In brief

On 23 July 2020, the Treasury Department (“Treasury”) and the Internal Revenue Service (“IRS”) published final regulations under Section 951A providing guidance with respect to the high-tax exception, which excepts certain ‘high-taxed’ income from being otherwise taxed as “Global Intangible Low-Tax Income” (“GILTI”). The final regulations maintain the same foreign tax rate threshold to be eligible for a high-taxed income exclusion while simultaneously modifying operational rules that may affect a U.S. individual’s decision to pursue the exclusion. In conjunction with these final regulations, Treasury and the IRS issued new proposed regulations conforming aspects of the Subpart F high-tax exception with the newly finalized GILTI high-tax exception, and providing for a single high-tax exception election under Section 954(b)(4).


Additionally, on 9 July 2020, the Treasury and the IRS released final regulations under Section 250 related to the deductions offsetting income that is taxed as “Foreign Derived Intangible Income” (“FDII”). These regulations finalize proposed regulations, which were originally published on 6 March 2019, and apply to years beginning on or after 1 January 2021. The final regulations retain the basic approach and structure of the proposed regulations, with certain revisions.

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