IRS & Treasury Issue Guidance on Global Intangible Low-Taxed Income (GILTI)

The Treasury Department and the Internal Revenue Service issued final and proposed regulations on June 14, 2019 concerning global intangible low-taxed income under section 951A the would expand an exception the GILTI tax, 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 controlled foreign corporation subject to a high rate of foreign tax under section 951A. 

Commonly referred to as GILTI, the Treasury Department and the IRS issued final regulations that provide guidance to determine the amount of global intangible low-taxed income included in the gross income of certain U.S. shareholders of foreign corporations, including U.S. shareholders who are members of a consolidated group.

The final regulations retain, with certain modifications, the 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.

In addition, the Treasury Department and the IRS issued final regulations under sections 78, 861 and 965 relating to certain foreign tax credit aspects of the transition to an exemption system for income earned through foreign corporations.

The Treasury Department and the IRS also issued proposed regulations regarding 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 proposed regulations would allow U.S. companies to elect an exemption to the Tax Cuts and Jobs Act's global intangible low-taxed income if they've already paid foreign taxes equal to 90% of the 21% U.S. corporate tax rate, or 18.9%. The proposed rules were included in a package of new releases from Treasury, which include final regulations on other aspects of GILTI.

The New, Expanded High-Tax Exception For GILTI Wasn't Included In The Final Regulations, Which Means It Won't Be Available For Taxpayers Retroactive To The Date Of Enactment Of The 2017 Legislation.

The Treasury Department and the IRS request comments on these proposed rules.

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