Subpart F vs. GILTI: Strategies for U.S. Companies After Tax Reform and New Foreign Tax Credit Rules

Planning Subpart F Inclusion to Use Excess Foreign Tax Credit Carryovers

Note: CLE credit is not offered on this program

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


Conducted on Tuesday, June 18, 2019

Recorded event now available

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Program Materials

This webinar will provide corporate tax decisionmakers and advisers with a practical overview of the significant changes the 2017 tax reform law made to Subpart F tax treatment of controlled foreign corporations (CFCs). The panel will detail the intersection of Subpart F with GILTI and the new proposed foreign tax credit regulations, and describe strategies in which it can be advantageous for U.S. multinational companies to report Subpart F income rather than claiming the 50% deduction for GILTI under Section 250.

Description

The new GILTI provisions created in the 2017 tax reform law continue to reverberate in the area of tax attributable to foreign subsidiary income and activities. IRC 951A, which created GILTI, increased the number of foreign subsidiaries subject to these provisions and expanded the reach of the historic Subpart F regime.

The Subpart F rules require "U.S. shareholders" of CFCs to treat certain types of income as taxable in the current year. Section 951A adds a layer of current income inclusion for CFC shareholders on global "intangible income," and then a companion provision-- new Section 250—provides U.S. corporate shareholder with a 50% deduction, which reduces their effective U.S. tax rate on the included income.

In conjunction with the new GILTI section, the IRS proposed regulations on the application of the foreign tax credit rules to GILTI inclusions, disallowing corporations from carrying GILTI credits either forward or backward, or cross-crediting the foreign taxes imposed on GILTI against another type of income. A disparity in the treatment of excess credits arises from GILTI versus Subpart F income treatment.

In certain circumstances, a U.S. corporation may achieve more favorable treatment by structuring activities to plan on Subpart F inclusion to maximize the value of excess credits. Tax advisers must be able to evaluate the overall tax treatment of excess foreign tax credits to determine whether to plan into GILTI or Subpart F.

Listen as our authoritative panel of international tax practitioners reviews the Subpart F rules and provides a practical guide to the specific changes the 2017 tax law makes to determining CFC ownership and reporting obligations.

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Outline

  1. Existing Subpart F framework
  2. Expansion of Subpart F in the new tax reform law
    1. Expanded definition of a controlled foreign corporation and U.S. shareholder
    2. Additional income included in the calculation base
    3. Downward attribution rules
  3. Section 951A GILTI rules
  4. Treatment of excess foreign tax credits GILTI vs. Subpart F income
  5. Planning opportunities to elect into Subpart F to utilize carryforward FTCs

Benefits

The panel will discuss these and other important topics:

  • How the 2017 tax law's expansion of the definitions of CFCs and U.S. shareholders will create new tax and reporting obligations for U.S. taxpayers previously exempt from filing duties
  • Constructive ownership tests in CFCs after the new 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, JD, LLM

Of Counsel
Tully Rinckey PLLC & Royse Law

Ms. Fuller advises a wide range of clients--including private and public companies, joint ventures, private equity...  |  Read More

McCormick, Patrick
Patrick J. McCormick, J.D., LL.M.

Principal
Drucker & Scaccetti

Mr. McCormick specializes in the areas of international taxation, tax compliance, and offshore reporting...  |  Read More

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