The U.S. Department of Treasury is expected to release guidance in the fall to help explain the complex international provisions of the Tax Cuts & Jobs Act (TCJA). A Law360 article outlines six sticky areas in which industry professionals are left with questions and have made assumptions as to how the government might address certain measures in their tax overhaul.
Partner Stewart Kasner provided important information to help answer how the global intangible low-taxed income (GILTI) provision of Section 531 might involve accumulated earnings tax, and how this could possibly affect corporations and their shareholders.
Mr. Kasner said it was uncertain what would happen when GILTI income from an underlying controlled foreign corporation (CFC) is treated as earnings of a U.S. corporation even when the CFC does not make a cash distribution. However, he also noted that undistributed cash could still go into the calculation of the accumulated taxable income of a U.S. company.
"If you have millions of dollars of GILTI that is never distributed from an underlying CFC to its U.S. parent corporation, the IRS could still treat the money as technically accumulating at the U.S. corporate parent level," Mr. Kasner said.
As for an ideal regulatory response, Mr. Kasner said the accumulated earnings tax would not apply to GILTI: "Alternatively, the regulations could provide safe harbors clarifying how a newly formed parent U.S. corporation...can manage the accumulated earnings tax risk with respect to its GILTI income."
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