The IRS put forth final regulations related to deductions for taxes paid on controlled foreign corporations. The regulations specify that U.S. shareholders of these corporations benefit from the alterations to rules on deductions.
The new regulations provide a significant deduction to foreign derived intangible income tax liabilities. The specific deduction amount is 37.5%. Furthermore, there now exists a 50% deduction that may be offset against global intangible low-taxed income, or GILTI. These rules intend to benefit U.S. shareholders of controlled foreign corporations.
There is a notable component to these new regulations: They are retroactive in relation to the GILTI. GILTI rules went into effect in 2018, the year the new regulations are retroactive. On the surface, the assumption would be that taxpayers may file amended returns for 2018 to take advantage of the new rule. Such an outcome might not be the case, though. The proposed regulations did not appear until early 2019, which would decrease the chances of many amended 2018 returns landing at IRS service stations.
An attorney may provide a client with detailed explanations of domestic and foreign tax law. If the taxpayer runs into compliance issues, then he or she might ask an attorney for representation. An attorney may represent a client in tax court, draw up appeals and help in other ways.
The attorney might review an initial tax return, an amended one and any accompanying schedules. The attorney may also point out any legality concerns and make recommendations to avoid problems.