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Preliminary Highlights of the proposed GILTI regulations under section 951A

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On September 13, 2018, Treasury and the IRS released proposed regulations under Section 951A (the Proposed Regulations or the Proposed GILTI Regulations), providing taxpayers with computational, definitional and anti-avoidance rule guidance relating to the determination of a US shareholder’s global intangible low-taxed income (GILTI) inclusion. 

The Proposed Regulations provide rules for determining a US shareholder’s GILTI inclusion generally as well as in the context of partnerships and consolidated groups. The Proposed Regulations do not include rules relating to foreign tax credits (FTCs), the Section 250 deduction or the interaction with Sections 163(j), 245A and 267A. The preamble notes that such rules will be addressed in future guidance and will include rules for assigning the Section 78 gross-up attributable to Section 960(d) deemed paid foreign taxes to the Section 904(d)(1)(A) separate category.

The Proposed GILTI Regulations are the first form of guidance provided with respect to Section 951A enacted by the 2017 tax reform legislation (the Act). For prior coverage of the Act, see the ‘See also’ section below.

Taxpayers subject to Section 951A should review the Proposed Regulations and determine the potential impact the provisions may have on their GILTI computation. PwC is in the process of reviewing the Proposed Regulations in detail; some of the key highlights we have identified thus far are set forth below. Look for our in-depth published Insight(s) on the Proposed Regulations in the coming days. Or catch up with our Tax Reform Readiness series webcast to hear more from PwC's experts.

The takeaway

The Proposed Regulations provide much-needed guidance under Section 951A, particularly with respect to computation of tested income and QBAI. The Proposed Regulations do not, however, provide guidance on other key issues such as FTCs and expense allocation for Section 904 limitation purposes. Such guidance is expected to be forthcoming in future regulation packages.

The highlights above are not an exhaustive list of the provisions set forth in the Proposed GILTI Regulations. Taxpayers should review and assess the impact of the specific proposals on their business and industry, and consider commenting on the proposals, or other issues arising under the Proposed GILTI Regulations that the IRS and Treasury should address before issuing final guidance.

See also:

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Doug McHoney

International Tax Services Co-Leader, PwC US

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