IRC 163(j) Interest Deduction Limits for Controlled Foreign Corporations: Planning & Calculations

The new Section 163(j) limitation on business interest deductibility creates serious tax consequences for many U.S. and foreign taxpayers. The Section 163(j) proposed regulations provide that the Section 163(j) limitation applies to CFCs, generally treating CFCs in the same manner as domestic corporations, but with a couple of significant distinctions.

One such key difference is the availability of a "CFC group election" allowing certain commonly controlled CFCs to limit the amount of business interest expense of a CFC group member subject to the Section 163(j) limitation in certain situations. If a CFC group election is in effect, Section 163(j) proposed regulations also permit the “rolling up” of excess taxable income through the tiers of ownership in certain situations.

Listen as our experienced panel provides a thorough and practical guide to the new Section 163(j) business interest deduction limitation as they impact CFCs and their U.S. shareholders.

1. Contrasting new Section 163(j) rules with the prior Section 163(j) rules
2. Small business exception
3. Calculating ATI to arrive at the 30% deduction limitation
4. Application of Section 163(j) to CFCs and their U.S. shareholders
5. The CFC group election and the corresponding benefits
6. Application of Section 163(j) to foreign persons with effectively connected income

The panel will review these and other relevant topics:

• The impact of new Section 163(j) on CFCs and their US shareholders
• Critical provisions of the recently proposed Treasury regulations
• Specific exceptions to the application of new Section 163(j)
• How to calculate ATI for purposes of determining the Section 163(j) limitation
• CFC group election and mechanics

Learning Objectives

After completing this course, you will be able to:

• Recognize the changes in business interest deductibility under new Section 163(j)
• Assess the impact of new Section 163(j) on CFCs
• Determine how to calculate ATI for purposes of arriving at the 30% deduction limitation
• Identify the available elections for commonly controlled CFCs

• 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 partnership and corporate structure, agreements and liquidation, including capital accounts, debt allocation and distributions; familiarity rules governing transactions between a partnership and its partner(s); familiarity with deferred foreign-source income, earnings and profits, controlled foreign corporations, specified foreign corporations, and repatriation of deferred foreign earnings.

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).