Taxation of Foreign Source Income: GILTI HTE Regulations, Subpart F, Sec. 245A DRD, Sale of Interest, Attribution

The taxation of foreign source income is at the forefront of developing tax planning strategies for U.S. individual and corporate shareholders. Subpart F, GILTI, FDII, and the territorial DRD, and these rules' application to transfers of stock in foreign corporations, among other matters, require a careful analysis of the rules affecting the structure of offshore activities and the U.S. reporting of foreign source income.

Subpart F imposes an immediate tax on certain U.S. shareholders of a controlled foreign corporation (CFC) when and as the CFC realizes certain income. GILTI is an expansion of U.S. taxing jurisdiction beyond the boundaries of Subpart F. It increases the amount of CFC income currently taxable to the U.S. shareholders in circumstances where deferral was possible under prior law. Changes to the attribution rules regarding U.S. ownership thresholds for foreign corporations to be categorized as CFCs also affect application of the Subpart F and GILTI regimes.

Income taxed under local law at a rate higher than 18.9 percent (based on 90 percent of the current U.S. corporate tax rate) can be excluded from GILTI under final regulations when a proper election is made (GILTI HTE). U.S. corporations that are shareholders of CFCs are eligible to claim a deduction that generally reduces the effective U.S. tax on GILTI income by 50 percent to 10.5 percent. While individuals cannot claim the deduction, an election under Code Section 962 may reduce the current U.S. tax liability on profits retained offshore.

Listen as our panel provides guidance on the tax rules impacting U.S. shareholders of stocks in foreign corporations, the application of Subpart F and GILTI, obtaining the territorial DRD, transfers of interests in foreign entities, and reporting compliance.

1. Taxation of foreign source income: an overview
2. Code 245A and foreign-source dividends received deduction
3. GILTI HTE final regulations
4. Sales and other transfers of stock in foreign corporations
5. CFC ownership attribution rules
6. GILTI and FDII

The panel will review these and other relevant issues:

• The changes to the attribution rules
• Understanding U.S. reporting requirements for foreign income as affected by the TCJA
• Tax implications of sales or transfers of shares of CFCs by U.S. individual and corporate shareholders
• Guidance for determining whether the GILTI HTE may be available
• Best practices and planning considerations for tax professionals regarding the U.S. taxation of foreign income

Learning Objectives

After completing this course, you will be able to:

• Identify the GILTI and its interaction with Subpart F
• Ascertain how the Subpart F Income High-Tax Exception is impacted by final and proposed regulations
• Decide whether an IRC 962 election is beneficial or could result in a tax increase
• Determine what qualifies as a testing unit
• Calculate GILTI on CFCs
• Recognize deductions provided under IRC 250 for foreign derived intangible income

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience at mid-level within the organization, preparing complex tax forms and schedules, supervising other preparers/accountants. Specific knowledge and understanding of foreign tax credit rules and passive/portfolio income definitions; familiarity with Subpart F income inclusions and deemed dividend provisions. Foundational knowledge of the Subpart F and taxation of foreign source income.

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IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).