Anti-deferral Regimes: Subpart F, PFIC, and GILTI after TCJA

Author: William J. Seeger

CPE Credit:  1 hour for CPAs
1 hour Federal Tax Related for EAs and OTRPs
1 hour Federal Tax Law for CTEC

U.S. taxpayers may believe they have no obligation for payment of U.S. taxes on income earned on their foreign investments: CFC and non-CFC. Unfortunately, U.S. anti-deferral regimes prevent deferral of income earned on foreign investments including US foreign subsidiaries. Further, some taxpayers conclude that unless the investment is considered a Controlled Foreign Corporation (CFC) there is no Passive Foreign Investment Company (PFIC) exposure. This conclusion is false and confuses PFIC with Subpart F.

Anti-deferral regimes will trap those heedless of their implications and consequences especially regarding PFICs. U.S. taxpayers may unwittingly subject themselves to taxes and penalties for failure to comply with the appropriate rules.

The Internal Revenue Code contains three principal anti-deferral regimes that impose tax on a U.S. taxpayer on a current basis as its foreign subsidiaries generate income.

The three regimes are the:
• Controlled Foreign Corporation (CFC) regime under Code §§951-964, also known as the “Subpart F” provisions;
• Passive Foreign Investment Company (PFIC) regime under Code §§1291-1298; and
• Global Intangible Low-Taxed Income (GILTI) regime under USC §951A.

This webinar focuses on the identification, taxation and reporting of Subpart F and GILTI income and the role of PFICs in a corporate structure.

Publication Date: August 2021

Designed For
Business tax and finance executives, directors, managers and staff; CPAs; Enrolled Agents; tax preparers and staff; accountants, attorneys and financial advisors who work with and advise businesses that have cross-border operations, activities and issues.

Topics Covered

  • Determination of whether a foreign corporation is a controlled foreign corporation (CFC)
  • How to structure ownership so that a foreign corporation is not a CFC
  • Identification of Subpart F income for inclusion on a U.S. taxpayer's return
  • Use of the exceptions to avoid including Subpart F income
  • Understanding the inclusion for investment in U.S. property, including the pledge of foreign assets
  • Reporting Subpart F income on Form 5471
  • Definition of a PFIC
  • Range of PFIC Investments
  • The taxation electives of a PFIC investment
  • Determination of whether a foreign corporation is a Passive Foreign Investment Company (PFIC) - The Assets Test - The Income Test
  • Understanding the two alternatives by which PFICs can be taxed - Excess Distributions - Qualified Electing Funds
  • Reporting for PFICs on Form 8621
  • The four-step GILTI computation
  • Net CFC Tested Income under Section 951A(c)
  • Net Deemed Tangible Income Return under Section 951A(b)

Learning Objectives

  • Recognize why Congress created anti-deferral regimes
  • Recognize the principles surrounding the taxation of income earned by foreign subsidiaries
  • Describe important changes to deferral regimes related to TCJA
  • Identify, exclude, and report Subpart F income
  • Differentiate examples of controlled foreign corporation (CFC)
  • Identify the type of income related to a Foreign personal holding company income
  • Identify the requirements to be completed when a taxpayer has Subpart F income
  • Identify when a taxpayer has an inclusion of income under Subpart F
  • Differentiate when a U.S. shareholder can exclude Subpart F income
  • Recognize how much foreign tax credit is available to the individual shareholder for taxes imposed on the CFC on average
  • Identify what year the IRS issue proposed regulations providing guidance for how to determine a foreign company's proportion of the share of assets and income of a look-through subsidiary

Level
Basic

Instructional Method
Self-Study

NASBA Field of Study
Taxes (1 hour)

Program Prerequisites
None

Advance Preparation
None

Registration Options
Quantity
Fees
Houston CPA Society, Chapter of Texas Society of CPAs Special Fee $36.75
Regular Fee $49.00

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