Final Regulations Issued Regarding Partnerships and S Corporations that Hold Controlled Foreign Corporations
By Anthony Diosdi On January 25, 2022, the United States Department of Treasury (“Treasury”) and Internal Revenue Service (“IRS”) published final regulations related to the treatment of domestic partnerships and S corporations that hold stock in a controlled foreign corporation (“CFC”) for purposes of determining amounts included in the gross income of their partners and shareholders with respect to the CFCs. The regulations finalize a portion of the proposed regulations published on June 21, 2019.The final regulations provide pass-through entities such as partnership and S corporations consistent treatment for subpart F income, GILTI, and Section 956 inclusions. The guidance provided in the regulations represent a shift in the way pass-through entities are taxed on foreign source income. Since 1962, U.S. partnerships have been treated as separate entities for purposes of…