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B-332384 1 (2020-08-06)

handle is hein.gao/gaobaebqa0001 and id is 1 raw text is: cAO U.S. GOVERNMENT ACCOUNTABILITY OFFICE 441 G St. N.W. Washington, DC 20548 B-332384 August 6, 2020 The Honorable Chuck Grassley Chairman The Honorable Ron Wyden Ranking Member Committee on Finance United States Senate The Honorable Richard Neal Chairman The Honorable Kevin Brady Ranking Member Committee on Ways and Means House of Representatives Subject: Department of the Treasury, Internal Revenue Service: Guidance Under Sections 951A and 954 Regarding Income Subject to a High Rate of Foreign Tax Pursuant to section 801 (a)(2)(A) of title 5, United States Code, this is our report on a major rule promulgated by the Department of the Treasury, Internal Revenue Service (IRS) entitled Guidance Under Sections 951A and 954 Regarding Income Subject to a High Rate of Foreign Tax (RIN: 1545-BP15). We received the rule on July 21, 2020. It was published in the Federal Register as final regulations on July 23, 2020. 85 Fed. Reg. 44620. The effective date of the rule is September 21, 2020. This final rule relates to changes made by the Tax Cuts and Jobs Act, Pub. L. No. 115-97, 131 Stat. 2054 (Dec. 22, 2017). IRS stated that the rule provides that the global intangible low-taxed income (GILTI) high-tax exclusion in section 951A(c)(2)(A)(i)(lll) of the Internal Revenue Code (IRC) applies to high-taxed income of a controlled foreign corporation (CFC) that is excluded from foreign base company income (FBCI) or insurance income under section 954(b)(4) of the IRC regardless of whether the income would otherwise be FBCI or insurance income. According to IRS, the rule provides instructions to determine the effective rate of tax on foreign items of income for the purposes of applying the GILTI high-tax exclusion. IRS stated that the rule provides that the effective foreign tax rate is determined on a tested unit basis. Additionally, IRS stated that the rule provides instructions to determine the net amount of income and the foreign taxes paid or accrued with respect to such net amount of income that are used to compute the effective rate of tax. IRS further stated that the rule includes how to make a GILTI high-tax exclusion election, and provides that the election, if made, must be made consistently for certain related CFCs. Lastly, IRS noted that the rule provides that taxpayers can make the election annually. The Congressional Review Act (CRA) requires a 60-day delay in the effective date of a major rule from the date of publication in the Federal Register of receipt of the rule by Congress,

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