Repatriation of Foreign-Sourced Accumulated Earnings In Transitioning to a Participation Exemption System For Reporting Foreign Sourced Dividends Under The Tax Cuts and Jobs Act of 2017 *
On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (TCJA) of 2017, P.L. 115-97, which introduced a wholesale set of tax cuts and other reforms that affect substantially all U.S. taxpayers, both corporate and individual.
One of the highlights of the new law is the repatriation of foreign-sourced accumulated earnings and profits with respect to controlled foreign corporations (CFCs) as defined. Newly enacted section 965 imposes a transition tax on the accumulated (and untaxed) foreign earnings of foreign subsidiaries of US companies by constructive (mandatory) repatriation under section 951(a)(1). Foreign earnings held in the form of cash and cash equivalents are taxed at a 15.5% rate and the residual untaxed foreign earnings are taxed a rate of 8%. The “transition tax” may be paid in installments over an 8 year period.
Congress Gets Ready To Pass Historic "Tax Cuts And Jobs Act": A Look At The Complex New World Of The Qualified Business Deduction Rule Applicable To Partnerships, S Corporations And Sole Proprietorships
Adapted from an article to be published in the January, 2018 issue of the CPA Journal which is the official journal of the NY State Society of CPAs
By the time this article is published, we will know whether the new tax law was enacted by Congress and signed into law by President Trump. While the conference committee resolved the differences between the bills, and there indeed were many differences, at this point the conference agreement has selected the provisions going forward for the final vote of Congress. This article will focus on the new reforms to the tax rates applied to owners of unincorporated businesses with respect to qualified business income.
Chairman Brady Issues Official "Chairman’s Mark" Of The Tax Cuts And Jobs Act; House Ways And Means Committee Passed The Historic Tax Bill; And Senate GOP Tax Plan Released
House GOP Bill, H.R. 1 and Chairman’s Mark Amendments of November 9, 2017
On November 2, 2017, the Republican GOP released a comprehensive tax reform plan which introduced a set of individual and corporate tax reforms that have received much attention and criticism from both sides of the aisle. Summaries of the proposed legislation were described in this forum in “House Republicans Release Tax Reform Plan: Ways And Means Committee Chair Brady Suggests Flex Rate Package” posted on November 2, 2017, and “Republican GOP Tax Bill Introduces Major Reforms To The Taxation Of U.S. Corporations Engaged In Business Operations Overseas: Introduction Of The Participation Exemption” posted on November 3, 2017.
Republican GOP Tax Bill Introduces Major Reforms To The Taxation Of U.S. Corporations Engaged In Business Operations Overseas: Introduction Of The Participation Exemption
Overview of Need for Reform of Income Taxation of U.S. Corporations With Respect to Foreign Subsidiaries
As promised from various talks and presentations leading up to the introduction of H.R. 1, 115TH Cong., 1st Sess., the Tax Cuts and Jobs Act, as well as the recent Republican Unified Framework for Tax Reform, released September 27, 2017, the GOP Bill introduces major reforms to the international taxation of U.S. businesses, particularly U.S. corporations owning 10% or more of the stock of a foreign corporation. The changes are wide-sweeping and perhaps controversial and marks a paradigm shift in moving the taxation of U.S. corporations from a worldwide income system, with allowance for claiming deemed foreign tax credits on dividends received from such foreign corporations, to a territorial based, participation exemption system which is utilized by many foreign countries.
House Republicans Release Tax Reform Plan: Ways And Means Committee Chair Brady Suggests Flex Rate Package
As reflected in Tax Notes Today for November 2, 2017, Ways and Means Committee Chair, Kevin Brady, R-Texas, stated that it may not be so easy for the House Republicans to get to a permanent 20% corporate tax rate which is a key, if not the centerpiece, provision of President Trump’s tax reform initiative, and that it may take several steps in the process to get there.
Government Fires Back Its Defense To Large Tax Refund Suit Recently Filed By Perrigo Co. (USA) Alleging Elaborate Assignment Of Pharma Licenses From U.S. Subsidiary To Israeli Controlled Foreign Corporation And Related Transactions Were Shams
Perrigo Company and Subsidiaries (“Perrigo”) on August 15, 2017, filed a tax refund suit against the United States in the United States District Court for the Western District of Michigan, Southern Division, No. 1:17-cv-00737.  Perrigo alleged it overpaid Federal income taxes, penalties and interest, for its 52-53 week tax years ending in the last week in June for the years 2009 through 2012 by over $163 million.
U.S. Treasury Department Issues Second Report On Identifying And Reducing Tax Regulatory Burdens: Repeal Of Section 2704 Regulations And Revisions Pending To The Regulations Issued On Partnership Debt
As recently set forth in a post to K&F, LLP Business and International Tax Developments, in Executive Order 13789, President Trump directed the Treasury Department to undertake a detailed review of certain tax regulations projects that were either in proposed or final form on or after January 1, 2016 that imposed financial burdens on U.S. taxpayers, overly complicate the Federal tax laws, or exceed the statutory authority of the IRS in issuing regulations and report back to the President on its recommendations.
Action Expected Shortly By U.S. Treasury On Outbound Transfers As Well As Other Important Issues, Including The Branch Currency Rules
Shortly after President Trump took the oath of office as President, on April 21, 2017, President Trump issued Executive Order 13789, a directive intended to reduce tax regulatory burdens on the IRS and Treasury. The order instructed the Secretary of the Treasury to review all “significant tax regulations” issued on or after January 1, 2016 by the predecessor administration, and submit two reports, followed promptly by taking concrete action to alleviate the burdens of regulations that meet criteria outlined in the order.
Tax Court Holds Gain From the Liquidation of a Foreign Partner’s Ownership Interests In a U.S. Partnership Actively Engaged in Business in the U.S. Is Not Effectively Connected Income
Grecian Magnesite Mining, Industrial & Shipping Co., SA v. Commissioner, 149 T.C. No. 3 (July 13, 2017)
In 2001 Grecian Magnesite Mining, et al (“GMM”), was organized in 1959 under the laws of Greece (the Hellenic Republic) and maintained its principal place of business at the time it filed its petition with the Tax Court in Athens, Greece. GMM's business includes extracting, producing, and commercializing magnesia and magnesite, which it sells to its worldwide customer base. GMM owns magnesite deposits in Greece, has a research and development facility in Greece, and has an office in Greece. Other than through its ownership interest in a Delaware limited liability company, Premier Magnesia, LLC (“Premier”), GMM had no office, employees, or business operation in the United States.
Buy Sell Agreements In Canada And Their Impact On Preserving The Tax Favored Status Of Canadian Resident Controlled Private Corporations
Canadian Controlled Private Corporations
In a recent article written by lawyers in the Aird & Berlis LLP law firm in Toronto, which was just published in Tax Notes International, U.S. international tax practitioners and business lawyers can obtain valuable insights on drafting issues and problems with Canadian controlled private corporation (CCPC) shareholder agreements. The idea is to preserve favorable tax attributes of a Canadian private corporation by ensuring that de jure and de facto control of the CCPC is maintained by Canadian persons throughout.