IRC 163(j) Interest Deduction Limits for Controlled Foreign Corporations: Planning & Calculations

ATI Computation, CFC Group Election, Treatment of Tiered CFCs, Addback Rules

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


Conducted on Thursday, August 22, 2019

Recorded event now available

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Program Materials

This webinar will provide tax advisers serving clients with controlled foreign corporations (CFCs) with a detailed and practical guide to the new Section 163(j) business interest deduction limitation rules--part of the 2017 tax reform law--as they apply to foreign corporations and their U.S. shareholders. The panel will discuss the CFC group election and potential benefits of making the CFC group election, as well as detail the mechanics of calculating adjusted taxable income (ATI) for CFCs and their U.S. shareholders.

Description

The new Section 163(j) limitation on business interest deductibility creates serious tax consequences for many U.S. and foreign taxpayers. The Section 163(j) proposed regulations provide that the Section 163(j) limitation applies to CFCs, generally treating CFCs in the same manner as domestic corporations, but with a couple of significant distinctions.

One such key difference is the availability of a "CFC group election" allowing certain commonly controlled CFCs to limit the amount of business interest expense of a CFC group member subject to the Section 163(j) limitation in certain situations. If a CFC group election is in effect, Section 163(j) proposed regulations also permit the “rolling up” of excess taxable income through the tiers of ownership in certain situations.

Listen as our experienced panel provides a thorough and practical guide to the new Section 163(j) business interest deduction limitation as they impact CFCs and their U.S. shareholders.

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Outline

  1. Contrasting new Section 163(j) rules with the prior Section 163(j) rules
  2. Small business exception
  3. Calculating ATI to arrive at the 30% deduction limitation
  4. Application of Section 163(j) to CFCs and their U.S. shareholders
  5. The CFC group election and the corresponding benefits
  6. Application of Section 163(j) to foreign persons with effectively connected income

Benefits

The panel will review these and other relevant topics:

  • The impact of new Section 163(j) on CFCs and their US shareholders
  • Critical provisions of the recently proposed Treasury regulations
  • Specific exceptions to the application of new Section 163(j)
  • How to calculate ATI for purposes of determining the Section 163(j) limitation
  • CFC group election and mechanics

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

Morgan, Chip
Chip Morgan, JD

International Tax Partner
BDO USA

Mr. Morgan has focused his career on international tax for over 30 years. He has been an international tax services...  |  Read More

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