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

Note: CPE credit is not offered on this program

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

Conducted on Wednesday, November 6, 2019

Recorded event now available

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Program Materials

This CLE webinar 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 which 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) that is taxed in the U.S. whether or not repatriated.

A U.S. person who is at least a 10% 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% 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.

On June 14, 2019, the IRS published proposed regulations providing that partners in a U.S. partnership will not have any income inclusions under the Subpart F income and/or GILTI rules in respect of stock of a CFC owned by such U.S. partnership if those partners are not themselves 10% U.S. shareholders. The new regs provide welcome tax relief to 10% 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: iimplications 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

Robins, Scott
Scott Robins
International Tax Senior Manager
Grant Thornton

Mr. Robins is the international tax and transfer pricing practice leader in Grant Thornton LLP’s Philadelphia...  |  Read More

Terzian, Lincoln
Lincoln Terzian
Practice Leader, International Tax
Grant Thornton

Mr. Terzian is a partner based in the Manhattan office and serves as the East Region International Tax practice leader....  |  Read More

Zaiken, David
David Zaiken
Managing Director, International Tax
Grant Thornton

Mr. Zaiken is Managing Director, International Tax at Grant Thornton.

 |  Read More

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