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Other international tax changes – Tax Cuts and Jobs Act – P.L. 115-97

May 07, 2018

A. 100% dividend received deduction, Section 245(A) applies to foreign-source dividends from specified foreign corporations after December 31, 2017:

  1. Applicable only to domestic C corporations and thus not applicable to S corporations or individual indirect or direct individual shareholders
  2. One-year holding period requirement
  3. No FTC on which the dividend received deduction is applicable
  4. Applicable to Section 1248 amounts
  5. U.S. C corporations have incentive to incorporate foreign corporate subsidiaries

B. Section 958(b) amended to include downward attribution from a foreign person to a related U.S. person.

C. Section 951(b) expanded to include any U.S. person who owns 10% or more of the total value of shares of all classes of stock of a foreign corporation.

D. Active trade or business exception eliminated for cross-border transfers of property in nonrecognition transactions subject to Section 367(a). Thus, the transaction results in an outbound taxable gain of appreciated property.

E. Sourcing under Section 863(b) amended to source where manufactured instead of 50% where manufactured and 50% where titled transferred, thus significantly reducing foreign-source income for purposes of the foreign tax limitation. Also, the checking-the-box strategy for a U.S. manufacturing corporation selling to its FDE is no longer a proven strategy.