Baker McKenzie's North America Tax Practice Group has prepared a Tax News and Developments Client Alert on the temporary regulations under sections 245A and 954(c)(6) that Treasury and the IRS released on June 14, 2019. The temporary regulations partially deny the section 245A dividends-received deduction to repatriated earnings that were generated by dispositions of property from a specified foreign corporation to a related person during the period after December 31, 2017, but before the effective date of the section 951A GILTI regime for fiscal year taxpayers. As applicable to both fiscal year and calendar year taxpayers, the regulations also wholly or partially deny the dividends-received deduction to dividends arising from a reduction of a controlling U.S. shareholder's ownership in a controlled foreign corporation that could result in a reduction of subpart F or GILTI inclusions. The temporary regulations additionally extend such provisions to dividends from a lower-tier controlled foreign corporation to an upper-tier controlled foreign corporation by limiting the exception to subpart F under section 954(c)(6).
The temporary regulations apply to dividends received after December 31, 2017. Our Client Alert provides a discussion of the temporary regulations and the potential invalidity of same.
Please do not hesitate to contact the indicated authors of the alert or any member of our North America Tax Practice Group if you would like additional information or for further discussion of the issues addressed.