Treasury Releases Final and Proposed GILTI Regulations and Temporary Section 245A Regulations

On June 14, Treasury and the IRS (the Service) released final and proposed regulations on the new global intangible low-taxed income provisions, or GILTI, that were introduced under the Tax Cuts and Jobs Act. Along with finalizing regulations related to determining a US shareholder’s GILTI inclusion and their pro rata share of a CFC’s subpart F income, the regulations also address the GILTI high tax exception as well as the treatment of domestic partnerships that own CFCs. Among other proposed items, the regulations offer taxpayers an election to exclude highly taxed income from GILTI under certain conditions. The regulations also propose an aggregate approach for GILTI purposes when determining the GILTI inclusion of partners in a domestic partnership that own CFCs.

In addition to regulations addressing GILTI, the Service also released temporary regulations on the new section 245A, which provides a 100% deduction to a corporate US shareholder for the foreign-source portion of dividends received from a specified 10% owned foreign corporation (SFC). These temporary regulations do not address the general rules for section 245A, which the Service note will be issued later. Instead, the regulations limit the availability of section 245A if the dividend would be generated from a SFC’s earnings and profits before the GILTI provisions went into effect or if the SFC experiences a certain amount of change in ownership.

Read the Final GILTI Regulations: TD 9866

Read the Proposed GILTI Regulations: REG-101828-19

Read the Temporary Section 245A Regulations: TD 9865