The recently enacted tax reform legislation significantly expanded the application of Subpart F, adding a new inclusion rule for non-routine controlled foreign corporation (CFC) income, termed global intangible low-taxed income (GILTI). The GILTI rules apply higher tax rates to GILTI attributed to individuals and trusts that own CFC stock than to C corporation shareholders. There are several steps which individuals and trusts may take to defer or reduce the effect of the GILTI rules on individuals and trusts.
Recent broad tax reform legislation which applies to both US and non-US multinationals with cross-border operations has, among other things, reduced the corporate income tax rate and reformed the US international tax system. Several of the provisions could increase a foreign multinational entity's (FMNE's) US tax liability and compliance and administrative burdens. As such, FMNEs should thoroughly review their US operations, paying particular attention to cross-border payments to non-US related parties.
The 2017 tax reform act is now law, leaving private equity and M&A professionals to digest these significant changes and reconcile the new provisions with how they do business. Among other things, the act provides for a permanent reduction of the corporate tax rate to a flat rate of 21% and repeals the corporate alternative minimum tax. The act will be subject to corrections by and guidance from the US Department of the Treasury and the Internal Revenue Service in the coming months.
In an effort to offset the revenue loss associated with proposed tax cuts, both the House of Representatives tax reform bill and the corresponding Senate draft take aim at the tax treatment of several popular employer-provided fringe benefits. At this early stage of the legislative process, it is important to note that these proposals are subject to change. Nevertheless, it is important for employers to know which of their programmes may be cut or eliminated as soon as 2018.
Taxpayers that are not afforded the opportunity to seek review by Internal Revenue Service appeals after a case has been docketed in the Tax Court should seek to elevate the matter up the chain to obtain reconsideration and reversal of such a decision. If that course of action is unsuccessful, taxpayers should consider other options. In this regard, the outcome of Facebook's recent case in the District Court for the Northern District of California may be instructive.