The High-Taxed Exception and E&P Limitation to Subpart F Income topical imageSubpart F has long included exceptions to subpart F income for income of controlled foreign corporations (“CFCs”) subject to a relatively high rate of foreign tax and limited subpart F inclusions to the current earnings and profits (“E&P”) of the CFC. After the Tax Cuts and Jobs Act (the “Act” or the “TCJA”), most income of CFCs that is not subpart F income will be subject to current U.S. tax as global intangible low-taxed income (“GILTI”). GILTI incorporates the high-taxed exception, but not the E&P limitation or qualified deficit rules. Subpart F income, but not GILTI, may be reduced by certain prior year E&P deficits in accumulated E&P of CFCs attributable to same activities. Read more to learn how these rules may apply following the Act.

This article is reprinted with the publisher’s permission from the International Tax Journal, a bi-monthly journal published by Wolters Kluwer. Copying or distribution without the publisher’s permission is prohibited. Learn more at


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