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April 7, 2020
2020-9014

BREAKING TAX NEWS | New anti-abuse rule targeting certain "GILTI gap period" transactions included in proposed regulations on hybrid mismatch, dual consolidated loss, conduit financing and GILTI rules

The proposed regulations (REG-106013-19) released April 7 under IRC Section 951A include a new rule that would effectively deny deductions for payments made directly or indirectly by a controlled foreign corporation (CFC) during the period from January 1, 2018 through the effective date of the global intangible low-taxed income (GILTI) provisions for the recipient CFC (the GILTI "disqualified period"). The proposed rule is intended to apply if (1) a payment is made during the disqualified period that would have given rise to tested income in the hands of the recipient CFC if the GILTI provisions had been effective for the recipient CFC, and (2) a deduction is taken in a later period when economic performance with respect to the earlier payment occurs.

The proposed regulations would apply to tax years of foreign corporations ending on or after the date of filing in the Federal Register and to US shareholders' tax years in which or with which such years end.

A forthcoming Tax Alert on the final and proposed regulations under IRC Sections 245A(e) and 267A will include discussion of this new rule.

 

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