IRS Issues Final Regs for GILTI and Proposed Regs for the Subpart F Income High Tax Exception

On July 20, 2020, final regulations (Final Regulations) were released by the United States (U.S.) Department of Treasury (Treasury) related to the global intangible low-taxed income (GILTI) inclusion under Section 951A (Treasury Decision 9902), which was originally enacted under Tax Cuts and Jobs Act, Public Law 115-97 on Dec. 22, 2017, alongside new proposed regulations under Section 954(b)(4) (Proposed Regulations) related to high-tax subpart F income.

A notable development in the Final Regulations was that taxpayers are provided an opportunity to amend prior year tax returns to claim this new high tax exclusion for GILTI if they did so on an amended federal income tax return filed within 24 months of the unextended due date of the original federal income tax return in which such GILTI inclusion was incurred. This is a significant opportunity for calendar year taxpayers who were subject to a GILTI inclusion for the 2018 tax year (i.e. tax year ending December 31, 2018) wishing to minimize their GILTI exposure and may result in significant tax savings. Given the 24 month period prescribed under the Regulations, taxpayers should consider the impact of this new GILTI high tax exclusion and if necessary, file an election on an amended federal income tax return by no later than April 15, 2021.

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