Beware of the New CFC Rules Triggering a Surprise 965 Inclusion
By Anthony Diosdi The Controlled Foreign Corporation (“CFC”) rules are embedded in the Internal Revenue Code. The CFC rules are designed to limit artificial deferral of foreign income using foreign entities. The CFC provides that certain classes of taxpayers must include in their U.S. taxable income amounts earned by foreign entities they or related entities/persons control. The 2017 Tax Cuts and Jobs Act made significant changes to these rules. The Definition of a CFC Before the Enactment of the 2017 Tax Cuts and Jobs ActPrior to the 2017 Tax Cuts and Jobs Act, Internal Revenue Code Section 951 provides that a United States shareholder of a CFC must include in its income its pro rata share of its “Subpart F income” regardless of whether that income has been distributed to…