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Guidance on an international tax reform provision dealing with global intangible low-taxed income (GILTI) will be a strong focus for the Treasury Department, a senior official said.
“GILTI is a priority” after additional guidance on the new requirement that U.S. multinationals pay a one-time tax on earnings and profits they bring back to the U.S., Brenda Zent, special adviser in Treasury’s Office of International Tax Counsel, said Feb. 9 at a meeting of the American Bar Association Section of Taxation in San Diego.
Zent said Treasury’s hope is to get GILTI guidance out by the end of the year.
She said guidance to implement the controversial base erosion and anti-abuse tax is also a priority and there is the same hope for calendar-year guidance.
Zent said one option is proposing regulations that would be treated as effective back to Dec. 22, the enactment date of the 2017 tax act ( Pub. L. No. 115-97), but that the department is still considering a broad range of options.
In the area of repatriation, both Zent and Jason Yen, an attorney-adviser in the international tax counsel’s office, answered a question many multinationals have been asking about the repatriation tax imposed by new tax code Section 965.
They said Section 965 is intended to apply under all circumstances to consolidated groups of companies. That means in calculating income subject to the tax, those companies will be treated as one entity under all circumstances, Zent and Yen said.
“We did mean for consolidated return language to apply for all purposes of 965,” Zent said during a panel on outbound international tax issues.
Treasury also is studying what companies will have to include as part of their “cash position” when calculating the tax on their earnings and profits, Zent said. The department is keeping an “open mind” about this, she said.
This is a critical question because under the statute, when companies bring foreign cash and cash equivalents home, those assets are subject to a 15.5 percent tax. Illiquid assets only face an 8 percent tax.
Zent said the government is weighing this carefully because there are “so many sympathetic fact patterns” and so many open questions as to how to treat cash. The question is “Where do you draw the line?”
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