Expansion of Subpart F under the Tax Reform Act

By David G. Noren, Elizabeth Chao and Lowell D. Yoder on February 8, 2018

Under Subpart F, certain types of income and investments of earnings of a foreign corporation controlled by US shareholders (controlled foreign corporation, or CFC) are deemed distributed to the US shareholders and subject to current taxation. The recent tax reform legislation (Public Law No. 115-97) increased the amount of CFC income currently taxable to US shareholders, and expanded the CFC ownership rules, which means more foreign corporations are treated as CFCs.

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Tags: active rents, business exception, CFC, CFC distributions, controlled foreign corporation, dividends, domestic corporation, earnings, foreign corporation, foreign tax credits, GILTI, global intangible low-taxed income, high-tax exception, income, interest, investments, net investment, pro rata basis, Public Law No. 115-97, qualified business asset investment, rents, royalties, section 951A, section 962, Subpart F, tax purposes, tax treaty, US shareholders

David G. Noren
David G. Noren focuses his practice on international tax planning for multinational companies. David advises clients on a wide range of "outbound" and "inbound" issues, with a particular focus on the subpart F anti-deferral rules, the application of bilateral income tax treaties, and the treatment of cross-border flows of services and intellectual property rights under transfer pricing and other rules. Read David G. Noren's full bio.

Elizabeth Chao
Elizabeth Chao focuses her practice on US and international tax matters. Read Elizabeth Chao's full bio.

Lowell D. Yoder
Lowell D. Yoder focuses his practice on cross-border mergers and acquisitions, global tax planning and international tax controversies, representing high-tech, pharmaceutical, e-commerce, financial, consumer and industrial companies. He advises on tax-efficient structuring of cross-border acquisitions, dispositions, financings, internal reorganizations and joint ventures, as well as tax-beneficial planning for intangible holding companies, global supply chains and multi-jurisdictional service arrangements. Lowell also represents clients before the Internal Revenue Service (IRS), handling audits and obtaining tax rulings. He works with an extensive network of lawyers worldwide, developing tax-favorable transactional and operational cross-border structures. Lowell is the global head of McDermott's Tax Practice. Read Lowell Yoder's full bio.

Expansion of Subpart F under the Tax Reform Act

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