Temporary regs address Section 245A loophole

Tax Hot Topics newsletter The IRS has released temporary regulations (REG-106282-18) under Sections 245A and 954(c)(6) that limit gap-year and other planning strategies the IRS said used the dividends-received deduction (DRD) contrary to the legislative intent. They apply to transactions occurring after Dec. 31, 2017, and deny in whole or in part the Section 245A DRD or the Section 954(c)(6) exception to foreign personal holding company income. The regulations also prevent fiscal-year taxpayers from exploiting Section 245A due to a mismatch in the effective dates of the new legislation by applying Section 245A against income that should have been subject to tax under the global intangible low taxed income regime (GILTI) under Section 951A or otherwise subject to U.S. tax.

For more details, see our Tax Flash.

David Sites
Washington National Tax Office 
T +1 202 861 4104

David Zaiken
Managing Director
Washington National Tax Office 
T +1 202 521 1543

Cory Perry
Senior Manager
Washington National Tax Office 
T +1 202 521 1509

Mike Del Medico
Washington National Tax Office 
T +1 202 521 1522

Tax professional standards statement 
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.