Post by lairezippert on Nov 16, 2018 7:01:27 GMT 4
The U.S. Treasury Department and the IRS proposed regulations that affect certain U.S. corporations that own, or are treated as owning, stock in foreign corporations. The proposed regulations would limit the circumstances under which a "deemed repatriation" of the earnings of a controlled foreign corporation (a "CFC") under Internal Revenue Code Section 956 ("IRC Section 965") would be taxable to a corporate 10-percent U.S. shareholder.
Under IRC Section 956, a CFC's previously untaxed earnings may be taxable to a 10-percent U.S. shareholder if: (i) the CFC guarantees the shareholder's debt, (ii) the shareholder pledges two-thirds or more of the CFC's stock as collateral for a loan, or (iii) the CFC invests in U.S. stock, the obligations of a U.S. person or certain other U.S. property.
Under the Tax Cuts and Jobs Act, dividends paid by a CFC to a corporate 10-percent U.S. shareholder generally are tax-exempt if the shareholder has held the CFC's stock for more than one year, among other things. However, the Tax Cuts and Jobs Act does not explicitly provide a similar exemption for income inclusions under IRC Section 956. The proposed regulations generally would exempt a 10-percent U.S. shareholder from tax under IRC Section 956 if the 10-percent U.S. shareholder would not have been subject to tax on an actual dividend from the CFC.
Under IRC Section 956, a CFC's previously untaxed earnings may be taxable to a 10-percent U.S. shareholder if: (i) the CFC guarantees the shareholder's debt, (ii) the shareholder pledges two-thirds or more of the CFC's stock as collateral for a loan, or (iii) the CFC invests in U.S. stock, the obligations of a U.S. person or certain other U.S. property.
Under the Tax Cuts and Jobs Act, dividends paid by a CFC to a corporate 10-percent U.S. shareholder generally are tax-exempt if the shareholder has held the CFC's stock for more than one year, among other things. However, the Tax Cuts and Jobs Act does not explicitly provide a similar exemption for income inclusions under IRC Section 956. The proposed regulations generally would exempt a 10-percent U.S. shareholder from tax under IRC Section 956 if the 10-percent U.S. shareholder would not have been subject to tax on an actual dividend from the CFC.