Published: July, 2021
Subpart F has been the backbone of United States international tax law since its enactment in 1962 and remains so today even after the changes provided by the Tax Cuts and Jobs Act. Subpart F was originally designed to combat deferral and the movement of operations abroad to low-tax and zero-tax jurisdictions. Subpart F, the CFC rules, GILTI, and PFICs are all responses to the challenges posed by globalization and the free movement of capital. Planning around and legally avoiding Subpart F income inclusions is a fundamental part of international tax planning for any United States corporation with significant international subsidiaries and operations.
This online IRS approved CE course will also discuss how the core provisions of Subpart F govern the taxation of Controlled Foreign Corporations (CFCs). Controlled Foreign Corporations are foreign corporations (corporations incorporated outside of the United States) that are owned more than 50% (by vote or value) by U.S. shareholders (U.S. persons who own 10% or more of the corporation’s stock). Subpart F provides special rules in the form of the Foreign Base Company Income provisions that tax income earned by the CFC where the CFC appears to be more of an economic and business intermediary rather than a substantial participant.
As a part of the Tax Cuts and Jobs Act of 2017, Congress enacted a new tax on Global Intangible Low Taxed Income (GILTI). GILTI operates as a residual backstop for the taxation of CFCs. GILTI applies to active income of CFCs that is not subject to Subpart F but is deemed to be in excess of a “normal” return on tangible assets. It is not just about intangible assets and a taxpayer can have relatively few intangible assets and still be subject to GILTI. Unlike the CFC rules, GILTI is earned by U.S. shareholders and not by the CFC itself and the inclusion rules account for all CFCs owned by a U.S. shareholder and also differ depending upon whether the U.S. shareholder is an individual or a corporation.
The rules regarding Passive Foreign Investment Companies (PFICs) were designed to target “incorporated pocketbooks” of wealthy Americans. The PFIC rules govern the ownership by any American of interests in a foreign corporation for which 75% or more of its gross income is passive income or 50% or more of its assets are held for the production of passive income.
Key topics covered in this online CPE/CE webinar:
Upon successful completion of this course, participants will be able:
Owner Grossberg Continuing Education
Jonathan D. Grossberg, J.D., LL.M. (Taxation) is a licensed attorney in Pennsylvania and New York. He is Assistant Editor, National Income Tax Workbook published by the Land Grant University Tax Education Foundation, Inc., and Adjunct Professor of Law, Temple University Beasley School of Law. Until August 2020, he was Assistant Professor of Taxation at Robert Morris University (RMU) School of Business in Moon Township, PA. Jonathan has taught a wide variety of tax courses to undergraduate, graduate, and law students, including federal income taxation, taxation of business entities, tax procedure, advanced income taxation, tax research, corporate tax, and international tax. Before entering academia, Jonathan clerked for Judge Gale of the U.S. Tax Court and practiced tax law at Drinker Biddle & Reath LLP in Philadelphia and Milbank, Tweed, Hadley & McCloy LLP in New York. Jonathan has written articles for academic and practitioner publications and made CLE/CPE presentations to lawyers and accountants on a variety of topics including tax and business ethics, judicial doctrines in tax law, partnership tax, tax issues facing small businesses, and universal basic income.