Tax Reform Series 45 – Foreign High Return Amounts of U.S. Shareholders of Controlled Foreign Corporations (CFCs)


Plain Language of Change:

  • The Act adds section 951A to the Internal Revenue Code which would require a U.S. shareholder of a CFC to include in income its GILTI in a manner similar to subpart F income

  • In general, GILTI would be the excess of a shareholder’s CFCs’ net income over a routine or ordinary return

  • The deduction for FDII and GILTI is available only to C corporations that are not RICs or REITs

  • The deduction for GILTI applies to the amount treated as a dividend received by a domestic corporation under section 78 that is attributable to the corporation’s GILTI amount under new section 951A

  • GILTI inclusions do not constitute subpart F income, GILTI inclusions are generally treated similarly to subpart F inclusions

  • Under the new 21 percent corporate tax rate, and as a result of the deduction for FDII and GILTI, the effective tax rate on FDII is 13.125 percent and the effective U.S. tax rate on GILTI (with respect to domestic corporations) is 10.5 percent for taxable years beginning after December 31, 2017 and before January 1, 2026

Detailed Analysis of Foreign High Return Amounts of U.S. Shareholders of Controlled Foreign Corporations (CFCs)

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