Chapter 6 – Options for Anti-Deferral Tax Regimes
Alternative approaches to U.S. taxation of U.S. owners & foreign corporate income:
1) Complete deferral (or a territorial approach?).
2) Partial deferral – “Subpart F” approach.
3) Deferral, but imposition of an interest charge when an income distribution later occurs.
4) Deferral, but a tax characterization change to ordinary income (from CG) when gain is received.
5) No deferral - all current income recognition is required (or “acceleration”?).
Present/Former U.S. Anti-Deferral Tax Structures
1) FPHC - current attribution of investment income (repealed in 2004) (but rules are used for the Subpart F definitions).
2) Controlled foreign corporation or “CFC” -Subpart F (of Subchapter N) provisions - partial current recognition of undistributed income.
3) Foreign investment companies - (repealed in 2004) - characterization of a distribution.
4) Passive foreign investment company rules - PFIC - interest charge on an excess distribution or on stock sales proceeds
Purposes for Using a “Base Country” Corp. p.487
1) Holding stock in foreign subsidiaries.
2) Licensing arrangements.
3) Export sales or import purchases concluded through a “base company.”
4) Services provided from a base company.
5) Financing operations provided at foreign base.
What is a “base country”? Tax haven country, including no tax imposed on income realized outside the base country.
Picking a Base Country p.488
Choices of foreign country jurisdiction:
- Tax haven (no tax on transactions through the jurisdiction).
- Legal system – probably based on English common law.
- Types of countries: (1) Developed countries – Switzerland or Luxembourg; or (2) Islands, etc. – Cayman Islands, BVI, Bermuda, Bahamas, Channel Islands, Gibralter, Isle of Man (often engaged in a “race to the bottom”).
The “Subpart F” Provisions Summarized p.489-490
Code §§ 951-964.
Current income taxation to U.S. shareholders (even though income not actually received):
1) Must be a “controlled foreign corporation” (or CFC), i.e. more than 50% “U.S. shareholders.”
2) Must be a 10% or greater shareholder.
3) Limited to certain types of movable income - not including “active” income, e.g., manufacturing income.
PFIC Provisions Summarized p.490
Code §§1291-1298 (TRA-1986)
“Passive Foreign Investment Company” (or PFIC) status – passive investment income.
Deferral is permitted since no CFC status for the corporation in the U.S. (e.g., for an offshore investment fund with a large shareholder base).
But, the benefit of the income tax deferral is recaptured (through an interest charge) when either (1) an “excess distribution,” or (2) a stock sale occurs.
PFIC Provisions, cont. p.491
No stock ownership percentage test; PFIC rules applicable only to U.S. taxpayer owners.
Income of PFCI must be 75% passive (or 50% of the entity’s assets must be those producing passive income).
Options for U.S. shareholder avoiding a subsequent interest charge on the deferral benefit:
1) Qualified electing fund (“QEF”)
2) “Mark to market” for PFIC stock – assuming marketable/traded stock.
“Temporary” Dividends Received Deduction p.492
Code §965 – temporary (2004) provision enabling an 85% DRD. Expired, but to be renewed?
Therefore, tax of 35% times 15% income inclusion in U.S. tax base = 5.25% effective U.S. income tax rate.
Only cash dividends. Must be extraordinary dividends (i.e., exceeding average repatriations)
Reinvestment in U.S. required – (1) must be a dividend reinvestment plan, and (2) funds to be used for prescribed purposes.
Definition of a “Controlled Foreign Corporation” p.494
Code §957(a) defines a “controlled foreign
corporation” (CFC) as a foreign corporation where
more than 50 percent of:
(i) the vote, or (ii) the value
of all the outstanding stock is owned (or is
considered as owned) by one or more “United
States shareholders” on any day during the taxable
year (determined on a year-by-year basis).
“United States shareholder” defined – next slide.
“United States Shareholder” Defined p.494
Who are “United States shareholders”? See the Code §951(b) definition.
U.S. citizens, resident aliens, corporations, partnerships, trusts or estates owning directly or indirectly or constructively (under the ownership rules of §958) 10% or more of the total combined voting power of all classes of stock of a foreign corporation for at least 30 days during the year.
Less than 10% ownership: a “portfolio interest” and not a “direct interest”.
Subpart F Constructive Dividends Concept p.496
1. Include a pro rata share of “Subpart F income” (§951(a)(1)(A)(i)), as determined on the last day of the year. Objective: Constructive receipt - economic power exists to control the income and an immediate accretion to wealth thereby causes gross income inclusion. Reduced by amounts paid earlier in year to prior owner.
2. Include pro rata share of investment in “U.S. Property” (§956) - a deemed repatriation of profits into U.S. (income type is not relevant). continued
Subpart F Constructive Dividends Concept, cont.
3. Income attributed to the shareholder is treated as ordinary income (i.e., capital gain may be transformed into ordinary income). Important to an individual situation. Cf., branch status.
4. No loss pass-through from CFC to the shareholder; cf., branch treatment.
5. Subsequent stock disposition gain – ordinary income to the extent of profits allocable to the stock sold (if not previously included). §1248 -(i.e., not capital gain). Important to individual.
Subpart F - Foreign Tax Credit Availability p.498
An indirect foreign tax credit is available for U.S. corporate shareholders when current Subpart F inclusion is required - similar to §902. See §960.
The §78 gross-up to the deemed dividend is required for the taxes deemed paid which are attributable to the deemed distribution.
§962 – election is available to an individual shareholder for the same treatment (i.e., to enable availability of the deemed paid foreign tax credit & income tax based on corporate rates).
Subpart F - Adjustment Mechanisms p.498
§959(a) - actual distributions from the CFC are sourced first from amounts already taxed under §951(a). Similar treatment for previously taxed §956 U.S. investment amounts (& §951(a)(1)(B).
§961(a) – an increase in tax basis is made for shares held by the U.S. shareholder by the amount included in gross income under §951(a).
§961(b). A reduction of tax basis for shares is made for untaxed distributions. Cf., S corporation treatment for distributions to shareholders.
“Subpart F Income” Elements - §952(a) p.499
1) “Foreign base company income” – derived from a diversion of passive (& similar) income to a low-tax jurisdiction. Next slide.
2) Income from insurance activities. §953.
3 International boycott-related income.
4) Illegal bribes and kickbacks.
5) Bad country income. Cf., §901(j) re FTC.
Foreign Base Company Income - §954(a) p.500-1
Categories of FBC income:
1) Foreign personal holding company income (FPHCI). Identified in §954(c).
2) Foreign base company sales income.
3) Foreign base company services income.
4) Foreign base company oil related income.
Not active business income. Formerly, also,
FBC shipping income. Special treatment for
income in less-developed country corp. (LDCC).
Limits on Subpart F Income Inclusion p.502
1) §954(b)(3)(A)&(B) - de minimis (exclusion) rule (5%); but, also, a 70% “full inclusion” rule.
2) §952(c)(1) provides a limit on CFC's Subpart F income to the CFC’s “earnings and profits” for that year.
3) §952(b) excludes from Subpart F income certain U.S. source income - ECI with a U.S. trade or business (since this income is currently subject to U.S. income tax on the basis of geographic source).
Definition of a “Controlled Foreign Corporation” p.502
§957 - more than 50% of the vote or value of the corp. stock is owned by “U.S. shareholders.”
§958 specifies (1) direct, (2) indirect, and (3)
constructive ownership rules to determine 50% test.
§958(a)(2) - indirect ownership rules (e.g., subs).
§958(b) - constructive ownership rules concerning
attribution between family members and between
(i) entities and (ii) their shareholders, partners or
(iii) beneficiaries. Cf., §318 (Subchapter C) constructive ownership rules.
Problem 1 p.504
Zeus as a Swiss corp has 1,000 shares of a single class of stock outstanding. Jupiter, a widely held U.S. corporation, owns 460 shares and the remaining 540 shares are owned equally by six unrelated U.S. individuals.
Result: None of the individuals is a “U.S. shareholder” because none owns 10%; therefore, Zeus is not a CFC (since not over 50% “U.S. shareholders.”). §957(a) and §951(b).
Problem 2 p.504
More than 10% Individuals
The number of corporate shareholders is reduced from six to five.
Each individual shareholder then owns more than 10 percent (10.8%, or 108/1000).
Result: Each individual would be a “United States shareholder.”
Therefore, Zeus would be a CFC (since more than 50% of its stock is owned by “United States shareholders”).
Problem 3 p.504
Attribution to Partnership
1) A partnership (one of the six shareholders each owning 9%) owns 90 shares, and 2) a partner owns 90 shares. The partner's shares are attributed to the partnership and the partnership is deemed to hold 180 shares. §958(b) and §318(a)(3)(A).
Zeus is a CFC (when including partnership’s 180
shares). §958(b) and §318(a)(3)(A). 180 plus 460
Jupiter shares (= 640) & is more than 50 percent.
2) Is the partner a U.S. shareholder? No, 318(a)(2)
(5% of 90 shares = 4.5 shares).
Problem 4 p.504
Husband & Wife Attribution
Two of the individuals are husband and wife. Each spouse's shares are attributed to the other under §958(b) and §318(a)(1)(A)(i). Query: Who is a “spouse” for this purpose?
Each spouse is deemed to own 180 shares (90 actually and 90 by ownership attribution) and each spouse is a U.S. shareholder.
Therefore, Zeus is a CFC - when the 180 shares of a spouse are combined with the 460 Jupiter shares (= 640 or 50%+).
Problem 5 p.504
Nonresident Alien Status
Two of the individual shareholders are husband and wife. One spouse is a nonresident alien.
No ownership attribution occurs under §318(a)(1)(A)) to/from a nonresident alien spouse. See §958(b)(1) limiting § 318(a)(1)(A) attribution in this context.
Therefore, Zeus S.A. is not a CFC.
Problem 6 p.505 Attribution Among Siblings?
Two of the individuals are brother and sister.
No attribution occurs between siblings under §318(a)(1)(A).
But, attribution from each child to parent & parent then owns 180 shares & then add Jupiter’s 460 = 640 shares (more than 50%)? Therefore, Zeus S.A. is a CFC.
But, only Jupiter has actual §951(a) gross income inclusion. §951(a)(2)(A).
Problem 7 p.505
One of individuals (owning 90 shares) owns 50% of stock of Jupiter corp. (a U.S. corp, which owns 46% of Zeus).
All of the individual’s 90 shares are attributed from the individual to Jupiter Corp. and, then, Jupiter owns 550 shares (460 + 90). §318(a)(3)(C).
Zeus is therefore a CFC.
Cf., attribution to individual (yes, ½ of 460 shares). §318(a)(2)(C). U.S. shareholder (230 plus 90 = 320).
Problem 8 p.505
10% Share Ownership
One of the individuals (owning 90 shares) owns 10% (not 50%) of the stock of Jupiter corporation (the U.S. corp. which owns 46% of Zeus), and that individual is a U.S. shareholder.
The individual’s 90 shares are combined with 10% of Jupiter Corp. 460 shares for 136 shares & individual is a “U.S. shareholder.”
§318(a)(2)(C) & §958(b)(3) (i.e. 10%, not 50%).
Therefore, Zeus is a CFC. 90 plus 460 = 550 shares.
Problem 9 p.505
5% Share Ownership
One of the individuals (owning 90 shares) owns five percent of the stock of Jupiter corporation (U.S. corp. which owns 46% of Zeus).
The individual’s 90 shares are not attributed from individual to Jupiter Corp. See §318(a)(2)(C) & §958(b)(3).
Zeus is not a CFC since Jupiter is the only “U.S. shareholder” (holding 46%), within the meaning of §951(b).
Problem 10 p.505
Ownership Thru Foreign Corp.
410 shares of Zeus are owned by Jupiter Corp, and
90 shares are owned by a U.S. citizen who (1) also owns 3% of the shares of Juno B.V. (a Dutch corporation) & (2) Juno B.V. owns 500 Zeus shares (i.e., U.S. citizen indirectly owns 15 additional shares of Zeus or a total 105).
See §958(a)(2) for indirect ownership rule.
105 shares plus 410 shares (total 515 shares) means Zeus is a CFC.
Juno (foreign corp.) is not a U.S. shareholder.
Stock Voting Power (or Value?) Test - 50% plus
CCA, Inc. p. 505 Old CCA owned all of the issued and outstanding stock of AG (Swiss).
AG was exporter of CCA products from the United States. AG had exclusive right to use CCA trademarks. AG had manufacturing plants in other European jurisdictions.
After 1962, an objective existed to “decontrol” AG for Subpart F purposes (after distribution of shares of active subsidiaries).
Accomplished here. Yes. Why/how?
Koehring case p.515
Nominal control irrelevant
KOS, a Panamanian sub, operating as a wholly owned sub of the U.S. parent corporation. Voting control transferred to Newton Chambers, an English company, by its purchase of cumulative voting preferred stock having 55% of the vote (but stock subject to cash-out?).
See Reg. §1.957-1(b)(2) re shifting only of formal voting power & a cross-investment arrangement. KOS was treated as a CFC.
What impact of the “clearly erroneous” rule?
Problem 4, p.526
Avoiding CFC Status
Still possible to decontrol foreign corp.? yes, but preferred stock must also have a value equal to at least 50% of total corporate value, and:
1) restrictions re no transfer to a U.S. person;
2) 50 percent of the Board of Directors as preferred share representatives;
3) no common share right to redeem preferred;
4) no means to resolve the deadlocks, etc.
Stapled Stock Corporations p.527
Structure: Holdings in (1) the U.S. corp. and (2) the foreign corp. can only trade as a unit.
“Stapling” occurs to avoid the applicability of the Subpart F rules for the foreign corp. - & the sufficiently wide distribution of shares of the foreign corporation to not be a CFC.
§269B specifies that the foreign corporation when stapled is treated as a U.S. corporation (subject to worldwide U.S. income taxation). Cf., a nonstapled corp.
Corporate Inversions p.529
Transformation of a U.S. publicly traded corporation into a subsidiary of a foreign corporation. U.S. tax treatment of this change?
After the transaction the U.S. shareholder ownership of the foreign corporation is widely dispersed & foreign corporation is not a CFC.
Stripping profits outbound from the U.S. sub to the foreign parent would then be enabled.
But, foreign corp. may be treated as a U.S. corp. See §7874.
Possible Rules for Corporate Residency p.530
Should the corporate residency status be determined by where the primary corporate officers reside and regularly work (rather than being based on the place of organization)?
Cf., other foreign country tests of the place of “management and control” for determining the situs of a corporation. Is this different from the place where the corporate business is regularly conducted?
Problem under this approach is in determining with clarity the residence status of corporation.
Mechanics of Subpart F Income Inclusion p.530
§951(a)(1) - gross income inclusion is possibly required for a shareholder if the corporation is a CFC for a 30 day period during the tax year.
Every person who is a “United States shareholder” must include his/her/its pro rata share of the Subpart F income at year-end.
Pro rata share of a person’s includible Subpart F income is determined by reference only to direct and indirect CFC ownership (but not to constructive ownership rules).
Subpart F Mechanics, cont.
If CFC for only part of the year - then pro rata allocation for a portion of year. §951(a)(2)(A).
Reduction of Subpart F income amount if dividends were actually received earlier in the same year by a prior owner (plus §1248 gain). §951(a)(2)(B).
Note: How negotiate a corporate acquisition transaction with this Subpart F income consideration? Wanting dividend or no dividend treatment? Consider the FTC situation to the potential acquirer (after a dividend was paid).
Subpart F Income Inclusion, cont. p.532
If multiple classes of stock are outstanding, how allocate the Subpart F income among the several classes? Allocation is to be based on the E&P amounts allocable to each class. P. 532.
How allocate income if directors have discretionary power to allocate income among the several classes of stock? Allocation is based on the relative values of the shares.
Subpart F Income Inclusion, Multiple Tiers p.533
If multiple tiers of corporations, how determine the shareholder’s Subpart F income amount? Use the “hop-scotch” method for Subpart F income from lower corps to the U.S. shareholder(s).
Eligibility for an (indirect) foreign tax credit? Yes.
Gross-up the Subpart F income amount by the allocable deemed paid credit amount under §960.
Shareholder increases tax basis for above tier corps.
What happens when 1st tier corporation sells shares of 2nd tier corporation? Tax basis increase for the holding in the 2nd tier sub. §961.
The Partnership “Blocker” Transaction p.534
Possible to interpose a domestic partnership in the middle of a chain of foreign corporations to avoid CFC status for the foreign corporation(s) held below the domestic partnership?
Identified as a “Subpart F income partnership blocker.”
See Notice 2010-41 that indicates that (for §951 purposes) the U.S. partnership is to be classified as a foreign partnership to determine CFC status of the lower tier corp.
Foreign tax credit availability p.535
§960 – similar to §902 concerning availability of the indirect FTC to upstream corp. shareholders.
Indirect credit is available down to the 6th tier foreign corporation (if a controlled foreign corporation). Cf., §902(b)(2).
At least 10% corporate ownership of voting stock must exist at each level.
No indirect FTC below the 6th tier (but then use a “disregarded entity”?).
Problem 1 p.537
FBC Income Allocation
Two NRAs and a U.S. corporation organize Irish Foreign Base Company, Inc. (FBC). Two NRAs get 30% each & Widgets (U.S.) gets 40%.
On August 8 NRA Molly gets a “green card.”
FBC has net income of $400,000 for year one – 1/2 of this amount being Subpart F income.
FBC paid $80,000 in foreign income tax on pre-tax foreign net income of $480,000 (16+% rate). continued
Problem 1, continued
CFC status during mid-year
FBC becomes a CFC on August 8 when FBC has a 40% & a 30% U.S. shareholder (Molly).
For the year $200,000 is Subpart F income (after foreign tax liability) (§954(b)(5)).
Proportionate allocation of the Subpart F income is to be made to that period during which the corporation is a CFC - 40% (145/365) of that year, times $200,000 ($80,000), CFC income.
Equals (1) $32,000 inclusion for Widgets (40%) and (2) $24,000 inclusion for Molly (30%). continued
Problem 1, continued
Basis & FTC Treatment?
Molly tax basis adjustment for her FBC stock: $30,000 cost plus $24,000 Subpart F income – $54,000. No indirect FTC (since an individual), assuming no §962 election made by Molly.
Widgets’ basis increase for its FBC stock: $40,000 cost, plus $32,000 Subpart F income = $72,000 basis. Widgets gets a §960 deemed paid credit: 32,000/400,000 x 80,000 (total tax) = 6,400.
No tax basis increase for Widgets’ stock for this 6,400 FTC amount (since used as a FTC).
Problem 2 p.537
Actual dividend distribution
Year two distribution of dividends is made from FBC: $20,000 to Widgets, and $15,000 to Molly and Sam. FBC breaks even for 2nd year.
Sam (foreigner) is not subject to U.S. income tax.
Under §959 no tax to Widgets & Molly since amounts received are paid from earnings previously taxed (under §951). See §959(c) ordering rules.
Under §961(b) share basis is reduced (prior tax basis increase when earlier income inclusion).
Exclusion of U.S. Trade or Business Income p.537
§952(b) provides an exclusion from Subpart F for U.S. trade or business income. Assumption of net basis income taxation in the United States to enable this exclusion from Subpart F income.
No exclusion from Subpart F income, however, where the trade or business income in the U.S.:
(1) is entitled to an exclusion from gross income (e.g., no P.E.) under a tax treaty, or
(2) has a reduced rate of tax under an income tax treaty.
Subpart F Income Is Based on Current E&P p.538
§952(c)(1)(A) - Subpart F income is limited to CFC’s current “earnings and profits.”
Some CFC current losses may reduce the CFC’s Subpart F income (even though losses are not attributable to Subpart F type activities).
However, possible subsequent Subpart F income recapture is required when an excess of current earnings and profits is realized over the Subpart F income. §952(c)(2). This is a timing rule.
Accumulated Deficits As Reducing Subpart F Income
Accumulated deficits do not reduce Subpart F income for the current year, except as permitted in §952(c)(1)(B) (i.e., "qualified activity"). P. 539.
Deficits in related companies cannot be used to reduce Subpart F income except where the same “qualified activity” is conducted by a "qualified chain member” and deficits are incurred.
Qualified activities produce: (1) FBC oil-related income, (2) FBC sales income, (3) FBC services income, (4) certain insurance co. income, or (5) certain financial company income.
Defining Foreign Base Company Income p.540
Definition of FBCI is specified in §954(a):
1) Foreign personal holding company income. Certain “same country” exceptions.
2) Foreign base company sales income.
3) Foreign base company services income.
4) Foreign base company oil related income.
FBCI formerly included foreign base company shipping income.
Defining “Foreign Personal Holding Company Income”
P. 540. Definition is provided in §954(c) - Interest, dividends, rents, royalties, annuities and gains from the sale of stock or securities.
P. 541. Exception for rents and royalties received from unrelated persons when derived in the active conduct of a business - §954(c)(2)(A).
Exception for “same country” dividends and same country interest from a related person. §954(c)(3)(A)(i) & (ii). Same for “same country” rents and royalties. continued
Defining FPHCI, continued
The exception for related party payments is not applicable where payments reduce Subpart F income of payor. §954(c)(3)(B). P. 542.
“Look-through rule” applies for payments received or accrued from a related controlled foreign corporation. §954(c)(6). This transforms Subpart F income (e.g., dividends) into non-Subpart F income. Extended in the 2015 tax legislation through the year 2020. Enables remarshalling of foreign assets without FPHCI results.
Defining FPHCI, continued
Gain on the sale by a CFC of another foreign corp. stock is treated as a dividend as if IRC §1248 would be applicable. §964(e). P.544. But, an anti-taxpayer (or pro-taxpayer) rule if the FTC is also available?
Similar treatment if a §311(b) gain recognition transaction upon distribution of CFC stock by foreign parent to U.S. shareholder. P. 545. Remembering the General Utilities doctrine?
Related Person Factoring Income p.546
Sale of receivables to a “factor” at a discount.
What is a “receivable” for this purpose? §864(d)(3).
§864(d)(1) - discount income to foreign corporation from factoring with a related person is treated as “interest” income from a loan.
Also, a loan to a purchaser from a related party is treated as a receivable purchase for purposes of this rule. §864(d)(6).
A same country exception is available in some situations. §864(d)(7). See p. 548.
Other Foreign Personal Holding Company Income
P. 548. Foreign currency gains. §954(c)(1)(D). A hedging exception is applicable.
Income from commodity transactions. P. 548. §954(c)(1)(C). A hedging exception is available. §954(c)(5)(A).
P. 549-550. Income is FPHCI if derived from the sale of property producing either (1) passive income or (2) no income. §954(c)(1)(B). Exceptions exist for certain property sales (particularly sale of trade or business assets).
The “Check & Sell” Plan
The Dover case p.551
A CFC’s sale of stock (including the stock of a 2nd tier foreign subsidiary) produces a capital gain which is FPHC income.
Assume the sale of sub’s assets produces no FPHCI - but may cause a foreign country gains tax.
Option: Use the “check the box” entity characterization rules (assuming an “eligible entity”) to (1) cause a deemed liquidation of the foreign corp. (under §332), and (2) then sell the stock (which is a treated as a sale of assets for U.S. income tax purposes).
Active Financing Exception p. 555
Exception from FPHCI definition for certain active financing income realized by a CFC. §954(h).
1) Line item veto history – p. 555.
2) This exception also extended through the year 2014 in year-end “extenders” legislation.
3) Time limitation for this treatment eliminated in 2015 tax legislation.
Foreign Base Company Sales Income p.556
§954(d). Defined as income derived from the purchase and the sale of personal property:
(1) if purchased from or sold to a related party, &
(2) the property was manufactured outside the country (a) where the CFC is organized and (b) where the property is sold for ultimate use.
Includes income from “commission” sales.
A “tax avoidance” purpose is not relevant.
Requires three countries & two related parties.
Foreign Base Company Sales Income, continued
Exception from FBC sales income treatment where CFC conducts significant manufacturing of the product sold: But, what is “manufacturing”?
Three alternative tests:
(1) Must be “substantial transformation.”
(2) A 20%+ “safe-harbor” is possible for the CFC. Minor assembling is not sufficient.
(3) “Substantial contribution” test (re outsourcing, i.e., “contract manufacturing”).
See Dave Fischbein case (later, Ch. 11, p. 911).
Foreign Base Company Sales Income, cont. p.558
Possible application of a “branch rule,” i.e., treating the branch as a separate corporation for Subpart F. §954(d)(2). Why?
Example: Swiss CFC is engaged in manufacturing and uses a Cayman Islands branch for its sales operation. Tax arises only in Switzerland on the manufacturing income (i.e., a Swiss territorial taxation approach). No tax imposed in Cayman Islands on the sales activity (and the income).
CI branch is treated as a separate sub for FBC sales income purposes.
Foreign Base Company Services Income – p.558
§954(e)(1). Services are performed (1) for a related person and (2) outside the country where the CFC is organized. Both a "related person" test and a "geographic" test need to be satisfied.
Consider foreign construction or drilling companies engaged in offshore activities.
"Substantial assistance" provided to the foreign subsidiary may cause this rule to apply. P.559.
See the exception for financing activities. P.561 & §954(h).
Foreign Base Company Oil Related Income – p.561
§954(g)(1). “Oil related” income realized by big producers outside the country of the oil & gas production. E.g., refining, transportation & distribution income from oil and gas products. See §907(c)(2)&(3) for definitions.
Applicable only to large oil producers (1,000 + barrels per day).
Exception applies for “in country” consumption.
Subpart F Definition of a “Related Person” p.562
§954(d)(3) specifies that a “related person” is one of the following:
1) More than 50% of the vote or value of a corporation owned by that person.
2) More than 50% of value of the beneficial interests in a partnership, trust or estate owned by that person.
Special Rules for Inclusion/Exclusion p.563
1) De minimis rule (lesser of 5% of GI or $1 mil. is
FBCI; e.g., for interest received on cash balances at a bank). §954(b)(3)(A). An anti-abuse rule applies for aggregation among related entities.
2) Full inclusion (70%+) of GI rule. §954(b)(3)(B).
3) Exception for a high-taxed income item. P.565.
§954(b)(4). At least a 31.5% (effective, not nominal)
tax rate. No PLR issuance is available.
Note: Blocked earnings exclusion. §964(b). P.567.
But, see re swap and similar arrangements.
Income Earned by CFC Through Partnership p.568
Consider Subpart F income when realized by a partnership - attribution to the partners, including a CFC (sub of a US parent)?
§702 - provides for separate characterization.
See Brown Group cases & §954(d)(3).
§701 anti-abuse regulations - partnership to be treated as an “aggregate” (and not an “entity”).
Notice 96-39 (IRS disagreement with Brown Group 8th Cir. decision). See p. 571.
Subsequent aggregation regulations & then §954(c)(4) look-through rules (2004).
Subpart F and the New Economy p.573
U.S. Treasury Department Study, 12-2000,
examining the impact of the Subpart F rules on
transactions conducted through websites and the
Sourcing issues: Where is the place of performance
or the place of use?
Sales of goods? Royalties? Services?
Manufacturing within the CFC, e.g., for software?
Relevance of “branch rules”? Or, “U.S. trade or
Problem 1a Matterhorn, S.A. Swiss sub of USM(US) p.581
Matterhorn (a CFC) acquires from its parent corp. and sublicenses patents for royalties to be received from independent licensees outside Matterhorn’s place of organization.
Royalties are included in the definition of FPHCI.
Unless: (i) same country-related person exception under §954(c)(3)(A)(ii), or (ii) the active business - unrelated person exception of §954(c)(2)(A). But, not here – not an active business.
Problem 1b Matterhorn
Matterhorn patents are acquired from inventions developed by Matterhorn’s own technicians.
Not FPHC income since for Matterhorn the royalties are “derived in the active conduct of a trade or business,” i.e., its own business.
§954(c)(2)(A); see Reg. §1.954-2(d).
Problem 1c Matterhorn
Matterhorn (Swiss Co.) receives 200x of dividends and 100x of interest from each of two wholly owned subs - (i) Belgium & (ii) Switzerland.
Dividend and interest income normally constitutes FPHCI under §954(c)(1). Consider the same country related person exception for the Swiss sub. §954(c)(3)(A)(i). But, consider the rule that a payment is not permitted to reduce Subpart F income. The interest from the Swiss sub is deductible & would reduce Subpart F income. §954(c)(3)(B). continued
Problem 1c Matterhorn
Dividends and interest from Belgium sub.
Not same-country, but related companies.
Under Code §954(c)(6) 80 percent of dividends and interest received by Matterhorn is not FPHCI (since attributable to non-Subpart F type income.
This look-thru rule extended through 2020 in the 2015 extenders tax legislation.
Problem 1d Matterhorn
Sales of gold coins having numismatic value.
Coins were purchased for investment. Sale is made to an independent dealer in Switzerland.
This is an investment in property which “does not give rise to any income”.
Gain on this sale is FPHCI. See §954(c)(1)(B)(iii).
Not FPHCI if purchased by a dealer (i.e., inventory) (&, also, not foreign currency gain).
Problem 1e Matterhorn
p.581 Sales Gain re Patents
Sale of all the rights to a group of patents to a related Swiss corporation.
The gain will be FPHCI under §954(c)(1)(B)(i).
No exclusion exists where not an active trade or business income concerning these royalties (where same country related party exception of §954(c)(3)(A)(ii) would otherwise be available).
Problem 1f Matterhorn
Sale of golf balls outside Switzerland.
§954(d) - FBC sales income.
Purchase of golf balls and their resale would constitute FBC sales income here:
(1) Purchase from a related person and (2) sales (to independent distributors) outside Switzerland.
The packaging is not “manufacturing” in Switzerland - which would eliminate FBC sales income treatment.
Problem 1g Matterhorn
Sale of golf balls to independent distributors in Switzerland (assuming the property is for actual use in Switzerland).
No FBC sales income exists here since the goods are sold within Switzerland, i.e., no third country is involved (assuming no subterfuge on the destination of the purchases!).
Remember the rule: For FBC sales income – three countries and two related parties.
Problem 1h Matterhorn
Purchase of golf balls (i) from an unrelated person and also sales (ii) to an unrelated person.
No FBC sales income here since no related person is involved in these purchase or sale transactions.
§954(d)(3) – the related party rule is not invoked in this situation.
Problem 1i Matterhorn
Manufacture by Matterhorn of golf balls in Switzerland occurs with component material purchased from the U.S. parent corporation.
What constitutes “manufacturing” for this purpose? (Fischbein case in later chapter).
§954(d)(1), but minor assembly or repackaging is not sufficient to be manufacturing for this purpose.
Problem 1j Matterhorn
Manufacture for Matterhorn under a “contract manufacturing” arrangement with an unrelated corporation.
The manufacturing is occurring outside Switzerland.
No significant Matterhorn employee oversight of the manufacturing process is occurring and, therefore, income is FBC Sales income.
Problem 1k Matterhorn
Manufacture for Matterhorn under a “contract manufacturing” arrangements with an unrelated corporation. The manufacturing is outside Switzerland.
But, Matterhorn’s employees do engage in product design and quality control in this situation.
Result: The “substantial contribution” test is applicable (assuming supported by the actual facts and circumstances).
Problem 1l Matterhorn
Foreign taxes reduced p.582
Matterhorn (1) purchases from (a) USM 49% owned German corp. & (b) USM 51% owned Dutch corp. and (2) resells outside Switzerland.
Issue concerns what is a “related party” for Subpart F purposes - see §954(d)(3) concerning the definition of a related party. More than 50% of the vote or value is required.
Germ. Co. is not related & no FBC sales income. Dutch is related and FBC sales income.
Note: Foreign country tax reduction (& U.S. tax increase) resulting in this transaction.
Problem 1m Matterhorn
Definition of “related”? P.582
Matterhorn (Swiss Corp) purchases from a
50 percent owned (vote & value) German corporation.
The German corporation would be related (to Matterhorn) and the sales income would be foreign base company sales income.
See §958(b) & §318(a)(3)(C) re “related party” attribution of all Matterhorn stock from USM to German corp.
Problem 1n Matterhorn
Matterhorn acts as a sales agent, receiving a commission for services, rather than buying and reselling.
Tax results are the same as above: inclusion since (in addition to purchase/resale arrangements) the FBC sales income definition also contemplates sales commission income.
Problem 1o Matterhorn
Services are rendered by Matterhorn to independent customers outside Switzerland:
- not for or on behalf of a related party
- although performed outside the country where Matterhorn was organized.
Not FBC services income – since not performed for a related party. See §954(e).
Problem 1p Matterhorn
Services are rendered for a brother-sister corp. The parties are “related.” See §954(d)(3).
But, the services are performed in the country (Switzerland) where Matterhorn is organized.
Consequently, not FBC services income (the geographic element of the FBC services income test is not met).
Problem 1q Matterhorn
Only 4% of the income is FBC services income and, therefore, all this income is within the protection of the “de minimis” rule (i.e., no FBC income taint arises).
This is a gross income test. See §954(b)(3)(A).
Planning: generate a large amount of active operation gross income (20 mil.) to protect a limited (no more than 5%) passive income amount (up to 1 mil.).
Problem 1r Matterhorn
Full Inclusion Rule p.583
75 percent of the Matterhorn income is foreign base company sales income.
Therefore, all the Matterhorn income (including the 25% non-tainted income) is treated as “foreign base company sales income” under the §954(b)(3)(B) “full inclusion” (more than 70% FBC income) rule.
Problem 1s Matterhorn
High Foreign Tax Rule p.583
Services income is subject to an “effective rate” of Swiss and other foreign income tax of 32 percent.
Problem 1q facts: No FBC income.
Problem 1r facts: Services income is excluded from FBC services income if the proper high-taxed income election is made. Effective tax rate is to be greater than 31.5% (90% of 35%) to enable this treatment.
Problem 1t Matterhorn
Partnership & p.583
Matterhorn as a 60% partner in a Belgium partnership. This partnership receives interest income that would be FPHCI if received directly by Matterhorn.
Make an income classification decision concerning the income as if the income is being received directly by the partner? Is an entity or aggregate analysis applicable? See Reg. §1.954-1(g)(1) & Brown case (Tax Court, not 8th Circuit), to apply an “aggregate” approach.
Problem 2 p.583
Sale by a US seller to its 100% owned Swiss sub of installment notes received by the US seller.
Price paid is less than the unpaid balance on the obligations. Swiss sub either (1) collects on the debt or (2) sells it at profit to an unrelated party.
Income (when) realized is (1) related party factoring income & treated as interest income (§864(d)(1)) and, therefore, (2) FPHCI (assuming not active banking income to Matterhorn & §954(h) is applicable).
Problem 3 p. 583
Loan to Parent’s Customers
Matterhorn loans funds directly to unrelated foreign customers who use these borrowed funds to buy USM goods.
The income from the loans (i) would be interest income, and (ii) therefore, would be FPHC income. §864(d)(6).
Also, a §956 problem (investment in U.S. property, discussed later).
Problem 4 p.583
Sale of good or service?
Eastlaw (US) on-line legal research database.
Foreign Base Co. (sub) purchases access to database & sells access to unrelated customers in other foreign countries.
Foreign base company income to sub?
1) Is this sales income (sale of goods)? - then FBC sales income under §954(d).
2) Is this services income? Not FBC services income (not performed for a related person?) – unless the “substantial assistance” rule applies.
Problem 5 p.583
In-Country Services (Sales)?
US Corp sells computers on Internet.
Tax haven sub processes customer orders and arranges delivery into third countries.
Tax haven sub receives a fee for its services.
Foreign base company services income? Not if services are rendered in tax haven; if performed outside the tax haven, FBC services income. §954(e).
But, what if §954(d) FBC sales income (sale of personal property on behalf of a related person)? Doubtful analysis.
Earnings Invested in U.S. Property - §956 p.584
Concept of deemed repatriation of foreign earnings (any income type - not limited to “tax-haven” type income realized by CFC) when invested in U.S. property.
For determining this amount “invested in U.S. property” – i.e., the lesser of:
1) the current year investment, or
2) the shareholder’s pro rata share of "applicable earnings".
Limit of the required inclusion is the adjusted tax basis of the property acquired (less debt).
§956 Ancillary Effects
2nd gross income inclusion is avoided if prior Subpart F inclusion has occurred - §959.
§960 provides for foreign tax credit availability if income inclusion is required under §951(a)(1)(B).
Exploiting §956 applicability: Cause a constructive dividend under §956 –
1) FTC is available for U.S. income tax purposes.
2) No foreign withholding tax at source on the deemed dividend (which occurs for U.S. tax purposes).
Result: possibly reducing the foreign tax rate.
Defining Investment in “U.S. Property” p.587
1) Tangible property located in the United States - §956(c)(1)(A).
2) Stock of a U.S. corporation, if related (25% ownership connection). §956(c)(1)(B).
3) Debt obligations of related U.S. persons.
§956(c)(1)(C) (as of end of each quarter)
Special exception in 2009-2010 – why? Next slide.
4) Rights to use U.S. patents, know-how, copyrights or similar U.S. use property.
Short-term Loans to Related Party p.588
Certain short-term loans disregarded.
A series of short-term loans might be integrated for §956 purposes.
Notice 2008-91: “60-180” obligation.
repay loan with 59 days & total loan days cannot exceed 180 days. Two year rule.
Notice 2009-10: extend to 3 years availability
Notice 2010-12: rule applies through 2010.
Anti-abuse rule: e.g., dropping cash into CFC sub to make loan & sub has no E&P.
Exclusions from “United States Property” §956(c)(2)
Examples (not U.S. property for §956):
1) U.S. Treasury obligations and bank deposits.
But, consider The Limited 6th Cir. case (p. 588) situation of purchase of CDs from related (credit card) bank by CFC. Held: bank deposits. But, see §956(c)(2)(A) (2004), as revised, re a “real bank.”
2) Stock issued by an unrelated corporation.
3) Transportation equipment outside U.S.
Pledges & Guarantees
Indirect Repatriations p.590
See §956(d) concerning deemed repatriation treatment for pledges & guarantees.
Possible alternative situations triggering §956(d):
1) CFC guarantees the financial obligation of the
U.S. corp. (or pledges its assets as collateral).
2) U.S. corporation pledges the stock of the CFC
to secure financing to U.S. corporation.
Ludwig case p.590
Pledging Stock of CFC
Stock of CFC (Oceanic, a Panamanian corporation) was pledged by Ludwig as collateral for a loan to enable the Union Oil stock acquisition by Ludwig.
Holding: CFC (Oceanic) was not a guarantor of Ludwig’s obligation. No undertakings by the CFC to pay Ludwig’s debt to the bank. The remedy is acquisition and then sale of the pledged stock (not Oceanic’s liquidation).
Note Rev. Rul. 76-125 (p. 594) as issued by IRS during pendency of this litigation.
Sequels to the Ludwig case
Reg. §1.956-2(c)(2) concerning indirect pledges. Why a 66 2/3% requirement (and accompanying “negative covenants”)?
What authority for the IRS to promulgate this §956 regulation?
What result if back-to-back (or parallel) arrangements for (1) foreign sub deposit and (2) loan to U.S. parent arranged with an independent bank?
What if two loans made with pledges of 35% and 65% of the stock of the CFC to two separate (unrelated) lenders?
Indirect Ownership of U.S. Property (thru Partnership)
Rev. Rul. 90-112 p.601
CFC is a minority partner in a foreign partnership which owns real property in U.S.
The partnership is foreign country based.
Code §956(c)(1) includes indirectly owned property as being a U.S. real property interest within the concept of U.S. property.
Use of an “aggregate” partnership approach is deemed appropriate. Should this be a permissible U.S. tax planning device?
What about a Pledge of a U.S. LLC Interest?
(1) U.S. parent corp. pledges its interest in a U.S. LLC, and
(2) the U.S. LLC owns stock in a CFC (and an interest in a U.S. business).
Should the LLC be treated as disregarded for applicability of §956? Probably.
Further §956 Questions
1) What if a pledge of an asset worth less than the amount of the loan? Inclusion to the amount of the loan or the lesser value of asset?
2) Guarantee by the CFC, but the value of CFC is less than the loan?
3) Pledge of partnership interest when the partnership holds CFC stock?
4) Loan by CFC to foreign partnership owner where a US partner holds majority/minority interest in the partnership?
Problem 1 p.602
Delft, N.V., a CFC
Dutch corporation owned by U.S. corp; Dutch
corp. is engaged in manufacturing.
Assume no FBC income. Dutch corp's surplus
earnings are loaned to U.S. parent corporation.
1) Loan to a related person - investment in U.S. property under §951(a)(1)(B) and §956.
2) Similar treatment for purchase of U.S. patent.
3) Not such treatment for an investment in stock of
an unrelated NYSE listed company.
Problem 2 p.603
Sale or Loan to CFC
1) Amount paid by Matterhorn from its earnings to USM is an investment in U.S. property to the extent of the U.S. obligations. §956(c)(3) and §864(d).
2) Loan to unrelated foreign customers of USM is not an investment in U.S. property since not acquiring a trade or business receivable from a related U.S. person. §956(c)(3)(A).
Previously Taxed Income and Ordering Rules p.603
Three levels of possible income recognition:
1) Subpart F
2) §956 - investment in U.S. property
3) Actual dividend distribution.
See §959(c) re order of distributions
(§956 income first, then Subpart F income).
If previously taxed, nontaxable distributions not carrying out foreign tax credits.
Previously Taxed Income and Ordering Rules, cont.
Consider an upstream dividend from a 2nd tier
subsidiary (CFC) to a first tier subsidiary (CFC).
Is this Subpart F (FPHC) income to the first tier
Yes, unless previously included in shareholder
income under §951(a). See §959(b). P.604
Treatment of Stock Sale Gain as Ordinary Income
Gain realized on the disposition of the CFC stock investment is (partly) treated as dividend income.
§1248 transforms cap gain into a dividend distribution to the extent of a 10% shareholder's allocable E&P, limited to amount of stock gain.
Is §1248 treatment preferred? Yes, for a corporate shareholder, since the deemed paid FTC is available. See Reg. §1.1248-1(d).
And, no foreign withholding tax if a stock sale (rather than if an actual dividend distribution)?
Avoiding §1248 by an individual – hold until death. continued
Treatment of Stock Sale Gain as Ordinary Income
§1248(b) limits the tax attributable to the deemed dividend.
Deemed dividend under §1248 does not reduce the CFC’s E&P.
But, §959(e) treats §1248 deemed dividend as previously taxed E&P and, therefore, not subject to tax on a later distribution.
E&P is reduced when a subsequent nontaxable distribution is actually made. §959(e).
Previously Taxed Income and Ordering Rules
(1) a sale of CFC stock, and
(2) CFC income previously included as Subpart F income in seller’s income (or includible under §956).
Inclusion in gross income again? No, §959(a).
Problem - §1248 p.608
Corp. Partial Stock Sale
Corp. shareholder sells 20% interest in FC for 300x; basis is 50x. 250x LT cap gain? No.
Prior 36x is prior Subpart F income (20% of 180k, after tax net earnings, i.e., 200x less 20x tax).
No prior actual dividends assumed made.
Stock sale gain is 300k less 50x basis = 250x.
§1248 amount: 1.2 mil less 120x tax = 1.08 mil. earnings times 20% = 216x less 36x prior deemed distribution = (i) 180x ordinary income (§1248), and (ii) 70x cap gain & FTC is available.
Problem - §1248 p.608
Individual Stock Sale
Individual sells 100% interest in FC for 300k; basis is 50x. 250x cap gain? No.
§1248 gain is 180x. Calculation: 1.2 mil earnings less 120x taxes = 1.08 mil. earnings times 20% (her interest sold) = 216x less 36x prior deemed distribution = (i) 180x ordinary income (§1248) and (ii) 70x LT cap gain (& §1(h) capital gain).
No indirect credit (to individual) under §§ 960 & 902, assuming no § 962 election for her income taxation as a corporation.
Sale or Exchange of a Patent to a CFC p.610
§1249 transforms capital gain into ordinary income when a patent is sold to a foreign corporation by a U.S. transferor which owns more than 50% of the voting power of the purchaser foreign corporation.
Objective: To preclude capital gains sales to the CFC which then sublicenses (receiving ordinary, deferred income; but FPHC income?)
Cf., §367(d) re contribution of intangibles to foreign corporation.
Note §174 re prior R&D deduction.
PFIC - Passive Foreign Investment Co. p.611
PFIC provisions - §§1291-1298
Applicable to all (no minimum) U.S. shareholders.
Choices of U.S. taxation for U.S. shareholders:
1) Election for current inclusion (QEF), possible deferral of tax payment, subject to a later interest charge.
2) Mark to market election (current income).
3) Not QEF - tax on (i) distribution from the corp. or (ii) sale of shares (plus interest charge).
Definition of a PFIC
1) 75% of Corp’s gross income is passive income (an income test), i.e., income that would be foreign personal holding company income),
2) 50% of its assets are held for the production of
passive income (the asset test), i.e., based on value, subject to election - except for public company - to use tax basis rather than asset FMV; plus mandatory requirement for non-public CFCs to use tax basis. §1297(a). Year-by-year test.
Special PFIC Status Rules
Active banking business exception. §1297(b)(2)(A).
Interest, dividend, rent and royalty from a related person exception (sourced from business income received by the related party). §1297(b)(2)(C).
Leased properties treated as assets held by PFIC - as part of the active business assets. §1298(d).
R&D expenses – see p.614.
Look thru rule for categorizing income from 25 percent or more owned subsidiaries - §1297(c).
Purpose: To enable foreign corps having active subs from being treated as PFICs.
Dividends and interest received from this subsidiary are eliminated from income for purposes of the income test.
Stock of this subsidiary is eliminated for purposes of the asset test. §1297(c).
The Starting or Changing Business Rules p.616
Special rules apply for:
1) the start-up year for an active business operation, §1298(b)(2), and
2) corporations changing from one active businesses to another active business.
The corporation is not treated as a PFIC (even though at that time its assets might consist of mostly cash). §1298(b)(3).
Subpart F – PFIC Overlap
If both rules would apply, the Subpart F rules take priority over PFIC rules. §1297(e).
This enables deferral without an interest charge accruing (for the non-Subpart F income) and PFIC rules do not apply.
Non “U.S. shareholders” (e.g., less than 10% ownership) are subject to the PFIC rules.
Excess Distribution from or Disposition of PFIC p.618
If PFIC is not a QEF, an interest charge is imposed
on the value of the tax deferral at the time of:
1) the disposition of the PFIC stock at a gain,
2) the receipt of an "excess distribution” from the
PFIC (i.e., above 125% of prior dividend
distribution level). §1291(a)(1) & (2).
PFIC distribution to a U.S. corp. does enable a
deemed paid FTC. See §1291(g). But, has any
foreign income tax actually been paid?
Qualified Electing Fund
Election by each shareholder
- not by the PFIC (i.e., the entity).
Information to come from the corporation.
Current inclusion in gross income of the shareholder’s prorata share of the PFIC's earnings and profits. §1293.
Can divide into the prorata shares of fund's:
(i) net capital gains, and
(ii) ordinary income. §1293(a)(1).
QEF & Tax Deferral
When No Distribution p.620
§1294 does permit the PFIC – QEF election shareholder to elect to defer the tax amount if no actual distribution has occurred.
No deferral permitted if §951 applies.
Deferral is subject to an interest charge.
Loan to a shareholder is treated as a distribution. §1294(f).
Available for “marketable stock” of PFIC.
§1296 - U.S. shareholder includes in (ordinary) income the excess of fair market value of the PFIC stock at close of year over basis (as previously adjusted).
Treated as ordinary income.
What if a current year loss? Permitted to the extent of the “unreversed inclusions.” Treated as ordinary loss. §1296(a)(2).
Problem 1 p.626
PFIC & CFC Comparison
PFIC provisions apply even if no CFC status. Applies even to less than 10 percent ownership by U.S. shareholder in PFIC.
CFC applies to more income types. PFIC only applies to passive income.
PFIC ends benefits of deferral for all income of the PFIC, not limited to specified types of gross income. PFIC has a more complete termination of the possible deferral of income recognition.
Problem 2a p.26
Tax Avoidance is a CFC under §957(a):
Two “United States shareholders” hold more than
1) US Parent owns 40 shares, &
2) Sam (US citizen) owns 12 shares; no attribution to Sam from NRA sister - §958(b)(1).
Problem 2b p.627
Tax Avoidance is a PFIC under §1297(a):
Meets the 50% passive assets test (based on tax basis ratios).
§1297(a)(2) & §1297(f)(2)(A).
Problem 2c p.627
U.S. shareholders are U.S. Parent (40%) and Sam (12%).
They have constructive dividends for their pro rata shares of Tax Avoidance’s $6.5 million Subpart F income:
1) $5.5 million dividends & capital gains (§954(c)(1)(A) & (B)), and
2) $1 million FBC sales income (§954(d)).
Problem 2d p.627
PFIC provisions apply without regard to the amount
But, not treated as a PFIC for those persons treated
as U.S. shareholders of a CFC. §1297(e).
This is applicable to U.S. Parent & Sam.
1) Alexandra (indirect ownership), (2) USA, Inc.,
and (3) John are subject to the PFIC rules. Options for them: interest charge or QEF. No “mark-to-market” option.
Problem 2e p.627
Regularly Traded Stock
Stock would constitute “marketable stock” within the meaning of §1296(e).
Those shareholders who are subject to the PFIC rules (Alexandra, USA, Inc. and John) could make the “mark to market” election under §1296.
Information returns (IRS Form 5471):
§6046 – information on formation of the foreign corporation.
§6038 – annual information by every person who is in control of a foreign corporation.
Policy Options p.632
Options for Foreign Income Taxation:
1. Current full inclusion in U.S. gross income.
2. Subpart F Structure
3. Foreign corporation dividend exemption.
JCT 2005 Options Paper, p. 650.
Bush 2005 Tax Panel Recommendations
2000 U.S. Treasury Study, p.633.
2015 JCT Report on Cross-Border Taxation.