GILTI Retroactive Election

In July of last year, final regulations came out pertaining to the global intangible low-taxed income (GILTI) inclusion under Section 951A, providing a potential opportunity for taxpayers to amend prior year returns to claim the new high-tax exclusion for GILTI. Fran Randall, Partner in DHG’s international tax practice, will discuss how some may be able to file an election on an amended federal income tax return to minimize their GILTI exposure and see tax savings in 2021.

Key Takeaways:
  • Regulations under Section 951A and proposed regulations under Section 954(b)(4) represent a significant opportunity for calendar year taxpayers who were subject to a GILTI inclusion for the 2018 tax year
  • Possibility to minimize GILTI exposure and glean significant tax savings
  • Taxpayers should consider the impact of the GILTI high tax exclusion and, if applicable, file an election on an amended federal income tax return no later than Apr. 15, 2021

Transcript

Fran Randall, Partner in DHG’s international tax practice

As you may recall, the Tax Cuts and Jobs Act enacted on December 22nd, 2017 contained significant changes to the way US multinationals foreign profits are taxed. Introducing an annual minimum tax on global intangible, low taxed income, GILTI. Under the GILTI regime, US shareholders of controlled foreign corporations, CFCs, can be subject to an annual income inclusion on a portion of the CFCs net tested income. The 2019 proposed GILTI regulations provided an expanded GILTI high tax exclusion election for CFCs, which excluded certain high taxed, tested income from the CFCs GILTI calculation. And the final GILTI regulations released on July the 20th, 2020, treasury provided tax payers an opportunity to amend prior year tax returns to claim the high tax exclusion, making the GILTI high tax exclusion election retroactive, if made on an amended federal income tax return filed within two years from the unextended due date of the original federal income tax return in which the GILTI inclusion was claimed.

This is a significant opportunity for taxpayers who were subject to GILTI and wishing to minimize the GILTI exposure. And it may also result in significant tax savings. For calendar year taxpayers, the original filing due date, and two year period run on April 15th, 2021. This means that if a calendar year taxpayer would like to take advantage of the opportunity to minimize their GILTI exposure claimed on a 2018 federal income tax return, they should consider the impact of a new GILTI high tax exclusion election and plan to amend their 2018 federal income tax return by no later than April 15th, 2021. If you have any questions about making the high tax exclusion election and the GILTI calculation, please contact any member of the DHG international tax team.

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