The Treasury Department and the IRS recently released several pieces of guidance related to the global intangible low-taxed income (GILTI) provisions and the deduction for dividends received from foreign corporations that were enacted as part of the Tax Cuts and Jobs Act of 2017 (TCJA).
The GILTI provisions require income to be reported in the U.S. if the income is greater than 10% of the return on investment in assets. The goal was to encourage more U.S.-based businesses to recognize income domestically instead of through controlled foreign subsidiaries.
The latest round of guidance includes some final rules, some proposed rules, and some temporary rules.
The Treasury Department and the IRS issued final regulations that provide guidance to determine the amount of GILTI included in gross income for U.S. shareholders of foreign corporations, including members of a consolidated group. The final regulations provide guidance relating to:
- Determination of a U.S. shareholder’s pro rata share of a controlled foreign corporation’s subpart F income included in the shareholder’s gross income.
- Reporting requirements relating to inclusions of subpart F income and GILTI.
- Foreign tax credit provisions applicable to persons who directly or indirectly own stock in foreign corporations.
New proposed regulations offer insights on:
- Determining how income received from foreign corporations is included in the gross income of partners in U.S. domestic partnerships.
- GILTI provisions regarding gross income that is subject to a high rate of foreign tax.
The Treasury and IRS also issued final temporary regulations that limit the availability of the TCJA’s deduction for dividends received from current or former controlled foreign corporations (CFCs) that the Treasury and IRS consider abusive.
If you have investments subject to these provisions as part of your business or personal portfolio, you should contact your tax advisor to schedule a consultation about how this new guidance could affect your tax position.