Structuring Private Equity for GILTI and Subpart F: Minimizing Tax for CFCs Under Section 951A, Final Regulations

Note: CPE credit is not offered on this program

Recording of a 90-minute premium CLE video webinar with Q&A


Conducted on Thursday, April 29, 2021

Recorded event now available

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Course Materials

This CLE course will examine the Subpart F and global intangible low-taxed income (GILTI) rules regarding taxation of controlled foreign corporation (CFC) income and how those rules impact the structuring of private equity investments and funds. The panel will also discuss new regulations that offer clarity and some relief to non-corporate CFC shareholders.

Description

One of the most far-reaching changes to the taxation of non-U.S. companies under tax reform was the expansion of the CFC regime. Before tax reform, U.S. owners of CFCs could generally defer paying U.S. tax on offshore earnings until repatriation, except for Subpart F (passive) income. Section 951A introduced a new category of income (GILTI) taxed in the U.S., whether or not repatriated.

A U.S. person who is at least a 10 percent shareholder of a CFC is subject to federal income tax on the CFC's GILTI, defined as net offshore income (excluding Subpart F income) that exceeds a deemed 10 percent return on the basis in certain tangible assets. Taken together, GILTI and Subpart F require close to full inclusion of offshore earnings in U.S. taxable income on a current basis, rather than the limited inclusion required under prior law.

The IRS published final regulations providing that partners in a U.S. partnership will not have any income inclusions under the Subpart F income and/or GILTI rules regarding stock of a CFC owned by such U.S. partnership if those partners are not themselves 10 percent U.S. shareholders. The regs provide welcome tax relief to 10 percent shareholders that are not corporations and give fund counsel a tax planning opportunity.

Listen as our authoritative panel analyzes GILTI, Subpart F, and the recent regs and how they affect the incentives driving portfolio company investment.

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Outline

  1. Taxation of CFCs pre-2017 tax reform
  2. Subpart F
  3. Section 951A and GILTI: impact on CFCs
  4. New regs: implications for private equity investors
  5. Planning opportunities to minimize tax on foreign holdings

Benefits

The panel will review these and other relevant topics:

  • What is a CFC, and what does Subpart F say about taxation of CFC passive income?
  • Why should private equity investors be concerned with the GILTI tax under Section 951A?
  • How is GILTI calculated on CFC income?
  • How have the new regs improved the tax position for private equity investors, and what kind of investment structures should now be employed?

Faculty

Burstein, Eytan
Eytan Burstein, CPA
International Tax Director
CohnReznick

Mr. Burstein has more than 13 years of experience providing international tax services to clients in a wide range of...  |  Read More

Mainguy, Bradley
Bradley Mainguy, JD, LLM

Senior Manager
CohnReznick

Mr. Mainguy has more than eight years of public accounting experience providing international tax services to clients...  |  Read More

Rokoff, Gerald
Gerald Rokoff

Partner; Co-Chair, Transactional Tax Practice
DLA Piper

Mr. Rokoff has more than 35 years of experience in global and U.S. tax matters, helping clients ensure maximum...  |  Read More

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