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IRS Proposes Extra Controlled Foreign Company Rules

by Mike Godfrey, Tax-News.com, Washington

05 June 2019


The United States Internal Revenue Service has proposed rules regarding the attribution of ownership of stock or other interests for purposes of determining whether a person is a related person with respect to a controlled foreign corporation (CFC) under section 954(d)(3)

The proposed rule was published in the Federal Register on May 20, 2018.

In addition, the proposed regulations provide rules for determining whether a CFC is considered to derive rents in the active conduct of a trade or business for purposes of computing foreign personal holding company income (FPHCI). The regulations would affect United States persons with direct or indirect ownership interests in certain foreign corporations.

Written or electronic comments and requests for a public hearing must be received by July 19, 2019.

Section 954(a) defines foreign base company income (FBCI), which is a category of subpart F income. Subpart F income generally is income earned by a CFC that is taken into account in computing the amount that a US shareholder of the CFC must include in income under section 951(a)(1)(A). FBCI includes foreign personal holding company income, as well as certain types of income from sales and services. The determination of whether certain types of sales and services income constitute FBCI depends, in part, on whether the income is earned from a transaction that involves a related person.

TAGS: business | holding company | interest | transfer pricing | United States | regulation | trade

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