What changed

The IRS has signaled another round of changes to how companies measure foreign-currency gains and losses under Section 987—rules that matter if your trucking business operates in Canada, Mexico, or other markets through branches or subsidiaries that keep books in a non‑U.S. dollar currency. In Notice 2026‑17, released February 26, 2026, Treasury and the IRS outline forthcoming proposed regulations aimed at simplifying compliance and narrowing the impact of Section 987 on routine transactions. Key elements include an optional “equity and basis pool method,” targeted tweaks to loss and grouping rules, and a potential election for controlled foreign corporations (CFCs).

Why it matters for trucking

Section 987 applies when a U.S. taxpayer owns a qualified business unit (QBU) with a functional currency other than the U.S. dollar—for example, a U.S. fleet with a Canadian dollar branch handling local freight, fuel, and parts. Currency swings can create taxable gains or losses when cash or assets are remitted back to the U.S. owner. The modern framework for Section 987 was finalized in late 2024 and generally applies to tax years beginning after December 31, 2024, with options for early adoption in certain cases. Understanding these mechanics now helps owner‑operators and fleets plan remittances, hedge currency exposure, and avoid surprises at tax time.

What’s in the new IRS notice

Optional equity and basis pool method. Taxpayers could elect a simplified approach that replaces daily netting with a single annual computation of the QBU’s net remittance. Under this method, you track an “equity pool” in the QBU’s local currency and a “basis pool” in the owner’s currency, and you generally translate QBU income at a yearly average exchange rate—an approach intended to cut administrative burden. The election is available only when a current‑rate election is in effect.
Tweaks to the 2024 final rules. The forthcoming proposal would modify the loss‑suspension rules, simplify consolidated recognition groupings, clarify treatment of successor deferral QBUs in reorganizations, and expand what qualifies as a Section 987 hedging transaction beyond GAAP‑designated hedges—useful for fleets that use FX forwards to stabilize CAD or MXN expenses.
New CFC election (not yet reliable). A U.S. parent could allow a CFC to elect out of recognizing Section 987(3) gain or loss on QBU remittances. Any unrecognized amounts before the election would be recognized pro rata over 120 months. Importantly, the IRS says taxpayers cannot rely on this CFC election until further guidance is issued.
Reliance and timing. Taxpayers may rely now on the equity and basis pool method and the other described modifications for tax years ending before final regulations are published—so long as the 2024 final regulations apply and all Section 987 group members apply the new rules consistently.

Practical implications for fleets

Cross‑border operations. If you run Canadian or Mexican branches, consider whether the current‑rate election and the equity/basis pool method would simplify computations tied to fuel, payroll, and parts purchases made in local currency.
Cash management. Because Section 987 can trigger tax on remittances, coordinate treasury and tax to plan timing and size of cash movements between foreign QBUs and the U.S. parent under the annual approach.
Hedging policy. The broadened definition of Section 987 hedges could bring more of your real‑world FX risk‑management tools into the tax hedge framework—review documentation standards with advisors.
M&A and reorganizations. If you’re buying or restructuring foreign operations, watch the successor deferral QBU and group‑recognition rules to avoid unintended loss suspensions.

Action steps to consider now

Inventory any non‑U.S. dollar QBUs (Canada/Mexico are common for trucking) and confirm which 2024 elections you made or plan to make.
Model the equity/basis pool method for 2025–2026 to estimate compliance savings and tax effects versus your current approach.
Align ERP/TMS and accounting processes to track equity and basis pools and to produce the annual computations under the method.
Review FX hedges (for fuel, parts, or revenue) against the expanded Section 987 hedge definition and tighten documentation.
Monitor forthcoming proposed regulations—and any separate IRS notice allowing reliance on the CFC election—before changing CFC treatment.

Bottom line

This is a meaningful attempt by the IRS to make Section 987 more workable for real businesses. For fleets with cross‑border QBUs, the equity/basis pool method and targeted tweaks could reduce record‑keeping friction and provide clearer, more predictable results—while you wait for formal proposed regulations and definitive rules on the CFC election.

Sources Consulted: Forvis Mazars; Internal Revenue Service (Notice 2026‑17); Federal Register final regulations on Section 987 (Dec. 11, 2024).

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This article was prepared exclusively for truckstopinsider.com. For professional tax advice, consult a qualified professional.