An Overview of Reporting Deemed Paid Foreign Tax Credits Related to GILTI Inclusions of an S Corporation on Part III, Section 3 for the New IRS Schedule K-3
By Anthony Diosdi The U.S. federal income tax liability associated GILTI or “global intangible low-taxed income” is dramatically different to an individual U.S. shareholder of a controlled foreign corporation (“CFC”) compared to a U.S. shareholder that holds a CFC through a pure passthrough entity such as an S corporation. Individual CFC shareholders of CFCs are subject to GILTI tax at federal rates of up to 37. Absent planning, no indirect foreign tax credits are available to offset the income liability imposed on a GILTI inclusion. Furthermore, each CFC shareholder (within the meaning of Internal Revenue Code Section 951(b)) must attach an IRS Form 5471 to their individual income tax return. Filing the Form 5471 Information Return of U.S. Persons With Respect To Certain Foreign Corporations, requires disclosure about the CFC,…