Passive Foreign Investment Company Tax Regulations

Navigating Complex Tax Features of Foreign Investments Absent Clear IRS Guidance

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

Conducted on Thursday, April 8, 2010

Recorded event now available

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Program Materials

This CLE webinar will update tax executives dealing with passive foreign investment companies on the material terms of applicable IRS regulations and guidance, how to deal with ambiguous areas of the regulations, and to navigate common tax planning and compliance challenges with PFICs.

Description

At a time when the Obama administration and IRS are closely scrutinizing sources of U.S. companies' income from foreign sources for perceived tax loopholes, the treatment of passive foreign investment companies (PFICs) has become a high-visibility issue.

PFICs can include foreign-based mutual funds, partnerships and other pooled investment vehicles that have at least one U.S. shareholder. Federal regs on PFICs are designed to prevent U.S. shareholders from avoiding income tax on earnings by foreign corporations, under a complex taxation formula.

While IRC sections 1291-1297 are designed to discourage ownership of PFICs by U.S. investors, these regulations feature complicated and strict tax guidelines and involve gaps that can vex tax professionals. Tax advisors must have a thorough understanding of the rules—and their shortcomings.

Listen as our panel of experienced tax advisors, who frequently work with PFICs, brings you up to date on the material terms of the applicable federal regulations and guidance, prepares you to deal with areas where the regs are lacking in detail, and offers alternatives for dealing with common PFIC compliance scenarios.

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Outline

  1. Determination of a passive foreign investment company (PFIC)
    1. What is a PFIC?
    2. Income test
    3. Asset test
    4. Start-up companies
    5. Companies with a substantial temporary increase in liquidity:
    6. Holding companies with substantial minority investments:
  2. Tax treatment of PFIC income
    1. Gain from the sale of shares
    2. Dividends deemed excess distributions
    3. Interest charge
    4. Qualified electing fund (QEF)
  3. Tax planning strategies
    1. Qualified electing fund (QEF)
    2. Mark-to-market election for publicly traded companies
    3. Importance of recordkeeping by PFICs and shareholders
    4. Enforcement trends

Benefits

The panel will review these and other key questions:

  • What are the tax consequences of PFIC status?
  • What are the benefits and disadvantages of having a PFIC investment qualified as a qualified electing fund (QEF)?
  • What recordkeeping is critical for PFICs and their shareholders?
  • When is an operating company in danger of being deemed a PFIC?

Faculty

Michael J. Miller
Michael J. Miller
Partner
Roberts & Holland

Mr. Miller has provided U.S. tax advice to domestic and international clients for more than 15 years. Working with...  |  Read More

Carol P. Tello
Carol P. Tello
Partner, Tax Practice Group
Sutherland Asbill & Brennan

Her practice focuses on cross-border tax planning and IRS controversies for both business and individual clients. She...  |  Read More

J. Richard Duke
J. Richard Duke
Principal
Duke Law Firm

His law firm specializes in international practice, and he is an adjunct professor of international tax and financial...  |  Read More

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