Treas. Reg. 1.861-18(g)(1) and (i): the label on the contract does not decide, and the rule's start date (26 CFR 1.861-18(g)(1), (i)(1))
Calling a deal a licence does not make it a royalty for tax. The IRS looks at what the buyer actually gets. The current version of the rule applies to tax years starting on or after 14 January 2025.
Dated 18 Oct 2026Source checked 18 Oct 2026Basis: primary text
In the source's own words
“Neither the form adopted by the parties to a transaction, nor the classification of the transaction under copyright law, shall be determinative. ... This section applies to taxable years beginning on or after January 14, 2025.”
Where it was read
Also read from the same source
- Treas. Reg. 1.861-18(a)-(b): what a digital content transaction is and its four categories (26 CFR 1.861-18(a)(2), (b)(1))
- Treas. Reg. 1.861-18(c): copyright rights and copyrighted articles (26 CFR 1.861-18(c)(2), (c)(3))
- Treas. Reg. 1.861-18(d)-(e): services to develop digital content, and know-how (26 CFR 1.861-18(d), (e))
- Treas. Reg. 1.861-18(f)(1): a transfer of a copyright right is a sale or a licence, and a licence is sourced as a royalty (26 CFR 1.861-18(f)(1))
- Treas. Reg. 1.861-18(f)(2)-(3): a copy that is not truly sold is a lease, and a delete-after-a-period rule is a lease (26 CFR 1.861-18(f)(2), (f)(3))
- Treas. Reg. 1.861-18(f)(2)(ii): sourcing of a sold copy, and the billing-address rule for electronic delivery (26 CFR 1.861-18(f)(2)(ii))
Figures it counts in
It is shown on its own, not counted into a figure.
Cited in this guide