International Tax Reform for US Individuals and Pass-through Entities

The recent Tax Cuts and Jobs Act has revolutionized the U.S. taxation of international income earned from outbound investment and business operations. While enacted to rationalize the taxation of U.S.-based multinational corporations, these rules have an even more dramatic effect on non-corporate U.S. shareholders of controlled foreign corporations, such as individuals, trusts, S corporations and partnerships. Under the new regime, such non-corporate U.S. shareholders will feel the “bite” of a new tax on “global intangible low-taxed income”—known as GILTI—through current taxation at ordinary rates of a large portion of many CFCs' business income. As these changes begin to be digested, U.S. owners of closely held CFCs may wish to consider various restructuring to mitigate the adverse tax effects of GILTI.

These slides, which were originally presented as part of a Strafford group webinar, provide an overview of GILTI as applied to a non-corporate U.S. shareholder, interaction with Section 962, and review of other international tax reform changes relevant to individual shareholders in foreign businesses.