Treasury and the IRS on June 14, 2019 released 318-page final regulations and 74-page proposed regulations under Section 951A as enacted by the 2017 tax reform legislation.
The Final Regulations incorporate with modifications the rules described in the prior proposed regulations under Section 951A and set forth additional guidance on a range of issues relating to the implementation of that provision. Among the changes, the Final Regulations clarify the interaction of subpart F and GILTI for purposes of determining tested income, modify anti-abuse rules for property transactions taking place prior to the effective date of Section 951A, and modify the treatment of domestic partnerships for purposes of determining a domestic partner’s GILTI inclusion.
The Proposed Regulations provide guidance on carving out an exception from GILTI gross tested income for certain income subject to ‘high tax’ in a foreign jurisdiction, as well as amending the treatment of domestic partnerships for purposes of determining a foreign corporation’s status as a CFC and computing a US shareholder’s subpart F and GILTI inclusion.
Although the Final Regulations generally follow the structure and approach set forth in the 2018 Proposed Regulations, there are significant modifications that are likely to impact a taxpayer’s GILTI calculation. Taxpayers should also consider the modifications proposed in the Proposed Regulations as they could have a significant impact in the future.
Taxpayers should immediately review the Final Regulations and Proposed Regulations to determine whether their GILTI tax liability and Section 965 tax liability may be affected.
The above-mentioned highlights are not an exhaustive list of the provisions in the Final Regulations or Proposed Regulations.