CFCs – General Overview (Portfolio 6200)

Bloomberg Tax Portfolio, No. 6200, CFCs – General Overview, describes the rules for U.S. federal income taxation of United States shareholders (U.S. shareholders) of controlled foreign corporations (CFCs) under the taxing regimes contained in subpart F of subtitle A, chapter 1, subchapter N, part III of the Internal Revenue Code, including the subpart F income and global intangible low-taxed income (GILTI) rules.

This Portfolio begins with a discussion of the background and legislative history of subpart F, from its original enactment in 1962 to changes made by the Tax Cuts and Jobs Act (TCJA) (Pub. L. No. 115-97) in 2017. It provides a detailed analysis of the ownership tests that must be satisfied for the subpart F income and GILTI regimes to apply, including such key terms as “controlled foreign corporation,” “United States person,” and “United States shareholder.” This Portfolio also describes the rules for determining amounts included in a U.S. shareholder’s income under §951(a) and §951A and the U.S. tax treatment of such income. It further provides an overview of the tax results to U.S. shareholders of various transactions involving CFCs, including the organization and reorganization of a CFC, CFC distributions, and liquidations and dispositions of CFCs. Finally, it describes the rules coordinating the taxing regimes of subpart F of the Code with other special rules that apply to foreign entities and foreign income and summarizes the return and compliance rules that apply to U.S. shareholders of CFCs.

Table of Contents

I. Introduction
II. Background and Legislative History
III. Overview of U.S. Taxation of CFC Income
IV. Definition of U.S. Shareholder
V. Definition of Controlled Foreign Corporation
VI. Stock Attribution Rules
VII. Items Subject to Current Inclusion Under §951(a)
VIII. CFC Taxable Years
IX. Determination of the Amounts of §951(a) Items
X. Earnings and Profits Limitations
XI. Pro Rata Share Taxable to U.S. Shareholders
XII. Global Intangible Low-Taxed Income and Foreign-Derived Intangible Income
XIII. Limitation on Deduction of Business Interest Expense
XIV. Taxation of CFC Distributions
XV. Deemed Paid Foreign Tax Credits
XVI. Adjustments to Basis in CFC Stock and Other Property
XVII. Election by Individuals to be Subject to Tax at Corporate Rates
XVIII. Organizations, Reorganizations and Dispositions of CFCs
XIX. Coordination of Subpart F With Passive Foreign Investment Company Provisions
XX. Returns and Reporting Requirements