The Subpart F high-tax exception before and after tax reform

[...]when this exception is applied, the U.S. group would not be subject to current tax under either the Subpart F or GILTI rules, and the CFC could have untaxed earnings that may be eligible for the Sec. 245A deduction when distributed to the U.S. group. [...]more significantly, the Sec. 902 poolin...

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Bibliographic Details
Published in:The Tax Adviser 2019-06, Vol.50 (6), p.411-414
Main Authors: Bloom, Brett M, Rasch, Barbara E
Format: Article
Language:English
Subjects:
Controlled foreign corporations
Corporate taxes
Earnings
Foreign source income
Foreign tax credits
Income taxes
Mechanics
Personal holding companies
Tax credits
Tax Cuts & Jobs Act 2017-US
Tax rates
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Summary:[...]when this exception is applied, the U.S. group would not be subject to current tax under either the Subpart F or GILTI rules, and the CFC could have untaxed earnings that may be eligible for the Sec. 245A deduction when distributed to the U.S. group. [...]more significantly, the Sec. 902 pooling regime for foreign taxes was repealed, and Sec. 960 was amended to require a direct association of current-year foreign income taxes with particular CFC income items for purposes of determining deemed paid foreign tax credits related to Subpart F inclusions and GILTI inclusions. [...]of this pooling approach for foreign income taxes, the Japanese and Irish taxes would be blended, and both items of income would satisfy the high-tax exception (provided USP made a valid election to apply the high-tax exception). [...]DutchCo's Subpart F income related to JapanCo's operations would continue to qualify for the high-tax exception, as the effective tax rate paid in Japan would be 40% ($500 -ť $1,250) (provided USP makes a valid election to apply the high-tax exception).
ISSN:0039-9957