![]() ![]() That treatment would apply prospectively to tax years beginning after the final regulations are published in the Federal Register, but taxpayers may apply the rules for tax years of foreign corporations beginning after December 31, 2017, provided the partnership, its US shareholder partners and other related domestic partnerships apply the rule consistently to all their foreign corporations.įacts. The proposed subpart F income regulations would extend this treatment to determining the US shareholders that must include subpart F income with respect to a CFC. This approach departs from the "hybrid" approach included in the original proposed GILTI regulations, which would have treated the domestic partnership as foreign with respect to any US partner that was also a US shareholder of any CFCs owned by the partnership but as domestic for all other partners.Īs noted, the treatment of domestic partnerships as foreign does not apply for purposes of determining whether a US person is a US shareholder (thus, a domestic partnership can still be a US shareholder) or whether a foreign corporation is a CFC, nor does it apply for purposes of determining ownership under IRC Section 958(a) for any other provision of the Code (e.g., IRC Section 1248). As a result, the domestic partnership will not have a GILTI inclusion with respect to that CFC instead, the GILTI inclusion would be directly to the US partners for which the inclusion is required. However, the domestic partnership can still constitute a US shareholder of the CFC and the foreign corporation can still constitute a CFC because of the domestic partnership. When a US person is a partner of a domestic partnership that owns, under IRC Section 958(a), stock in a CFC, the final GILTI regulations treat the domestic partnership as foreign, thus requiring the US partner to account directly for the GILTI items of that CFC in determining its GILTI inclusion. ![]() The discussion of the final regulations focuses on the provisions that deviate from the original proposed regulations. The following discussion describes the new proposed regulations and the final regulations. Those taxes can be claimed as a credit subject to the limitations under IRC Section 904(a).ĭetailed discussion of new proposed regulations and final regulations IRC Section 960(d) also treats the corporate US shareholder as paying 80% of the foreign taxes paid or accrued by its CFCs with taxable income (tested income) that is considered in determining its GILTI inclusion. Under current law, subject to a taxable income limitation, a corporate US shareholder is allowed a deduction equal to 50% of its GILTI inclusion under IRC Section 250. In contrast to a subpart F income inclusion, a US shareholder's GILTI Inclusion is based on the aggregate of the shareholder's pro-rata share of certain items (e.g., tested income, tested loss and qualified business asset investment (QBAI)) from all the CFCs in which the shareholder is a US shareholder for that year. IRC Section 951A requires a US person that is a US shareholder of a CFC for any tax year to include in its gross income for that tax year (US shareholder inclusion year) its GILTI for that year (GILTI Inclusion).
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