxable income certain deductible payments made to related foreign persons. The recently enacted 2017 tax reform act added section 59A to the Code, which imposes a new “base erosion” minimum tax on large corporations.

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