IRS and Treasury Department Issue Global Intangible Low-Taxed Income Guidance
The Treasury Department and IRS recently issued final and proposed regulations concerning global intangible low-taxed income (GILTI) under section 951A, 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.
The final regulations 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 U.S. shareholder’s pro rata share of a controlled foreign corporation’s subpart F income and global intangible low-taxed income included in the U.S. shareholder’s gross income, as well as certain reporting requirements relating to inclusions of these types of income.
In addition, the Treasury Department and 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 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 Treasury Department and the IRS request comments on these proposed rules.