The IRS recently released proposed regulations that provide Treasury guidance with regards to Global Intangible Low Taxed Income ("GILTI"). For U.S. companies with foreign operations, it is vital that a valuation of the company includes a liability associated with a GILTI tax where appropriate. As the GILTI tax treats certain non-U.S. income as taxable income in the U.S., not capturing the GITLI tax liability would result in an overvaluation of the company given the GILTI tax increases the overall effective tax rate of the company.
Just after 4 p.m. on Thursday, September 13, 2018, the IRS released its second set of proposed international regulations under the Tax Cuts and Jobs Act of 2017 (TCJA). These proposed regulations provide the first piece of Treasury guidance under Code Section 951A (Global Intangible Low Taxed Income), which brings into effect the so-called "GILTI" regime. To put it simply, GILTI is a mechanism to tax U.S. shareholders of controlled foreign corporations (CFCs), on their share of CFC income over and above a 10 percent return on the tax basis of tangible depreciable assets (subject to certain exceptions).