Clarity in the cloud: analyzing the new digital content and cloud computing regulations

Doug McHoney (PwC's US International Tax Services Leader) and Matt Chen (a Partner in PwC's Washington National Tax Services ITS Practice) discuss recently proposed digital content and cloud computing regulations. Doug and Matt cover a wide range of topics, including: background on the initial digital content regulations released in the late 1990s; how the evolution of technology has caused the need for updated digital regulations; how computer software is characterized currently; how the proposed regulations expand the characterization of computer software to include transfers of 'digital contents'; the definition of 'cloud transactions'; the importance of these regs from both an income and payment standpoint; the impact of how the regulations characterize transactions for various internal revenue code provisions; how the updated regulations determine the 'place of sale'; the lingering uncertainty in trying to source cloud transactions; how cloud computing transactions are characterized as 'all or nothing'; the potential impact of the 'predominant benefit' determination; and proactive steps companies should consider based on the proposed regulations.