Calculating Foreign Sourced Dividends-Received Deduction After Tax Reform

A critical provision mitigating the risk of dual taxation for U.S. corporations with overseas operations is the DRD, which exempts certain foreign-sourced portion of dividends received by a U.S. parent from specified foreign corporations in which the U.S. entity holds at least 10% ownership.

Section 245 provides the framework for claiming the deduction and specifies a broad interpretation of what constitutes a "dividend received." U.S. corporations that own stock of a foreign corporation through a partnership or other entity structure may claim the deduction by "indirect participation" on the same basis as if the U.S. corporation owned the stock directly.

However, there are significant restrictions and qualifications for claiming the Foreign DRD and corp tax advisers and compliance professionals must thoroughly understand the rules governing what types of income are eligible for the DRD. The calculations and determination of eligible dividend income can be extremely challenging for even the most seasoned tax practitioners. Further complicating matters are the changes the 2017 tax reform law made to the DRD regime, most notably in the treatment of Subpart F income and the 100% deduction for certain foreign source dividends provided in Section 245A.

Listen as our experienced panel provides a practical guide to navigating the DRD regime for foreign-sourced dividend income earned by U.S. corporations from specified 10% owned foreign corporations.

1. Foreign dividends received deduction provisions in general
2. Ownership thresholds including "indirect participation"
3. Determining what income qualifies as foreign dividends
4. Section 245A provisions
5. Calculation rules

The panel will discuss these and other relevant topics:

• Identifying which types of income are eligible for deduction as "foreign dividends"
• Changes in percentage deduction to correspond with lowered U.S. corporate tax rates
• How the DRD regime intersects with other provisions such as GILTI and the deemed repatriation rules
• Section 245A changes to the foreign DRD rules
• Calculating the deduction

Learning Objectives

After completing this course, you will be able to:

• Identify which types of income are eligible for deduction as "foreign dividends"
• Discern how the DRD regime intersects with other provisions such as GILTI and the deemed repatriation rules
• Recognize how Section 245A changed to the foreign DRD rules
• Design strategies for calculating the deduction
• Determine whether foreign income was taxed for purposes of foreign tax credit disallowance

• 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 of professional experience at mid-level within the organization, preparing complex tax forms and schedules. Specific knowledge and understanding of international taxation, foreign source income, deferred foreign source income, earnings and profits, controlled foreign corporations, specified foreign corporations, and repatriation of deferred foreign earnings; familiarity with accumulated cash and non-cash retained earnings and profits.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

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