U.S. Tax Reform Readiness: Territorial Tax System, Anti-Deferral Rules, Interest Expense Limitation, Operating Models

This column discusses tax reform readiness under the Tax Cuts and Jobs Act -- the largest overhaul of the Internal Revenue Code in 31 years -- in three areas: 1. territorial tax system and anti-deferral rules; 2. the new US interest expense limitation; and 3. the impact on operating models. The Tax...

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Bibliographic Details
Published in:Journal of International Taxation 2018-04, Vol.29 (4), p.54-58
Main Authors: DiFronzo, Mike, Dewar, Ninee, Lee, Rebecca E, Fine, Ilene W, Voloshko, Alex, Merrill, Peter, Saliba, Christine, Chandrasekhar, Krishnan, Jetli, Rajiv
Format: Article
Language:English
Subjects:
C corporations
Controlled foreign corporations
Foreign tax credits
Interest income
International taxation
Investments
Provisions
Stockholders
Tax credits
Tax cuts
Tax Cuts & Jobs Act 2017-US
Tax legislation
Tax rates
Tax reform
Tax services
Taxable income
Taxpayers
Withholding taxes
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Summary:This column discusses tax reform readiness under the Tax Cuts and Jobs Act -- the largest overhaul of the Internal Revenue Code in 31 years -- in three areas: 1. territorial tax system and anti-deferral rules; 2. the new US interest expense limitation; and 3. the impact on operating models. The Tax Cuts and Jobs Act makes numerous changes to the US international tax rules, many of which relate to the transition from a "worldwide" to a "territorial" tax system. The most notable of those changes is new Section 245A, which provides a 100% dividends-received deduction (DRD) for the foreign-source portion of certain dividends. The Act also contains various anti-deferral provisions. These include new Section 951A, which requires US shareholders to include in income the "global intangible low-taxed income" (GILTI) of their controlled foreign corporations, and new Section 250, which allows as a deduction an amount equal to 37.5% of a domestic corporation's foreign-derived intangible income plus 50% of the GILTI amount included in gross income of the domestic corporation.
ISSN:1049-6378