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The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 1.
NOTE: If you are seeking CPE credit, you must listen via your computer — phone listening is no
longer permitted.
Section 951A: GILTI Rules for Individual and Non-C Corporation CFC ShareholdersTreatment of CFC income, Reporting Requirements, Planning Techniques to Defer or Reduce GILTI Tax, and More
Today’s faculty features:
1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific
TUESDAY, JULY 16, 2019
Presenting a live 90-minute webinar with interactive Q&A
Cindy Grossman, Partner, Giordani Swanger Ripp, Austin, Texas
Libin Zhang, Partner, Fried Frank Harris Shriver & Jacobson, New York
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© 2019 Giordani Swanger Ripp LLP. This report has a been prepared for informational purposes only. It does not constitute an offer or solicitation for the purchase or sale by our firm to you or to any other person to acquire a life insurance product. The information contained herein has been obtained from sources believed to be reliable, but our firm cannot guarantee its accuracy or completeness.
100 CONGRESS AVENUE, SUITE 1440 | AUSTIN, TEXAS 78701
phone 512.767.7100 | fax 512.767.7101 | GSRLAWFIRM.COM
Strafford Webinar: New Section 951A: GILTI Rules for Individual and Non-C Corporation CFC Shareholders
Presented by Cindy L. Grossman for Strafford Publications
July 16, 2019
PRIVATE PLACEMENT L IFE INSURANCE 6
Deferred DeferredLow-taxed High taxed
Income Income
Deferred Taxation – full U.S. rate
Subpart F Income
Immediate U.S. taxation—full U.S. rate
Controlled Foreign
Corp
Controlled Foreign
Corp
U.S.Shareholder
Controlled Foreign
Corp
Previous U.S. International Tax System (Pre-2018)
PRIVATE PLACEMENT L IFE INSURANCE 7
Deferred High-taxedIncome
Exempt 10% return on tangible assets
Immediate U.S. tax on excess returns
Subpart F Income Low-taxed Income
Immediate U.S. taxation full U.S. rate
Controlled Foreign
Corp
Controlled Foreign Corp
U.S.Shareholder
Controlled Foreign Corp
Post-TCJA U.S. International Tax System (Post-2017)
New system (“GILTI”) combines all deferred income and taxesexcess returns
PRIVATE PLACEMENT L IFE INSURANCE 8
Prior Treatment of CFC Income and Reporting Requirements
• Prior to enactment of 951A, most CFC planning involved avoidance of Subpart F income inclusion: earnings and profits of a CFC were permanently deferred until distributed, with the exception of Subpart F income and investment earnings from U.S. property
• Subpart F income includes:- Insurance Income – 953- Foreign Base Company Income - 954
◦ Foreign Personal Holding Company Income (exception for income from related parties)◦ Foreign Base Company Sales Income (subject to exceptions)◦ Foreign Base Company Service Income from service performed by CFC outside of CFC’s
country of incorporation- Income from boycott operations; amounts relating to illegal kickbacks, bribes, etc. paid by the CFC- Income derived in certain foreign countries disfavored by U.S.
• Income subject to accelerated tax under Subpart F or U.S. property investment rules was not taxed a second time upon distribution, and shareholder basis in CFC is increased
• U.S. Shareholders of CFCs filed Form 5471 (Information Return of U.S. Persons With Respect To Certain Foreign Corporations). Any U.S. Shareholder who owns stock in a CFC for an uninterrupted period of 30 days or more during any tax year of the CFC, and who owned that stock on the last day of the year, must file Form 5471 (these are called “Category 5 Filers).
PRIVATE PLACEMENT L IFE INSURANCE 9
Prior Treatment of CFC Income and Reporting Requirements
So, what changed?
• E&P of a CFC are still permanently deferred until distributed, but now GILTI is included as one of the exceptions to that rule, essentially obliterating the non-Subpart F planning that many CFCs engaged in
• Domestic C-corporations (and individuals making a 962 election) can receive a deduction equal to 50% of their GILTI and an 80% foreign tax credit
• Filing Requirements: New form 8992 consists of Part I, Part II, and Schedule A. - Schedule A is completed first, and reports the U.S. shareholder’s pro rata share from each CFC’s Form
5471, Schedule I-1 “Information for Global Intangible Low-Taxed Income.” - Schedule A totals are entered into Part 1, which reports pro rata share of tested income and pro rata
share of tested loss. This will determine if the shareholder has net CFC tested income or net CFC tested loss.
- If the Shareholder has net CFC tested loss, Part II is not required. If the shareholder has net CFC tested income, Part II should be completed to determine the deemed tangible income return by calculating specified interest expense and the pro rata share of qualified business asset income.
- Note that the Section 250 deduction (for domestic C corporations) is computed separately on Form 8993
PRIVATE PLACEMENT L IFE INSURANCE 10
Overview of Section 951A• Effective for tax years of controlled foreign corporations beginning after December
31, 2017, each person who is a United States shareholder of any controlled foreign corporation for any taxable year of such United States shareholder shall include in gross income such shareholder's global intangible low-taxed income for such taxable year.
• Computation is done on a U.S. shareholder basis, not on CFC basis
- However, certain elements of the GILTI calculation are done on a CFC by CFC basis
• Simply expressed, GILTI is calculated as follows:
- Shareholder’s net CFC tested income – Shareholder’s net deemed tangible income return
• Section 951A is a Russian nesting doll of defined terms…
PRIVATE PLACEMENT L IFE INSURANCE 11
Overview of Section 951A• United States Shareholder: a United States person who owns (within the meaning of section
958(a)), or is considered as owning by applying the rules of ownership of section 958(b), 10 percent or more of the total combined voting power of all classes of stock entitled to vote of such foreign corporation, or 10 percent or more of the total value of shares of all classes of stock of such foreign corporation.
- United States Person: a citizen or resident of the U.S., a domestic partnership, a domestic corporation, any estate (other than certain foreign estates ), and trusts over which U.S. court exercises primary supervision and U.S. persons control substantial decisions of the trust
- Final Reg. 1.951A-1(e)(1): Partners of a domestic partnership are treated as owning proportionately CFC stock owned by the partners as if partnership were a foreign partnership under 958(a)(2).
• Controlled Foreign Corporation: any foreign corporation if more than 50 percent of the total combined voting power of all classes of stock of such corporation entitled to vote, or the total value of the stock of such corporation, is owned (within the meaning of section 958(a)), or is considered as owned by applying the rules of ownership of section 958(b), by United States Shareholders on any day during the taxable year of such foreign corporation
PRIVATE PLACEMENT L IFE INSURANCE 12
Overview of Section 951A• United States Person: application to domestic partnerships:
- Final Reg. 1.951A-1(e)(1): Partners of a domestic partnership are treated as owning proportionately CFC stock owned by the partners as if partnership were a foreign partnership under 958(a)(2).
Foreign Corporation
US Partnership
US Corporation
US Individual A
Foreign Individual B
90% 10%
90%10%
PRIVATE PLACEMENT L IFE INSURANCE 13
Overview of Section 951A• Global Intangible Low Taxed Income: The term “global
intangible low-taxed income” means, with respect to any United States shareholder for any taxable year of such United States shareholder, the excess (if any) of—
- such shareholder's net CFC tested income for such taxable year, over
- such shareholder's net deemed tangible income return for such taxable year.
PRIVATE PLACEMENT L IFE INSURANCE 14
Overview of Section 951A• Net CFC Tested Income: The term “net CFC tested income” means, with respect to
any United States shareholder for any taxable year of such United States shareholder, the excess (if any) of
- the aggregate of such shareholder's pro rata share of the tested income of each controlled foreign corporation with respect to which such shareholder is a United States shareholder for such taxable year of such United States shareholder and which has Tested Income (determined for each taxable year of such controlled foreign corporation which ends in or with such taxable year of such United States shareholder), over
- the aggregate of such shareholder's pro rata share of the tested loss of each controlled foreign corporation with respect to which such shareholder is a United States shareholder for such taxable year of such United States shareholder and which has Tested Loss (determined for each taxable year of such controlled foreign corporation which ends in or with such taxable year of such United States shareholder).
PRIVATE PLACEMENT L IFE INSURANCE 15
Overview of Section 951A• Tested Income: the excess (if any) of the gross income of such corporation
determined without regard to—
- any item of income described in Section 952(b) (ECI),
- any gross income taken into account in determining the subpart F income of such corporation,
- any gross income excluded from the foreign base company income (as defined in Section 954) and the insurance income (as defined in Section 953) of such corporation by reason of Section 954(b)(4),
- any dividend received from a related person (as defined in Section 954(d)(3)), and
- any foreign oil and gas extraction income of such corporation,
◦ over the deductions (including taxes) properly allocable to such gross income under rules similar to the rules of Section 954(b)(5) (or to which such deductions would be allocable if there were such gross income).
PRIVATE PLACEMENT L IFE INSURANCE 16
Overview of Section 951A• Tested Loss: The term “tested loss” means, with respect to any controlled foreign
corporation for any taxable year of such controlled foreign corporation, the excess (if any) of the deductions associated with Tested Income, over Tested Income.
• Coordination With Subpart F To Deny Double Benefit Of Losses: Section 952(c)(1)(A) shall be applied by increasing the earnings and profits of the controlled foreign corporation by the tested loss of such corporation.
PRIVATE PLACEMENT L IFE INSURANCE 18
Overview of Section 951A• Determining Shareholder’s pro rata share:
- A US Shareholder’s share of each tested item is determined independently of its pro rata share of each other tested item
- Generally, pro rata share of tested income is determined under 951(a)(2) and 1.951-1(b) and (e) in the same manner as Subpart F income, substituting “tested income” for “Subpart F income”
- Generally, pro rata share of tested loss is determined in a similar manner as tested income.
- Pro rata share of QBAI is determined differently based on whether hypothetical tangible return exceed tested income
PRIVATE PLACEMENT L IFE INSURANCE 19
Overview of Section 951A• Net Deemed Tangible Income Return: The term “net deemed tangible income
return” means, with respect to any United States shareholder for any taxable year, the excess of
- “deemed tangible income return”: 10 percent of the aggregate of such shareholder's pro rata share of the qualified business asset investment of each tested income CFC with respect to which such shareholder is a United States shareholder for such taxable year (determined for each taxable year of each such controlled foreign corporation which ends in or with such taxable year of such United States shareholder), over
- “specified interest expense”: the aggregate of the shareholder’s pro rata share of the “tested interest expense” (defined in 1.951A-4(b)(1)) of each CFC, over aggregate of shareholder’s pro rata share of tested interest income (as defined in 1.951A-4(b)(2)) of each CFC.
PRIVATE PLACEMENT L IFE INSURANCE 20
Overview of Section 951A• Qualified Business Asset Investment: The term “qualified business asset
investment” means, with respect to any controlled foreign corporation for any taxable year, the average of such corporation's aggregate adjusted bases as of the close of each quarter of such taxable year in specified tangible property
- used in a trade or business of the corporation, and
- of a type with respect to which a deduction is allowable under Section 167
• Specified Tangible Property: the term “specified tangible property” means any tangible property used in the production of tested income; however:
- In the case of property used both in the production of tested income and income which is not tested income, such property shall be treated as specified tangible property in the same proportion that the gross tested income produced with respect to such property bears to the total gross income produced with respect to such property.
- Tested loss CFCs won’t have QBAI on which to calculate 10% return
PRIVATE PLACEMENT L IFE INSURANCE 21
Overview of Section 951A• Shareholder’s pro rata share of Qualified Business Asset Investment:
- This calculation differs based on whether the hypothetical return exceeds the CFCs tested income
- If CFC tested income is greater than deemed hypothetical return, then pro rata share of QBAI bears the same ratio to total qualified business asset investment as the US shareholder’s pro rata share of tested income of the CFC bears to total tested income of the CFC
- If CFC tested income is less than deemed hypothetical return, then US shareholder’s pro rata share of QBAI bears the same ratio to the QBAI of the tested income CFC as the US shareholder’s pro rata share of the hypothetical tangible return of the CFC bears to the total hypothetical tangible return of the CFC
◦ To calculate this, substitute “hypothetical return” for “tested income” in calculation
◦ “hypothetical tangible return” means 10 percent of the qualified business asset investment of the tested income CFC
PRIVATE PLACEMENT L IFE INSURANCE 22
Overview of Section 951A
• Example of pro rata share calculation
- Facts: E&P of CFC is $120. USSH A owns 70% of CFC stock, and USSH B owns 30%.
- Scenario 1: CFC has $750 of QBAI. E&P is greater than subpart F income and hypothetical tangible return, so allocable E&P = $120
◦ A’s share of tested income equals .7 x $120: $84
◦ B’s share of tested income equals .3 x $120: $36
◦ A’s share of QBAI equals $750 x (84/120)=$525
- Deemed hypo return: $5.25
◦ B’s share of QBAI equals $750 x (36/120) = $225
- Deemed hypo return: $2.25
PRIVATE PLACEMENT L IFE INSURANCE 23
Overview of Section 951A
• Example of pro rata share calculation
- Facts: E&P of CFC is $120. USSH A owns 70% of CFC stock, and USSH B owns 30%.
- Scenario 2: CFC has $1500 of QBAI. E&P is less than subpart F income and hypothetical tangible return, so allocable E&P = $150 (greater of E&P and sum of subpart F income and hypothetical tangible return)
◦ A’s pro rata share of allocable E&P equals .7 x $150: $105
◦ B’s pro rata share of allocable E&P equals .3 x $150: $45
◦ A’s pro rata share of QBAI equals $1500 x (105/150)= $1050
◦ B’s pro rata share of QBAI equals $1500 x (45/150) = $450
PRIVATE PLACEMENT L IFE INSURANCE 24
Overview of Section 951A• More on QBAI:
- A CFC that holds an interest in a partnership will use its distributive share of the partnership’s aggregate adjusted basis in tangible property held by the partnership for purposes of calculating QBAI
PRIVATE PLACEMENT L IFE INSURANCE 25
Overview of Section 951A• Tested Loss CFCs cause problems: “used in the production of tested income”
- Tested income only exists in a CFC in which its gross income exceeds deductions allocable to such income
- Tested loss CFCs won’t have QBAI on which to calculate 10% return
- Remember GILTI inclusion formula:
◦ Shareholder’s net CFC tested income – Shareholder’s net deemed tangible income return
- Tested loss CFCs cause the loss of any deemed tangible income return that would have otherwise derived from the assets of the CFC had it had tested income
PRIVATE PLACEMENT L IFE INSURANCE 26
Overview of Section 951A• Calculating GILTI:
GILTI: Net CFC Tested income - Net Deemed Tangible Income Return
CFC 1 CFC 2
Net CFC Tested Income: tested income - tested loss
Gross income $500,000 $250,000
Less: deductions allocable to gross income ($100,000) ($300,000)
$400,000 ($50,000)
US SH's pro rata share (ownership): 100% 100%
$400,000 ($50,000)
NTI: $350,000
Net Deemed Tangible Income Return: QBAI*.1
Qualified Business Asset Investment: specified tangible property $800,000 $300,000
Ownership percent 100% 100%
$800,000 $300,000
Applicable percent 10% 10%
$80,000 $30,000
Interest expense ($10,000) ($5,000)
$70,000 N/A
NDTIR: $70,000
GILTI: $280,000
100 CONGRESS AVENUE, SUITE 1440 | AUST IN, TEXAS 78701
phone 512.767.7100 | fax 512.767.7101 | GSRL AWFIRM.COM
512-370-2736 (office)512-657-4688 (cell)
New York | Washington, DC | London | Frankfurt
New Section 951A: GILTI Rules for Individual and Non-C Corporation CFC Shareholders
Libin ZhangFried, Frank, Harris, Shriver & Jacobson LLPNew York [email protected] July 16, 2019
Global Intangible Low-Taxed Income (GILTI)
Not necessarily intangible, or low-taxed
For a controlled foreign corporation (CFC), generally all income is GILTI except:
Income effectively connected with a U.S. trade or business and subject to U.S. income tax,
Subpart F income,
Subpart F income under high tax exception (>18.9% foreign tax),
Foreign oil and gas extraction income,
Net deemed tangible income return equal to 10% of adjusted basis of its GILTI-producing depreciable assets (qualified business asset investment, or “QBAI”)
29
GILTI Taxation
Ordinary income for a “United States shareholder”
Owns 10% or more of CFC by vote or value
Constructive ownership rules apply
50% section 250 deduction for domestic C corporation or for individual who makes section 962(b) election
37.5% in 2026 and later
80% indirect foreign tax credits (FTCs) allowed for domestic C corporation or for individual with section 962(b) election
No carryback or carryforward of GILTI-category FTCs
30
GILTI: Corporation vs. Individual
C Corporation U.S.
shareholder
Individual U.S. shareholder Individual U.S.
shareholder
with section 962(b)
electionU.S. Federal Tax Rate 21% up to 37% 21%
Section 250 Deduction 50%
(37.5% after 2025)
None 50%
(37.5% after 2025)Effective Income Tax
Rate
10.5%
(13.125% after 2025)
up to 37% 10.5%
(13.125% after 2025)
Indirect FTC 80% allowed 0% allowed 80% allowed
Federal Tax Generally on
Distribution to Individual
23.8% 3.8%
(cf. Treas. Reg. 1.1411-10(g))
23.8% or 40.8%
Total Tax Rates 31.8%
(33.8% after 2025)
40.8% 32.2% to 47.4%
(34.3% to 49.1% after 2025)
31
Section 962(b) Election
Allowed for an individual or trust United States shareholder since 1962
Election made on a year-by-year basis, for all CFCs
Three specified effects of the election:
Federal corporate tax rate on subpart F income and GILTI
Section 960 indirect FTC allowed, as if the subpart F income and GILTI were received by a domestic corporation (but no cross crediting with other individual income)
Some CFC distributions are taxable under section 962(d), rather than being tax-free PTI distributions
32
Tax Rate on Section 962(d) Non-PTI Distribution
Smith v. Commissioner, 151 T.C. No. 5 (Sept. 18, 2018)
Taxpayer made section 962(b) election and then received distributions from a Hong Kong CFC
Tax Court rejected taxpayer argument that there is a deemed domestic C corporation between the taxpayer and CFC
CFC taxable distributions are qualified dividends (20% tax rate) only if the CFC is a “qualified foreign corporation” (organized in some treaty countries or traded on a US stock exchange)
Dividend should be foreign-source income
33
Section 250 Deduction
Statute allows 50% section 250 deduction for domestic C corporations
March 2019 proposed regulations: individual or trust taxpayer who makes the section 962(b) election is allowed the section 250 deduction for GILTI inclusions (and section 78 gross-up)
Deduction allowed for 3.8% section 1411 Medicare tax? Compare with section 965(c) deduction for deemed repatriation income (no).
34
Partner in Partnership
For a partnership that is a United States shareholder of a CFC, the partnership has subpart F income and GILTI that is allocated to the individual partner.
June 2019 Final GILTI regulations and proposed subpart F regulations – only partners who are United States shareholders have GILTI and subpart F income starting in 2018.
If the individual partner is also a United States shareholder of the CFC, the individual can make a section 962(b) election for the CFC.
But if the individual partner is not a United States shareholder of the CFC, the individual cannot make a section 962(b) election for the CFC. Not applicable starting in 2018.
35
3.8% Section 1411 Tax
Net investment income includes interest, dividends, rents, etc.
Net investment income does not include subpart F income.
Section 1411 tax imposed on PTI distribution from the CFC, including the section 962(d) PTI distribution.
Treasury Regulation 1.1411-10(g) election to pay section 1411 tax on initial subpart F income instead of later PTI distribution.
Double tax interaction with section 962(b) election.
October 2018 proposed regulations, finalized in June 2019 -- GILTI is treated as subpart F income for all section 1411 tax purposes.
36
Direct Foreign Tax Credit (FTC)
Not affected by 20% indirect FTC reduction in section 960(d)
But see JCT Blue Book (technical correction may be necessary to reduce GILTI-related direct FTC by 20% too)
For individual without section 962(b) election, foreign withholding tax is imposed on a tax-free PTI distribution
For individual with section 962(b) election, foreign withholding tax is imposed on either a tax-free PTI distribution or a taxable dividend
Categorization of the direct FTC as either passive, general, GILTI, or foreign branch category
38
Direct FTC from PTI Distribution
December 2018 proposed regulations:
PTI distribution is a timing difference that relates back to the initial GILTI inclusion, instead of being a base difference
Either GILTI category FTC or (rarely) passive category FTC
No carryback or carryforward of GILTI category FTC
But section 960(c) increases the section 904 limitation in the PTI distribution year, to allow the direct FTCs as refundable credits. Applies to both subpart F income and GILTI.
39
Direct FTC from Taxable Distribution
Same FTC category as the taxable distribution (dividend income)
Look-through rules in section 904(d)(3):
Passive category to the extent that CFC’s earnings are passive,
General category to the extent that CFC’s earnings are general,
Special rules for CFC’s high-taxed income.
40
Ways to Mitigate GILTI
Contribute CFC stock to C corporation
Increase QBAI
Combine CFCs
Avoid CFC status and/or United States shareholder status
Convert GILTI to subpart F income
41
Contribute CFC stock to C corporation
Impractical if the CFC stock is owned by a partnership with other assets.
Less relevant now that 50% section 250 deduction is allowed for an individual who makes the section 962(b) election.
Possible benefits under U.S. income tax treaties for corporate shareholders.
Sometimes state and local income tax benefits.
Disadvantages:
Gain from future sale of CFC stock is subject to U.S. corporate-level tax.
Possible adverse foreign tax consequences.
Difficult to unwind. See Eagles, Hotel California (1977).
42
Increase QBAI
Section 338(g) election: Applicable upon acquisition of stock in CFC.
Section 338(g) election treats stock purchase as an asset purchase, resulting in increased basis in assets of CFC.
Increases the Net Deemed Tangible Income Return, and reduces tested income due to depreciation/amortization of the CFC’s assets at the higher beginning basis.
Purchase property that has been previously leased by CFC
Combine loss CFC that holds QBAI with a profitable CFC
Merger
Check the box if parent/subsidiary
43
Combine Income and Loss in One CFC
CFC A paid $100 foreign tax and has $1,000 tested income (with section 78 gross-up)
CFC B has $400 tested loss
Shareholder has net $600 of GILTI.
Shareholder’s indirect FTC is first multiplied by 80%, to reduce $100 to $80
Then multiplied by the section 960(d)(2) “inclusion percentage” which in this case is $600/$1,000 or 60%, to reduce $80 to $48.
U.S. tax reduced from $126 to $78.
CFC AB paid $100 foreign tax and has $600 tested income (with section 78 gross-up)
Shareholder has $600 of GILTI.
Shareholder’s indirect FTC is multiplied by 80%, to reduce $100 to $80.
U.S. tax reduced from $126 to $46.
44
Avoid CFC Status or U.S. Shareholder Status
CFC is a foreign corporation owned more than 50% by vote or value by United States shareholder(s)
United States shareholder is a U.S. person who owns 10% or more by vote or value of a foreign corporation
Constructive ownership rules that use modified section 318(a) attribution, including downward attribution
Downward attribution previously not allowed, in 2016 and earlier, for attribution from a non-U.S. person to a U.S. person
Smaller intended scope according to legislative history
45
Puerto Rico
Section 957(c): U.S. person exception for some residents of Puerto Rico and other possessions, with respect to certain corporations organized in Puerto Rico or the other possessions (such as qualified opportunity funds)
46
Downward Attribution
foreign corporation
U.S. corporation A
40%
foreign parent corporation
100%
60%
foreign corporation
U.S. corporation A
40%
60%U.S. corporation B
100%
foreign parent corporation
47
Downward Attribution II
foreign corporation
40%
60%
1%
U.S. person
foreign person
foreign corporation
40%60%
U.S. person
foreign person
1%
other partner
1%
U.S. corporation
100%
U.S. partnership
U.S. partnership
48
Foreign partnerships
A fund can use a foreign partnership to own CFC stock, instead of U.S. partnership
Helps avoid CFC status
June 2019 regulations --partnership type does not affect United States shareholder status starting in 2018 and later
Collateral tax consequences: U.S. dividend withholding, PFIC reporting, etc.
foreign corporation
100%
U.S. citizen A U.S. citizen B
8%16%
NRA
76%
partnership
49
Subpart F Income
No section 250 deduction
High taxed exclusion, if foreign income tax is >18.9%
Better for taxpayers who cannot use indirect FTC, such as REITs and individuals who do not make section 962(b) election
Favorable expense apportionment and allocation
June 2019 proposed regulations – same high taxed exclusion for GILTI income too, but only after regulations are finalized (some commentators have experienced premature excitement)
50
Subpart F Income (cont’d)
Subpart F indirect FTC (if allowed) is allowed at 100% instead of 80%
Subpart F FTCs are passive category or general category, which can be carried back 1 year and carried forward 10 years (compared to no carryback and no carryforward for GILTI category FTCs)
Other benefits for subpart F income in many cases
See generally Libin Zhang, To the Frying Pan: New Virtues of Subpart F Income over GILTI, 160 Tax Notes 73 (July 2, 2018).
51
How I Learned to Stop Worrying and Love Subpart F Income
Start a business in North Korea, Iran, Sudan, Syria, etc.
Foreign personal holding company income
Earn more passive income
Move employees of rental business to separate regarded entity
Check-the-box election before sale of subsidiary entity
Foreign base company sales income and services income
Sell property or provide services through related intermediate entities organized in low tax countries
Avoid same country exceptions
Use contract manufacturers (see Rev. Rul. 97-48)
52