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Since its introduction in 1962, the current earnings and profits (E&P) limitation, in Code Sec. 952(c)(1)(A), (1) has been a critical, yet often unsung, mainstay of the subpart F anti-deferral [...]

This article is the second part of Chapter 9, Controlled Foreign Corporations, from the authors' most recent edition of UNITED STATES INTERNATIONAL TAXATION: OUTBOUND AND INBOUND ACTIVITIES. [paragraph] 9.26 Global [...]

I. Introduction Prior to 1962, U.S. tax regime generally allowed multinational corporations to defer tax on the income earned by their foreign subsidiaries until the income was repatriated to the [...], There are several categories of income under the umbrella of Subpart F that is subject to U.S taxes in the year in which it is earned by a controlled foreign corporation ("CFC"). One of the categories is Foreign Base Company Sales Income ("FBCSI"). Code Sec. 954(d)(1) sets forth the general rule defining FBCSI and identifies four types of personal property transactions that a CFC derives FBCSI involving related persons outside the CFC's country of organization. Code Sec. 954(d)(2) provides a special branch rule that applies in situations where the carrying on of activities by a CFC through a branch outside the country of incorporation of the CFC has substantially the same tax effect as if such branch were a wholly owned subsidiary corporation deriving such income} The branch rule prevents a U.S. shareholder from avoiding Code Sec. 954(d)(1) by having its CFC conduct activity through a branch rather than a related person. Reg. [section]1.954-3 further defines FBCSI and provides exceptions where a CFC can exclude its sales income from FBCSI. The focus of this article is to discuss the purpose of Code Sec. 954(d)(1) and (d)(2) and Reg. [section]1.954-3 and examine how the courts applied these statutes and regulations in making judgment in Whirlpool Financial Corporation v. Commissioner (2) and analyze why this case is so controversial.

The US Court of Appeals for the Sixth Circuit issued a majority opinion in Whirlpool Financial Corporation & Consolidated Subsidiaries v. Commissioner (1) that disregards the regulatory manufacturing exception to [...]

This article (1) analyzes the Subpart F services rules and demonstrates how these antiquated rules--which have not been updated since the 1960s -- are ill-fitting and disruptive for modern services [...]

The definition of "pro rata share" in Section 951(a)(2) is fundamental to the subpart F regime. That regime, of course, dates to the John F. Kennedy administration.1 Most words in [...]

Code Sec. 267A generally disallows deductions for hybrid interest and royalty payments that are not included in the income of the recipient, which generally increases U.S. taxable income by the [...]

1. Introduction Before the 2017 Tax Cuts and Jobs Act ("TCJA"), the United States followed a worldwide tax system. Under this approach, all income a taxpayer earned worldwide was subject [...]

Table of Contents [paragraph]4.01 Introduction [paragraph]4.02 Background of DISCs [paragraph]4.03 DISC Qualification Requirements--Generally [paragraph]4.04 Gross Receipts Requirement for DISCs [paragraph]4.05 Assets Requirement for DISCs [paragraph]4.06 Deficiency Distribution to Meet DISC [...]

Under the pre-TCJA (Tax Cuts and Jobs Act) U.S. international tax system, the U.S. implemented a worldwide tax system that theoretically imposed U.S. tax on all foreign income of a [...]

Since the enactment of the law known as the Tax Cuts and Jobs Act (TCJA) at the end of 2017, (1) the TCJA's tax reform provisions have been subject to [...]

Due to the disruptions and economic shutdowns caused by COVID-19, many corporate taxpayers will have net operating losses (NOLs) in 2020. The Coronavirus Aid, Relief, and Economic Security (CARES) Act [...]

I. Introduction "[Credit is a system whereby] a person who can't pay, gets another person who can't pay, to guarantee that he can pay." (1) PL. 115-97, (2) better known [...]

Congress repealed Code Sec. 958(b)(4) ("Code Sec. 958(b)(4) Repeal") for a very narrow purpose--specifically, to address the perceived abuse of "decontrolling" of "controlled foreign corporations" ("CFCs"). Although this may have [...]

The landscape for cross-border spin-offs changed significantly after the 2017 enactment of the Tax Cuts and Jobs Act ("TCJA"). (1) In this column, we sketch out the beginnings of a [...]

Introduction As has been widely reported since its enactment in December 2017, the Tax Cuts and Jobs Act (the "TCJA") (1) represented a sea change in the U.S. international tax [...]

Introduction As international tax practitioners get their bearings post-TCJA, disregarded transactions are emerging as a problem of fresh significance for U.S. multinational companies. (1) In the pre-reform world, payments between [...]

While state and local tax is rife with uncertainty, the signature block of a state or local corporate income tax return is often deceptively simple and definitive. Typically, the signature [...]

Prior to tax reform, multinational businesses often had similar strategies with respect to outbound international tax planning. Given the high U.S. corporate tax rates and worldwide system of taxation, many [...]

Table of Contents I. Introduction: Squaring the Circle--Using a Corporate Framework to Tax Income on a Flow-Through Basis II. Disparate Treatment Depending upon the Level of the Sale--In General III. [...]

In Letter Ruling 202135006, released Sept. 3, 2021, the IRS permitted a taxpayer effectively to undo planning undertaken during the so-called gap period (described later). After many taxpayers implemented gap [...]

Nonautomatic accounting method changes are inconvenient and troublesome for taxpayers. When global intangible low-taxed income (GILTI) was introduced by the enactment of the law known as the Tax Cuts and [...]

Code Sec. 951(a)(1)(B) requires a U.S. shareholder of a controlled foreign corporation ("CFC") to include in its gross income "the amount determined under section 956 with respect to such shareholder [...]

On October 9, TEI submitted comments to the Treasury and IRS regarding proposed regulations promulgated under the transition tax imposed by section 965, as amended by the Tax Cuts & [...]

Subpart F has long included exceptions to subpart F income for income of controlled foreign corporations ("CFCs") subject to a relatively high rate of foreign tax and limited subpart F [...]

I. IntroductionAn individual or trust that owns stock in a foreign corporation, directly or through a passthrough entity, must take action to combat the relatively punitive manner in which the [...]

In the last several months much has been written about the implications of P.L. 115-97, known as the Tax Cuts and Jobs Act (TCJA). (1) For owners of flowthrough entities [...]

We are several months into a U.S. tax reform environment that most, if not all, of us could not have anticipated. Now that the dust has begun to settle following [...]

As the world eagerly awaits the issuance of regulations addressing previously taxed earnings and profits (PTEP) by Treasury and the IRS,this third installment of the authors' ongoing series covering international [...]

On May 11, 2021, the IRS issued Rev. Proc. 2021-26, which contains procedures for certain foreign corporations to obtain automatic consent to change their methods of accounting for depreciation to [...]

U.S. persons who own stock in controlled foreign corporations (CFCs) may be able to benefit from safe harbors for determining CFC status and resulting income inclusions under Rev. Proc. 2019-40. [...]

The law known as the Tax Cuts and Jobs Act (TCJA) (1) has forever changed the landscape of the taxation of foreign earnings. In 2017, Sec. 965 created "repatriated earnings" [...]

The Tax Cuts and Jobs Act (TCJA) added Section 965 to the Internal Revenue Code to tax earnings held offshore by controlled foreign corporations (CFCs) going back to 1987. In [...]

In Depth Effective for the first tax year of a controlled foreign corporation (CFC) beginning after December 31, 2017, any U.S. person who is a U.S. shareholder of a CFC [...], The recently enacted tax reform legislation significantly expanded the application of Subpart F, including by adding a new inclusion rule for CFC income, termed "global intangible low-taxed income" (GILTI). The GILTI rules apply higher tax rates to GILTI attributed to individuals and trusts who own CFC stock (either directly or through LLCs or S corporations) than to C corporation shareholders. This article describes the difference and suggests steps individuals and trusts may take to defer or reduce the effect of the GILTI rules on individuals and trusts.

PREVIEW * Be aware of the types of U.S. property that can give rise to Sec. 956 deemed income inclusions. * Besides direct ownership of U.S. property, a controlled foreign [...]

I. History of the Active Financing Exception to the Foreign Personal Holding Company Income Category of Subpart F-1962 to 1997 The current AFE is not a financial service give away, [...]

On Nov. 3, 2016, the IRS and Treasury issued final regulations pursuant to Sees. 954 and 956 (T.D. 9792), which generally adopted the proposed regulations and withdrew temporary regulations, both [...]

A U.S. shareholder of a controlled foreign corporation ("CFC") must include in its gross income the CFC's Subpart F income and global intangible low-taxed income ("GILTI"). (1) The CFC's remaining [...]

In Notice 2017-68, the IRS announced that certain obligations of U.S. persons received by controlled foreign corporations (CFCs) would be excluded from U.S. property for purposes of Sec. 956(c) if [...]

Authors Note: After completion of this article, Treasury issued Final Section 385 Regulations (TD 9790, October 13) that made several significant changes to the Proposed Regulations analyzed in this article. [...]

The new temporary regulations ("Temporary Regulations") reduce the tax benefits resulting from certain post-inversion transactions. (1) The Temporary Regulations implement the rules described in Notice 2014-52 and Notice 2015-79, but [...]

This article analyzes the Subpart F services rules and demonstrates how these antiquated rules--which have not been updated since the 1960s--are ill-fitting and disruptive for modern services businesses. The authors [...]

I. Introduction Code Sec. 956 applies when a controlled foreign corporation (CFC) invests its earnings in certain types of property ("U.S. property"). If Code Sec. 956 applies, the U.S. shareholders [...]