Strategies to Repatriate Untaxed Foreign Earnings

Repatriating Untaxed Foreign Earnings Using Section 311(b) Distributions or Section 964(e) Stock Sales

Introduction: Pairing Section 311(b) Distributions or Section 964(e) Stock Sales with the Section 245A DRD

U.S. multinational corporations may be able to use section 311(b) distributions or section 964(e) stock sales with the section 245A dividends received deduction (“Section 245A DRD”) to repatriate untaxed foreign earnings, tax-free. As explained in detail in our prior post, the Tax Cuts and Jobs Act, Pub. L. 115-97 (2017) (the “TCJA”) enacted section 245A which provides that the foreign-source portion of dividends received by certain domestic corporations are eligible for a dividends received deduction provided that certain requirements are met. The TCJA transitioned the United States from a worldwide tax system to a quasi-territorial tax system.[1]

As part of that transition, the United States enacted the GILTI regime as a backstop to the subpart F anti-deferral regime. Generally, under GILTI, a U.S. shareholder of a controlled foreign corporation (“CFC”) must include in its gross income the U.S. shareholder’s GILTI for a taxable year (generally, income that is not otherwise subject to U.S. tax on a current basis). Despite the subpart F and GILTI regimes, certain foreign income is excluded from GILTI and may remain untaxed, on a current basis, in the United States. These untaxed earnings represent an opportunity for taxpayers as they may be able to execute a section 311(b) distribution or a section 964(e) stock sale that repatriates untaxed foreign earnings using the Section 245A DRD.

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congressional Record - Tax Cuts And Jobs Act Part 2

(Continued From Part 1)

What did we discover in the aftermath of that?

Almost 20,000 layoffs in the weeks after it. The money was used for stock buybacks and dividends with no employment gains across the country.They keep telling us: Well, you are going to get 3 percent, 4 percent, 5 percent, and the President says 6 percent growth. I want to find that economist who says we are going to get 6 percent growth. Most projections are that we are being asked here today to participate in the following, because this is the context of the argument this morning: They are borrowing $2.3 trillion over 10 years for the purpose of giving a tax cut to people at the very top of our economic system.

We should be investing in human capital, community colleges, vocational education, internship programs, and aligning the American people with the skill sets that are necessary, as the Department of Labor reported this week, for the 6 million jobs that are available. That is the most gainful way to do long-term investment. Mr. Speaker, I reserve the balance of my time.

Mr. BRADY of Texas. Mr. Speaker, I would note that a family of four in Massachusetts’ First District will see a tax cut of nearly $2,000 under this bill.

Mr. Speaker, I yield 3 minutes to the gentlewoman from Kansas (Ms. Jenkins), one of our key leaders on the Ways and Means Committee who is really all in on growth and savings for America.

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By any measure, the tax code is huge. According to Commerce Clearing House’s Standard Federal Tax Reporter it’s up to 74,608 pages in length.¹

And each Monday, the Internal Revenue Service publishes a 20- to 50- page bulletin about various aspects of the tax code.²

Fortunately, it’s not necessary to wade through these massive libraries to understand how income taxes work. Understanding a few key concepts may provide a solid foundation. Read More

Now that small businesses and their owners have filed their 2017 income tax returns (or filed for an extension), it’s a good time to review some of the provisions of the Tax Cuts and Jobs Act (TCJA) that may significantly impact their taxes for 2018 and beyond. Generally, the changes apply to tax years beginning after December 31, 2017, and are permanent, unless otherwise noted.

Corporate Taxation

  • Replacement of graduated corporate rates ranging from 15% to 35% with a flat corporate rate of 21%
  • Replacement of the flat personal service corporation (PSC) rate of 35% with a flat rate of 21%
  • Repeal of the 20% corporate alternative minimum tax (AMT)

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WASHINGTON – With tax reform bringing major changes for the year ahead, the Internal Revenue Service today reminded the many self-employed individuals, retirees, investors and others who need to pay their taxes quarterly that the first estimated tax payment for 2018 is due on Tuesday, April 17, 2018.

The Tax Cuts and Jobs Act, enacted in December 2017, changed the way tax is calculated for most taxpayers, including those with substantial income not subject to withholding. Among other things, the new law changed the tax rates and brackets, revised business expense deductions, increased the standard deduction, removed personal exemptions, increased the child tax credit and limited or discontinued certain deductions. As a result, many taxpayers may need to raise or lower the amount of tax they pay each quarter through the estimated tax system. Read More

WASHINGTON — The Internal Revenue Service has updated the tax year 2018 annual inflation adjustments to reflect changes from the Tax Cuts and Jobs Act (TCJA). The tax year 2018 adjustments are generally used on tax returns filed in 2019.

The tax items affected by TCJA for tax year 2018 of greatest interest to most taxpayers include the following dollar amounts: Read More

WASHINGTON – Many U.S. corporations elect to use a fiscal year end and not a calendar year end for federal income tax reporting purposes.  Due to a provision in the recently enacted Tax Cuts and Jobs Act (TCJA), a corporation with a fiscal year that includes Jan. 1, 2018 will pay federal income tax using a blended tax rate and not the flat 21 percent tax rate under the TCJA that would generally apply to taxable years beginning after Dec. 31, 2017.

Corporations determine their federal income tax for fiscal years that include Jan. 1, 2018, by first calculating their tax for the entire taxable year using the tax rates in effect prior to TCJA and then calculating their tax using the new 21 percent rate, subsequently proportioning each tax amount based on the number of days in the taxable year when the different rates were in effect.  Read More

WASHINGTON — U.S. Armed Forces members who served in the Sinai Peninsula of Egypt may qualify for combat zone tax benefits retroactive to June 2015, according to the Internal Revenue Service.

Under the Tax Cuts and Jobs Act (TCJA) enacted in December 2017, members of the U.S. Army, U.S. Navy, U.S. Marines, U.S. Air Force, and U.S. Coast Guard who performed services in the Sinai Peninsula can now claim combat zone tax benefits. Eligible service members should review Publication 3, Armed Forces’ Tax Guide, available on Read More

WASHINGTON — The Internal Revenue Service has updated the tax year 2018 annual inflation adjustments to reflect changes from the Tax Cuts and Jobs Act (TCJA). The tax year 2018 adjustments are generally used on tax returns filed in 2019.

The tax items affected by TCJA for tax year 2018 of greatest interest to most taxpayers include the following dollar amounts:

  • The standard deduction for married filing jointly rises to $24,000. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,000; for heads of households, $18,000.

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After a lengthy process, Congress and the President did what they had to do in late December 2017 to put into law one of the most significant pieces of legislation in decades: the Tax Cuts and Jobs Act (TCJA). The Act put into place a number of provisions that will affect Not for Profit Organizations. Note the following areas of tax impact that the provisions of the TCJA  brought in relation to Not For Profit Organizations, as noted in Yeo Yeo:

  • Changes the computation of unrelated business taxable income (UBIT) if an organization has more than one unrelated trade or business. It’s possible that more nonprofits will have to pay UBIT. As Nolo explains:

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We won’t say we were barraged with questions of concern after the announcement of the most sweeping U.S. tax legislation in more than 30 years, but pretty darn close. At least we’re starting to have “Strategic” conversation about Taxes now instead of it being an afterthought.

The 2017 Tax Cuts Jobs Act And Opportunities

While the new legislation includes many pro-growth features, including a deep reduction in the corporate tax rate, a scaled-back state, and the local tax deduction, full-expensing for five years, and lower individual tax rates, discipline is essential. Read More

The Tax Cuts and Jobs Act enacted by Congress last year made major changes to the longstanding deductions for business-related entertainment and meal expenses. Starting in 2018, most business-related entertainment expenses are not deductible. However, the deductibility of certain meals is unclear.

Continue to find out what entertainment expenses are allowable tax deductions moving forward.

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