New IRS Rules for Digital Content and Cloud Transactions

This article originally appeared in the May 2026 issue of The Tax Adviser.

On January 10, 2025, Treasury and the IRS released final regulations [TD 10022] addressing the classification of digital content and cloud transactions. Proposed regulations [REG–107420–24] were issued concurrently for determining the source of income derived from cloud transactions.

The final cloud transactions regulations include several notable revisions to proposed regulations previously released in August 2019, while the final digital content regulations introduce a number of clarifications to existing regulations. Both the digital content and cloud transactions final regulations include examples setting out an application of the rules to resellers of both digital content and cloud transactions.

The final regulations are generally applicable to tax years beginning on or after January 14, 2025, although taxpayers may apply them retroactively provided certain conditions are met.

BDO’s Sebastian Biddlecombe, Monica Shum, and Anke Krueger provide the details in this article for The Tax Adviser.