Tax reform readiness: Overview of the GILTI regulations

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September 2018

Overview

The 2017 tax reform act (the Act) includes significant international tax provisions, including Section 951A, which creates a new category of income known as global intangible low-taxed income, or GILTI. On September 13, Treasury and the IRS released proposed regulations under Section 951A (the Proposed Regulations), providing taxpayers with computational, definitional, and anti-avoidance guidance relating to the determination of a US shareholder’s GILTI inclusion. The Proposed Regulations are the first form of guidance provided with respect to Section 951A.

PwC on September 19 hosted a webcast featuring PwC specialists who discussed some of the key issues under the Proposed Regulations. This Insight highlights those discussions. Watch the webcast replay and register for future webcasts in PwC’s Tax Reform Readiness series, which addresses other areas affected by tax reform.

The next webcast — Tax reform readiness: Q3 financial reporting considerations — will take place on Wednesday, October 3, from 2:00 PM - 3:00 PM (EDT).

For prior coverage and overviews of Section 951A, see PwC Insights, Tax reform readiness: GILTI mechanics impacting multinational entities, June 8, 2018, and  Republican tax bill will significantly impact US international tax rules, December 21, 2017.

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The takeaway

The Proposed Regulations provide some much-needed guidance for computing a US shareholder’s GILTI inclusion, including the mechanics for determining pro rata share depending on the type of entity directly invested in the CFC stock.  However, the Proposed Regulations also include some new rules and surprises that taxpayers should review.

Taxpayers will need to set up a mechanism for tracking tested income and tested loss of each CFC for purposes of making basis adjustments as well as determining the pro rata share each year.  Complying with these rules may be administratively burdensome for some US shareholders.

Contact us

Michael DiFronzo

Partner, Washington National Tax Services ITS Leader, PwC US

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