A&M Tax Advisor Weekly

Proposed Guidance on FDII and GILTI Deduction

Kristina Dautrich Reynolds, Managing Director

kdautrichreynolds@alvarezandmarsal.com

Nicolaus McBee, Senior Director

nmcbee@alvarezandmarsal.com

David Fetner, Senior Associate

March 13, 2019 / North America

On Monday, March 4th, the U.S. Treasury and IRS released proposed regulations under IRC section 250, a new section of the Code added by the Tax Cuts and Jobs Act of 2017 (TCJA). Section 250 generally provides domestic corporations with deductions that facilitate reduced taxation on export income as well as foreign subsidiary income. In other words, the regulations cover the deductions for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI). The proposed regulations offer insight into the computation of these deductions, as well as the determination of income qualifying for FDII treatment.

Overall, the regulations provide clear and logical guidance, and there are only a few controversial or unforeseen ramifications.  There are, however, numerous nuances to follow.  For most companies, the challenge will be the intense pace at which they must now modify their many complex calculations in determining the impact of the TCJA for financial statements and tax filings.

We intend to issue thought leadership for our clients and through this Tax Advisor Weekly on these regulations as we make our way through reporting season.

In the meantime, the following is a high-level overview of some of the key features of the proposed regulations.

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North America