Treasury released, on May 17, proposed regulations under Sections 954 and 958 (the Proposed Regulations) for purposes of computing subpart F income and global intangible low-taxed income (GILTI). The Proposed Regulations would modify the rules attributing stock ownership or other interests for purposes of determining whether a person is “related” to a controlled foreign corporation (CFC) under Section 954(d)(3). The Proposed Regulations also would modify the application of the active marketing exception for purposes of determining whether rents are foreign personal holding company income (FPHCI).
The Proposed Regulations provide guidance related to the attribution of stock ownership rules for subpart F purposes and the application of the active marketing exception for the computation of FPHCI. The Proposed Regulations would affect US persons with direct, indirect, or constructive ownership interests in certain foreign corporations, but the Proposed Regulations do not address a number of important issues raised by the Act with respect to downward stock attribution.
Taxpayers should assess the impact of the provisions in the Proposed Regulations, and consider commenting by July 19 on issues that Treasury should address before publishing final guidance on Sections 954 and 958.
Partner, Washington National Tax Services ITS Leader, PwC US