Contact: Gregory T. Bryant; Williams Mullen (North Carolina & Virginia, USA)
Key International Tax Provisions
Great news comes in with the American Taxpayer Relief Act of 2012 (the “Act” or “ATRA”) and its amendments to the Internal Revenue Code (the “Code”). The Act was passed by Congress on January 1, 2013 and signed into law by President Obama on January 3, 2013. Although there have been many news flashes summarizing the Act’s provisions, most have overlooked the international tax aspects of the Act. This Alert summarizes the key international tax provisions.
Look-Through Rules for Payments between Related CFCs.
ATRA § 323 amends Code § 954(c)(6)(C).
Look-through is back until the end of 2013 for calendar year taxpayers and is effective for tax years beginning after December 31, 2011. The Act allows deferral for certain payments (interest, dividends, rents and royalties) between commonly controlled foreign corporations (“CFCs”). An adjustment is available if you have been providing income taxes for possible Subpart F income from intercompany dividends, interest, royalties or rent. This should be great news to U.S. corporations with overall foreign losses and to individuals with Subpart F income, which is taxed at the ordinary income rates, not the lower tax rate for qualified foreign dividends.
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