International Taxation

Chapter 6Outbound International Tax Provisions under Tax Cuts and Jobs Act

Learning objectives

• Understand what constitutes a controlled foreign corporation (CFC) and U.S. shareholders.
• Recognize the primary outbound international tax provisions under the Tax Cuts and Jobs Act (TCJA).
  • Global intangible low-tax income (GILTI), under Section 951A and proposed regulations
  • Foreign-derived intangible income (FDII), under Section 250 and proposed regulations
  • Dividends received deduction (DRD) (participation exemption from foreign corporations), under Section 245A and proposed regulations
• Recognize categories of Subpart F income. A U.S. shareholder cannot have Subpart F income without a CFC.
• Identify some exceptions to Subpart F income.
• Recognize Section 956 modified for coordination with Section 245A (DRD) proposed regulations.
• Recognize the concept of a passive foreign investment company (PFIC).
• Recognize Section 367 — outbound toll charge on the transfer of property or intangible property (IP) to a foreign corporation.

Note to Reader or Practitioner

Some describe the TCJA as a shift from a worldwide tax system to a quasi-territorial system. However, the existing, pre-TCJA system did not tax all worldwide income of an international business group (IBG) or a multinational corporation (MNC). Recall that U.S. business owners and companies that had offshore operations through foreign corporations were able to defer the offshore earnings and profits (E&P) within those foreign corporations, ...