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Taxation of Foreign Source Income: GILTI HTE Regulations, Subpart F, Sec. 245A DRD, Sale of Interest, Attribution

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Thursday, July 20, 2023

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This course will provide tax professionals with guidance on final and proposed regulations governing foreign source income taxation. The panel will present an in-depth analysis of changes in the application of Subpart F as a result of the TCJA, global intangible low-taxed income (GILTI), foreign-derived intangible income (FDII), the Code Section 245A territorial dividends received deduction (DRD), and the Code Section 962 election.

Description

The taxation of foreign source income is at the forefront of developing tax planning strategies for U.S. individual and corporate shareholders. Subpart F, GILTI, FDII, and the territorial DRD, and these rules' application to transfers of stock in foreign corporations, among other matters, require a careful analysis of the rules affecting the structure of offshore activities and the U.S. reporting of foreign source income.

Subpart F imposes an immediate tax on certain U.S. shareholders of a controlled foreign corporation (CFC) when and as the CFC realizes certain income. GILTI is an expansion of U.S. taxing jurisdiction beyond the boundaries of Subpart F. It increases the amount of CFC income currently taxable to the U.S. shareholders in circumstances where deferral was possible under prior law. Changes to the attribution rules regarding U.S. ownership thresholds for foreign corporations to be categorized as CFCs also affect application of the Subpart F and GILTI regimes.

Income taxed under local law at a rate higher than 18.9 percent (based on 90 percent of the current U.S. corporate tax rate) can be excluded from GILTI under final regulations when a proper election is made (GILTI HTE). U.S. corporations that are shareholders of CFCs are eligible to claim a deduction that generally reduces the effective U.S. tax on GILTI income by 50 percent to 10.5 percent. While individuals cannot claim the deduction, an election under Code Section 962 may reduce the current U.S. tax liability on profits retained offshore.

Listen as our panel provides guidance on the tax rules impacting U.S. shareholders of stocks in foreign corporations, the application of Subpart F and GILTI, obtaining the territorial DRD, transfers of interests in foreign entities, and reporting compliance.

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Outline

  1. Taxation of foreign source income: an overview
  2. Code 245A and foreign-source dividends received deduction
  3. GILTI HTE final regulations
  4. Sales and other transfers of stock in foreign corporations
  5. CFC ownership attribution rules
  6. GILTI and FDII

Benefits

The panel will review these and other relevant issues:

  • The changes to the attribution rules
  • Understanding U.S. reporting requirements for foreign income as affected by the TCJA
  • Tax implications of sales or transfers of shares of CFCs by U.S. individual and corporate shareholders
  • Guidance for determining whether the GILTI HTE may be available
  • Best practices and planning considerations for tax professionals regarding the U.S. taxation of foreign income

Faculty

Gottlieb, Daren
Daren J. Gottlieb
International Tax Senior Manager, Washington National Tax
KPMG US

Mr. Gottlieb specializes in domestic and cross-border transactions involving complex international tax issues. He has...  |  Read More

Tohni, Eric
Eric Tohni
Director, Global Tax Reporting
Expedia Group

Mr. Tohni's responsibilities include compliance and provision reporting of Expedia Group's international...  |  Read More

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