The US IRS on June 14 released final and proposed regulations on the global intangible low-taxed income (GILTI) regime of section 951A, a key part of the 2018 Tax Cuts and Jobs Act 2018 rewrite of the international tax system. Separately, the IRS and Treasury issued temporary and proposed regulations under section 245A that limit the dividends received deduction available for certain dividends received from current or former controlled foreign corporations (CFCs).
The regulations also address the foreign tax credit, the treatment of domestic partnerships for purposes of determining the subpart F income of a partner, and the treatment of income of a CFC subject to a high rate of foreign tax under section 951A.
The final GILTI regulations provide guidance to determine the amount of global intangible low-taxed income included in the gross income of certain US shareholders of foreign corporations, including US shareholders who are members of a consolidated group.
According to a government press release, the final regulations retain, with modifications, anti-abuse provisions that were included in the proposed regulations and revise the domestic partnership provisions to adopt an aggregate approach for purposes of determining the amount of global intangible low-taxed income included in the gross income of a partnership’s partners under section 951A with respect to controlled foreign corporations owned by the partnership.
The final regulations also provide guidance relating to the determination of a United States shareholder’s pro rata share of a controlled foreign corporation’s subpart F income and global intangible low-taxed income included in the United States shareholder’s gross income, as well as certain reporting requirements relating to inclusions of subpart F income and global intangible low-taxed income, the release said.
The US Treasury Department and the IRS also issued final regulations under sections 78, 861, and 965 relating to foreign tax credit aspects of the transition to an exemption system for income earned through foreign corporations.
The proposed regulations relate to the treatment of domestic partnerships for purposes of determining amounts included in the gross income of their partners under section 951 with respect to controlled foreign corporations owned by the partnership and the treatment of income of a controlled foreign corporation that is subject to a high rate of foreign tax under section 951A. The Treasury Department and the IRS request comments on these proposed rules.
The IRS and Treasury also issued temporary and proposed regulations under section 245A that regs limit the applicability of the exception to foreign personal holding company income for certain dividends received by upper-tier CFCs from lower-tier controlled foreign corporations and temporary regulations under section 6038 to facilitate administration of certain rules in the temporary regulations, the preamble to the regs say.
The temporary and proposed regulations affect certain US persons that are domestic corporations that receive certain dividends from current or former CFCs or are United States shareholders of upper-tier controlled foreign corporations that receive certain dividends from lower-tier controlled foreign corporations.
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