On June 14, 2019, the Treasury Department published final regulations (Final Regulations) on global intangible low-taxed income (GILTI) under IRC Section 951A. The Final Regulations are generally consistent with the proposed regulations published on September 13, 2018, but make certain modifications.

Treasury also proposed new GILTI regulations (New Proposed Regulations) under IRC Sections 951(b) and 951A, along with the Final Regulations. The New Proposed Regulations include an election that would apply an elective high-tax exception to GILTI when the tax imposed on a tentative net tested income item exceeds an 18.9% corporate tax rate. The applicability of the high-tax exception would be tested at the level of a single qualified business unit (QBU) and would apply to all CFCs controlled by the same domestic shareholders.

Other notable provisions and changes made by Treasury in the new GILTI regulations include:

• Treating a US partnership generally as an aggregate for GILTI purposes (and similarly providing rules under the New Proposed Regulations that would treat a US partnership generally as an aggregate for subpart F inclusion purposes)
• Narrowing the scope of the anti-abuse rule under Proposed Treas. Reg. Section 1.951-1(e)(6), which applies when determining a US shareholder's pro rata share of subpart F income and tested items for determining GILTI
• Revising the anti-abuse rule for basis step-up transactions that occurred from January 1, 2018 through the effective date of GILTI (a Gap Period Basis Step Up) to provide that a deduction or loss attributable to disqualified basis is not properly allocable to gross tested income, gross subpart F income or gross income that is ECI
• Providing an election to eliminate disqualified basis resulting from a Gap Period Basis Step Up for all US tax purposes (and thus avoid losing foreign tax credits under Section 901(m))
• Abandoning the proposed rules that would require downward adjustments to the stock basis of a tested loss CFC at the time the tested loss CFC's stock is disposed
• Finalizing the rule to deny the treatment of Section 78 dividends from fiscal-year corporations as dividends for purposes of Section 245A (absent this rule, US shareholders owning fiscal-year foreign corporations might claim a Section 245A deduction for Section 78 dividends attributable to Section 965 inclusions in 2018)

A more detailed Tax Alert is forthcoming, and a webcast is scheduled for Friday, June 21, 2019, from 1 p.m. — 2:30 p.m. EST. An invitation will be sent shortly.