Subpart F Expansion Final and Proposed Regulations: Increased Tax Liability and Reporting Obligations

Controlled Foreign Corporation and U.S. Shareholder Definitions, GILTI

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

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Wednesday, December 14, 2022 (in 5 days)

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

or call 1-800-926-7926

This course will provide tax advisers with a practical overview of the significant to Subpart F tax treatment of controlled foreign corporations (CFCs). The panel will detail in plain language the specific areas of Subpart F, including the downward attribution rules, recent final and proposed regulations, and foreign information reporting requirements on Form 5471.

Description

The Subpart F rules require U.S. shareholders of CFCs to treat certain types of income as taxable in the current year. These calculations have long presented significant challenges to tax advisers serving clients with CFC holdings. Final regulations issued in January 2022 state that flow-through entities only have Subpart F income when the individual partner is an indirect shareholder of the CFC. Additionally, proposed regulations have been issued that would allow partners and S corporation shareholders to make mark-to-market and qualifying electing fund elections. Now the inverse is true--only the partnership or S corporation can make these elections.

Continually updated legislation adds complexity to an already challenging regime. Tax advisers must also know whether the new rules create new filing obligations to avoid severe penalties for foreign information reporting noncompliance.

Listen as our authoritative panel of international tax practitioners reviews the Subpart F rules and provides a practical guide to the specific CFC ownership and reporting obligations.

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Outline

  1. Impact of U.S. International Tax Reform: An Overview
  2. Subpart F’s CFC Rules: Expansion & Contraction of § 951(a)’s Application
    1. Six ways Subpart F’s purview was expanded by the 2017 TCJA
    2. Strategies to mitigate effects of § 318’s downward attribution rules due to Congress’ repeal of § 958(b)(4)
      1. Rev. Procedure 2019-40’s three safe harbors; Reporting examples
      2. Entity selection and check-the-box considerations
    3. Final January 2022 Regulations limiting Subpart F income; Examples
    4. US partnerships as US shareholders
    5. Proposed regulations offering mark-to-market QEF elections
  3. Global Intangible Low Taxed Income – Code § 951A
    1. Overview and recent final GILTI regulations
    2. Mechanics and computation
    3. Tax planning strategies
    4. Reporting considerations
    5. Examples
  4. Tax Planning Strategies and Pitfalls
    1. The § 962 election: determining whether making the election is optimal, mechanics, reporting
    2. The High-Tax Subpart F and GILTI Opt-out Elections
      1. Longstanding Subpart F High-Tax Exception of § 954(b)(4)
      2. GILTI High-Foreign Tax Exclusion (Final 2020 Regs).
      3. The 2020 Proposed “Unitary” High-Tax Annual Exclusion Election
    3. Practical tax planning opportunities given recent IRS administrative guidance
    4. Tax traps to avoid
  5. Key Takeaways and Q&A

Benefits

The panel will discuss these and other important topics:

  • How the proposed and final regulations affect Subpart F income
  • Constructive ownership tests in CFCs, including downward attribution rules
  • How the Subpart F changes run counter to the tax law's general aim to convert to more territorial taxation of U.S. taxpayers as opposed to global-based
  • Treatment of earnings invested in U.S. property

Faculty

Fuller, Pamela
Pamela A. Fuller, Esq., J.D., LL.M. (Taxation)

Senior Counsel (Tax, M&A, International)
Tully Rinckey PLLC and Zahn Law Group

Ms. Fuller’s practice has a triple focus: tax planning, tax controversies, and tax compliance. She advises a wide...  |  Read More

Samtoy, John
John Samtoy

Tax Partner
Holthouse Carlin & Van Trigt

Mr. Samtoy’s practice specializes in international tax compliance and consulting services, with a focus on...  |  Read More

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