GILTI Calculations for Individual U.S. Shareholders in CFCs: GILTI High-Tax Exclusion and Sec. 962 Elections

Subpart F Controlled Foreign Corporation Treatment, Recognizing QBAI, and Section 951A Tax on Foreign Intangible Income

Note: CLE credit is not offered on this program

A live 110-minute CPE webinar with interactive Q&A


Tuesday, February 16, 2021

1:00pm-2:50pm EST, 10:00am-11:50am PST

or call 1-800-926-7926

This webinar will provide tax advisers with a practical guide to the global intangible low-taxed income (GILTI) provisions for U.S. shareholders in controlled foreign corporations (CFCs). The panel will detail the tax calculations and reporting requirements for taxpayers with GILTI inclusions and describe planning opportunities to minimize the tax impact on individual U.S. shareholders, including electing the GILTI high-tax exclusion under the recent final regulations.

Description

Section 951A requires U.S. shareholders of CFCs to include in gross income the shareholder's GILTI for the tax year. Tax advisers must identify the tax consequences for their clients that are U.S. shareholders in CFCs.

GILTI is an anti-deferral regime which may subject U.S. shareholders (as defined in Section 951(b)) in a CFC to tax on all or a portion of the CFC's income. GILTI is calculated under a complex formula but essentially requires U.S. shareholders to include into gross income CFC net income (subject to certain exceptions) less a routine return on certain CFC tangible depreciable property (qualified business asset investment or QBAI) with adjustments for certain CFC interest expense.

Under the final regulation published in July of 2020, U.S. shareholders may elect to exclude from their GILTI calculations, certain CFC income subject to an effective foreign income tax rate greater than 18.9%. Understanding when this election is beneficial and properly making the election is critical for international tax advisers.

Also key to the tax impact of GILTI is the disparate treatment between corporate and individual taxpayers. C corporations are generally entitled to a Section 250 deduction for GILTI and the Section 78 gross-up attributable to the GILTI inclusion and an indirect foreign tax credit for certain foreign income taxes paid or accrued by the CFC subject to foreign tax credit limitation rules. Absent a Section 962 election, individual U.S. shareholders aren't eligible for these benefits. Making a Section 962 election however, could have certain adverse consequences depending on the facts.

Listen as our expert panel provides a thorough and practical guide to the mechanics of identifying, calculating, and reporting GILTI income for individual taxpayers.

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Outline

  1. Section 951A overview
  2. Final GILTI high-tax exclusion
  3. Section 962 election
  4. GILTI high-tax exclusion vs. Section 962 election
  5. Planning opportunities for individuals to minimize the tax impact of GILTI

Benefits

The panel will review these and other essential matters:

  • When an individual is subject to tax under IRC 951A
  • Determining a U.S shareholder's pro-rata share of CFC tested items
  • When electing the GILTI high-tax exclusion can benefit a U.S. shareholder
  • When making the Section 962 election can benefit a U.S. shareholder
  • Pros and Cons of the GILTI high-tax exclusion versus the Section 962 election

Faculty

Dokko, Sean
Sean Dokko, J.D., LL.M.

Managing Director, National Tax Office - International Tax Services
BDO USA

Mr. Dokko focuses on international tax planning and consulting for both inbound and outbound clients. He has experience...  |  Read More

Krueger, Anke
Anke Krueger

Managing Director
BDO USA

Ms. Krueger has been a member of the International Tax consulting group for more than 10 years. She consults on both...  |  Read More

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