CFC Tax Planning for U.S. Individuals and Family Offices

1. April 25, 2019 CFC Tax Planning for U.S. Individuals and Family Offices

2. Panelists Alan Winston Granwell (Moderator) Holland & Knight, LLP Washington, DC Paul G. Marcotte, Jr. Ted Zablocki Paley Rothman Baker Tilly Bethesda, MD Tysons, VA CFC Tax Planning for U.S. Individuals and Family Offices

3. Introduction • U.S. citizens and residents subject to worldwide income and transfer taxation • Tax Cuts and Jobs Act (TCJA) significantly revised international tax provisions • TCJA international tax changes primarily target U.S. corporate taxpayers • CFC owned by non-corporates detrimentally impacted CFC Tax Planning for U.S. Individuals and Family Offices

4. Agenda • Review TCJA international tax modifications, particularly CFC taxation regime • Prior law: Deferral, “lock-out” effect, 35% tax, repatriation planning • Current law: • For corporates, shift to immediate taxation and limited quasiterritorial system exemption • For non-corporates: immediate taxation and deferral, no limited territorial exemption • Strategies for U.S. Shareholders (individuals or non-corporates) to restructure • Q&A CFC Tax Planning for U.S. Individuals and Family Offices

5. U.S. Shareholder & CFC Definitions U.S. Shareholder Controlled Foreign Corporation Any foreign corporation in which more than 50% of the total combined voting power of all classes of stock entitled to vote is owned directly, indirectly, or constructively by U.S. shareholders on any day during the taxable year of such foreign corporation or more than 50% of the total value of the stock is owned directly, indirectly, or constructively by U.S. shareholders on any day during the taxable year of the corporation • A U.S. person who owns directly, indirectly or constructively 10% or more of the total combined voting power or value of all classes of stock entitled to vote • U.S. person. An individual, a domestic corporation (“C” or “S”), a U.S. partnership, a U.S. trust or a U.S. estate • TCJA changed U.S. Shareholder definition : • 2017. 10% or more of vote • 2018 and forward. 10% or more of vote or value CFC Tax Planning for U.S. Individuals and Family Offices

6. “Downward Attribution” (§ 958(b)(4))Repeal (1) • General. • To determine whether a U.S. person is a U.S. shareholder and whether a foreign corporation is a CFC, direct/indirect/constructive ownership rules apply • TCJA repealed limitations on “Downward Attribution” effective 2017 and going forward • What did Section 958(b)(4) do? It prevented constructive attribution from: • A foreign corporation to a U.S. corporation • A foreign partner to a U.S. partnership • A foreign beneficiary to a U.S. trust • A foreign beneficiary to a U.S. estate • Upon repeal, there is constructive attribution that can result in unanticipated tax consequences • Note. Repeal did not change prior constructive attribution rule that does not constructively attribute stock owned by an NRA to a U.S. citizen or resident alien individual CFC Tax Planning for U.S. Individuals and Family Offices

7. Downward Attribution – Examples (2) Partnerships Corporations FP#2 FP#1 Downward Attribution of FP#2’s 100% interest in F Co to USP USP Partnership US Co F Sub F Co • After repeal, US Co constructively owns F Sub stock through Downward Attribution from F Co • Application to foreign-owned MNCs with 50% or greater ownership value in US Sub; now all deemed CFCs • USP constructively owns F Co • No USP ownership threshold interest for attribution CFC Tax Planning for U.S. Individuals and Family Offices

8. Taxation of Subpart F IncomeDirect & Indirect U.S. Shareholder Ownership (3) • Subpart F Taxation • A U.S. Shareholder taxable only if it has direct and/or indirect ownership. • Although constructive ownership applies to determine whether a foreign corporation is a CFC or whether a U.S. person is a U.S. Shareholder, constructive ownership, of itself, is not sufficient to cause Subpart F or GILTI taxation • Example: If a US Sub owns 9% of the stock of F Sub, a CFC, directly but through FP Co is attributed 91% constructively, US Sub becomes a US Shareholder but is only taxed on Subpart F income or GILTI to the extent of 9% l FP Co >50% Value 91% US Sub F Sub 9% CFC Tax Planning for U.S. Individuals and Family Offices

9. Downward Attribution – Maybe? (4) • NRA parent ownership in stock of US Co not attributed to US child • Under “old” law, although US Child is a U.S. Shareholder of F Co, F Co is not a CFC (no 50+% ownership by U.S. Shareholders) • Query, whether under TCJA, US Co is also a U.S. Shareholder of F Co as a result of downward attribution from NRA Parent and therefore F Co is a CFC? • Under Senate Amendment, no intent to cause F Co to be a CFC with respect to US child since US child not “related” to US Co • Problem: Final legislation was enacted without any reference to Senate Amendment. Under Downward Attribution: NRA Parent's 80% direct stock ownership in F Co attributed to US Co constructively, making F Co a CFC NRA Parent US Child 100% 20% 80% F Co CFC Tax Planning for U.S. Individuals and Family Offices

10. Family Holding Company Trap (5) US Family Member Foreign Family Members • Scenario. It is not uncommon for non-U.S. families to hold interests in a family owned business through a foreign holding company or partnership • The Repeal can have unanticipated consequences, as reflected in chart • Result. • As a result of Downward Attribution, USCo will constructively own Foreign Sub2, causing Foreign Sub2 to become a CFC • USCo will not have an income inclusion because it only constructively owns Foreign Sub2 • US Family Member will have a 12% GILTI or Subpart F inclusion 88% 12% Foreign HoldCo 100% Foreign Sub2 Foreign Sub1 100% US Co CFC Tax Planning for U.S. Individuals and Family Offices

11. Legislative HistoryComments (6) • Purpose of Repeal. The purpose of this amendment was targeted at CFC de-control transactions following inversions • Senate Amendment/Colloquy. During the TCJA legislative process, the Senate Amendment contained the following sentence: “The provision is not intended to cause a foreign corporation to be treated as a controlled foreign corporation with respect to a U.S. shareholder as a result of attribution of ownership under section 318(a)(3) to a U.S. person that is not a related person (within the meaning of section 954(d)(3) to such U.S. shareholder as a result of the repeal of section 958(b)(4); see also colloquy of Senators Purdue (R-Ga) and Hatch (R-Utah) relating to limiting language in Senate explanation. The Conference Agreement did not contain any limiting language • Result. Constructive attribution to U.S. persons now may trigger taxation under Subpart F and Transition Tax for 2017, and Subpart F and GILTI for tax years 2018 forward • Traps. • Portfolio Interest Rules. Repeal impacts planning • Section 267(a))(3.) Deferral of deductions on payments to CFC • Section 1099 Reporting. For foreign corporations constructively treated as CFCs • There are numerous other corollary consequences, see E. Tannenbaum, Downward Attribution CFCs, 47 Tax Mgmt. Int’l J. 341 (May 11, 2018); K. Blanchard, Top Ten Reasons to Limit § 958(b)(4) Repeal, 47 Tax Mgmt. Int’l 405 (June 8, 2018) • How To Fix? • Technical Amendment • Regulatory Fix • Litigation CFC Tax Planning for U.S. Individuals and Family Offices

12. Domestic Taxation Changes Individual Tax Changes • Maximum 37% ordinary income tax rate (down from 39.6% rate) • Capital Gains: 20% top rate (unchanged) • NIIT: 3.8% (unchanged) • 20% “Pass-through” Deduction for Qualified Business Income • Other Deductions: Elimination/scaling back Corporate Tax Changes • 21% tax rate (down from 35%) • Business Interest Deduction Limitation • Full expensing for qualified tangible property • Net Operating Losses (NOLs) • Other Deductions: Elimination/scaling back CFC Tax Planning for U.S. Individuals and Family Offices

13. International Taxation Changes Inbound Changes • Enhancement in Base Erosion • Business Interest Deduction Limitation • BEAT • Anti-Hybrid Rules • Sale/Disposition of Partnership Interests Outbound Changes • Transition Tax • GILTI • FDII • Subpart F • Foreign Tax Credit (FTC) • Section 367 “Exit” Tax • Transfer Pricing CFC Tax Planning for U.S. Individuals and Family Offices

14. International Provisions – CorporateOverview Prior Law • U.S. tax deferral of active income until actual or deemed repatriation • Upon repatriation, U.S. tax @ 35 % rate (plus applicable state tax, if any) • Repatriation planning involved complex structures and FTC planning to reduce U.S. ETR • Because of high U.S. tax rate, "lock-out" of tax deferred E&P(estimated at nearly 3 trillion) • Subpart F income and Investment in U.S. Property taxed @ 35% rate, with accompanying FTCs TCJA • Transition Tax: mitigate “lock out” and shift to territoriality • Mandatory repatriation of post 1986-2017 tax deferred E&P at reduced rates • 15.5% cash, 8% other) • Large PTEP generated • Pre-1986 E&P can be repatriated tax free to C corporation shareholders • Deferral for active foreign source income eliminated • Shift to limited territoriality • Now, CFC foreign source income subject to new tax regime; • Taxed immediately or not at all • Drastic overhaul of FTC regime US Corp CFC Tax Planning for U.S. Individuals and Family Offices

15. International Tax System – CorporateTerritorial or Worldwide? Foreign Corp. US Person Passive Income Passive Assets Non-CFC (10/50), Non-PFIC Corp. U.S. Sh. w/10% or > interest CFC US Shareholder Corp. Sh. g CFC Active F Co (not CFC) F Co Active Immediate or No Taxation PFIC Regime No Tax CFC Tax Planning for U.S. Individuals and Family Offices

16. US Shareholder Taxation – CFCsCorporate US Corp • Immediate Tax • Subpart F Income taxed @ 21%, w/ 100% use of FTCs • GILTI taxed @ 21% rate, 50% ded. (e.g., 10.5%), 80% use of FTCs • FTCs for PTEP upon distribution • Gain on amounts in excess of retained tax-deferred earnings on sale of CFC stock taxed • Territorial –No Tax • Only foreign source non-Subpart F or GILTI • Applies to: • NDTIR • Subpart F High Tax Kick-Out Income • CFC dividends • FOGEI • Investments in US Property (Generally) • PTEP • Gain on tax-deferred retained earnings on sale of CFC stock taxed • No FTCs E&P Repat. CFC CFC Tax Planning for U.S. Individuals and Family Offices

17. International Provisions – IndividualsPrior Law • Assumption: • CFC derives non-Subpart F active foreign income • CFC does not make an investment of earnings in U.S. property • U.S. Result: • U.S. tax deferral • F Co's income taxed only when repatriated in the form of a dividend or upon a disposition • Federal tax rate: • 23.8% if received from treaty-qualified CFC • 43.4% if received from non-treaty-qualified CFC Individual 100% F Co F Co's active income not taxed to Individual until dividend or disposition CFC Tax Planning for U.S. Individuals and Family Offices

18. Impact of Transition Tax (2017)Individuals Owning CFCs • General Rule. All U.S. Shareholders of a CFC (corporates and individuals) have a mandatory deemed Subpart F inclusion of pro rata share of accumulated post-1986 deferred income for last taxable year of the CFC beginning before January 1, 2018 • Applies even though individuals not eligible for participation exemption • S corporations that are U.S. Shareholders of a CFC can elect to defer until triggering event • Note, non-S corporation Shareholders can elect to defer payment of the Transition Tax over 8 years with no interest charge; note strict due dates for election and don’t overlook “acceleration” issues upon subsequent events or restructuring • Rates (assumes calendar year): • 17.5% (cash) • 9.1% (non-cash) • 3.8% NIIT (generally upon repatriation) • Inclusion creates previously taxed income (PTEP) • Repatriation of PTEP: • PTEP tax-free • FTC planning: • First: apply Section 960(c) • Second: apply one year carryback, 10 year carryforward Individual 100% F Co Transition Tax requires mandatory Subpart F inclusion of F’ Co’s post-1986 E&P in 2017 (assuming calendar year CFC) Inclusion creates PTEP CFC Tax Planning for U.S. Individuals and Family Offices

19. U.S. Shareholder Taxation – CFCsIndividuals Individual • Limited Territoriality Participation Exemption • None • Immediate Taxation: • Subpart F income & Section 956: • Taxed @ 37% rate • No indirect FTCs (but reduce E&P) • Direct FTCs, if any (e.g., W/H taxes) • 3.8% NIIT upon repatriation • GILTI: • Taxed @ 37% rate • No deduction • No indirect FTC (but reduce E&P) • Direct FTCs, if any • 3.8% NIIT upon repatriation (but no FTC offset) • Remaining Income (primarily, QBAI or Subpart F high-taxed income) • Taxed upon repatriation @ 20% if treaty protected • Taxed upon repatriation @ 37 % if non-treaty protected • 3.8% NIIT, generally upon repatriation (but no FTC offset) unless elect under Treas. Reg. § 1.1411-10(g) GILTI eliminates U.S. tax deferral generally Individual taxed at a 37% rate on F Co's active income of $100 (with no FTCs) 100% F Co CFC Tax Planning for U.S. Individuals and Family Offices

20. What is GILTI -- Overview • Application: To CFCs/All U.S. Shareholders • Consequence: Immediate taxation of most non-Subpart F income • U.S. Corp. Shareholder: • Special corporate level deduction • 80% deemed paid FTCs • Taxable income limitation • Individual or non-corporation U.S. Shareholder taxed @ 37% rate • No GILTI deduction or indirect FTCs (assuming no § 962 election) US Co 100% CFC *Computation: Assumes (unrealistically) no US Shareholder level expenses allocable to GILTI and U.S. Shareholder eligible to claim full GILTI deduction CFC Tax Planning for U.S. Individuals and Family Offices

21. GILTI -- Observations • GILTI causes immediate inclusion in a U.S. Shareholder's income of most of a CFC’s active earnings in excess of 10% return on QBAI (minus Specified Interest Expense), so-called “NDTIR” (Net Deemed Tangible Income Return) • Inclusion not limited to income from IP, despite GILTI’s IP focus • No general exclusion for high-taxed income, such as in Subpart F (> 18.9%) • Based on GILTI prescribed computation of taxable income (determined under US rules) • Not based on E&P as is Subpart F • NDTIR subject to zero rate when repatriated (territoriality) by U.S. corporation, but taxable when repatriated by individual or non-corporation U.S. Shareholder @ 20% rate if treaty-protected or 37% if not treaty protected • Rewiring the brain: Role of affirmative Subpart F planning, U.S. corporates taxed @ 21%, but with full FTCs • Use of Subpart F high tax kick-out (> 18.9% rate), but no FTCs • Caveat: Proposed GILTI Regulations anti-avoidance rule CFC Tax Planning for U.S. Individuals and Family Offices

22. GILTI TaxationIndividual v. Corporate Tax Rates Individual GILTI: 86.875 ($100 Tested Income minus 13.125 local corporate tax) No deduction No deemed-paid FTC U.S. tax: $ 32.14 ETR: 45.265% (i.e. $ 36.14 + $13.125 before repatriation) Assumptions: Gross Income: $100 | Foreign Tax Rate: 13.125 | No Deductions | No QBAI Corporate • GILTI: $100 • (86.875 (Tested Income + 13.125 (FTC) =$100 • 50% Deduction • ($50 x 21%) • U.S. tax: 0 • (80% of 13.125 = 10.50) • ETR: 13.125% (before repatriation) CFC Tax Planning for U.S. Individuals and Family Offices

23. GILTI Planning For Individuals • Interpose a U.S. corporation between CFC and Individual • Section 962 Election • “Check-the-box” on CFC • Subpart F planning • Technical GILTI Planning • Avoid losses in CFC to benefit from QBAI and deemed-paid FTCs • Increase amount of QBAI in CFC • Decrease amount of interest paid to third parties • Move activities to U.S. from CFC, form U.S. corporation, use Foreign Derived Intangible Income (FDII) provision • Not practical for U.S. persons resident abroad CFC Tax Planning for U.S. Individuals and Family Offices

24. Interpose U.S. Corporation Individual • Benefits • 21% corporate tax rate • GILTI: • Benefit from GILTI deduction (subject to taxable income limitation) • Benefit from 80% deemed-paid FTCs After Before s • Traps • Section 965 “acceleration event” • Transfer agreement/filed within 30 days • Prop. Reg. § 1.951-1(e)(6) anti-abuse? • When to distribute PTI (PTEP)? • 3.8% NIIT US Co CFC Individual transfers CFC to USCO Reduced U.S. taxation could be 10.50% or possibly zero, depending on circumstances CFC 37% GILTI taxation • Detriments • Double taxation • Anti-Abuse Rules • AET • PHC • State Taxation CFC Tax Planning for U.S. Individuals and Family Offices

25. PTEP of a CFC Transferred to a U.S. Corporation • CFC’s Transition Tax Previously Taxed Earnings (PTEP) • As a result of the Transition Tax, the CFC’s post-1986-2017 tax-deferred E&P become previously taxed earnings (PTEP) • PTEP can generally be distribution to the U.S. shareholder tax-free • Therefore, if the PTEP were distributed by the CFC to a U.S. C corporation shareholder of the CFC, the distributed PTI would not be taxed to the C corporation • Query: whether distributed PTEP increases E&P of the U.S. C corporation, which, if that were the case, would result in a shareholder-level tax upon distribution to the U.S. individual shareholders from the C corporation • See Eaton Corporation v. Commissioner, 152 T.C. 2 (2019), in which the U.S. Tax Court held that the E&P of upper tier CFC partners of a domestic partnership are increased by partnership’s Subpart F inclusions; AM 2015-001 (E&P generated at time of Subpart F inclusion) CFC Tax Planning for U.S. Individuals and Family Offices

26. Section 962 Election (1) • Background: • Enables individuals who are U.S. Shareholders of a CFC to elect (annually) to be taxed on amounts included in their income under Subpart F, Transition Tax or GILTI at the corporate tax rates and obtain benefits of deemed paid FTCs. • The provision, when enacted, originally was meant to achieve U.S. tax results as if the U.S. individual owned the CFC through a U.S. corporation, particularly with respect to benefiting from a CFC’s deemed-paid FTCs. • Until proposed regulations were issued, it was not clear whether the Section 962 election permitted benefitting from the GILTI 50% deduction for taxable years prior to 2026, subject to the taxable income limitation. Proposed regulations confirmed that the election is available. • Consequences of Section 962 election: • Inclusion (Subpart F, Transition Tax, or GILTI) taxed at current favorable corporate tax rates (21%) rather than individual tax rates (maximum rate of 37%). • GILTI deduction (50% for tax years prior to 2026). • 80% deemed-paid FTCs offset U.S. income tax. • Upon distribution by the CFC of the CFC income for which a Section 962 election was made, the individual U.S. Shareholder is subject to U.S tax at individual tax rates on the amount distributed that exceeds the U.S. tax (at corporate tax rate) paid by the individual U.S. shareholder (after taking into account the deemed-paid FTC); viz., 23.8% rate for distributions from treaty-protected CFCs, but ordinary tax rates (maximum rate of 37%) for distributions from non-protected CFCs (Smith v. Commissioner, 151 T.C. No 5 (2018)) (not treated as a “qualified dividend”). CFC Tax Planning for U.S. Individuals and Family Offices

27. Section 962 Election (2) Individual Election • Individual U.S. Shareholders of a CFC taxed on Subpart F, Transition Tax or GILTI at corporate tax rates and benefit from GILTI deduction and deemed paid FTCs 100% CFC • Detriments: • Double Tax (on amount distributed in excess of U.S. corporate tax paid) • When distributed, non-treaty E&P, taxed @ 37% rate +3.8 NIIT • When distributed, treaty E&P, taxed @ 20% + 3.8% NIIT • Can’t be used to come within § 245A reduction of § 956 inclusion • Benefits: • Annual election • No restructuring • Less complicated • Inclusion taxed @ 21% corporate rate • GILTI deduction • Use of 80% deemed paid FTCs • AET and PHC rules don’t apply • No need to repatriate PTEP • Corporate anti-abuse rules don’t apply • Provides much flexibility Elect to be treated as C corporation Reduced GILTI taxation CFC Tax Planning for U.S. Individuals and Family Offices

28. Check-the-Box Planning (CTB) • Detriments: • Consider consequences resulting from making the election: • Taxable liquidation for U.S. tax purposes • “Acceleration” event under Transition Tax • Upon CTB • Subpart F income • GILTI • After, such as: • New branch FTC basket limitations • Anti-hybridity deduction rule • Dual consolidated losses Individual What is it? 100% • Treats “eligible” entities as transparent solely for U.S. Federal income tax purposes FCo CFC • Benefits: • Useful if CFC subject to high rate of local corporate and/or W/H tax • Avoids Subpart F and GILTI • Under GILTI: no FTC carrybacks/carryforwards Restructured to FCo Transparent entity solely for U.S. tax purposes CFC Tax Planning for U.S. Individuals and Family Offices

29. Subpart F Planning Subpart F • Rewire brain – structure to generate Subpart F income, rather than GILTI • Although full income inclusion, obtain full use of general basket FTCs. • Compare 80% for GILTI, separate GILTI FTC basket and no GILTI FTC carry back or carry over Subpart F High Tax Exception • Under TCJA, Subpart F high tax exception can be elected if foreign ETR is >18.9% (i.e., 90% of U.S. 21% corporate rate) • If circumstances warrant, it may be advantageous to take advantage of this rule, as it avoids GILTI and, if domestic corporate shareholder, income can be repatriated under § 245A, but deemed paid FTCs lost • Note, under Prop. FTC Regs., the “Malta tax refund strategy” does not work CFC Tax Planning for U.S. Individuals and Family Offices

30. Technical GILTI Planning • Avoid losses in CFC to benefit from QBAI and deemed-paid FTCs • Increase amount of QBAI in CFC • Decrease amount of interest paid to third parties to avoid reducing QBAI by Specified Interest CFC Tax Planning for U.S. Individuals and Family Offices

31. GILTI Planning -- Opportunity • Assume: Sales transaction by US Co owning CFC • Rather than selling CFC stock, Section 338(g) election made • Election treated as a deemed asset sale; usually results in GILTI, taxable to seller and seller level share taxation; US Co buyer has “step-up” in CFC’s assets • GILTI Inclusion taxed at preferential rate (10.5%), rather than 21%, and seller’s stock basis increased by amount of inclusion • Factual Assumptions re USCo: FMV of CFC $1,000 USCO: Basis in CFC stock 0 Gain on sale $1,000 l US Co USCo Buyer CFC: Active non-Subpart F Business Assets E&P 0 Asset Basis 0 Gain $1,000 CFC Target CFC Tax Planning for U.S. Individuals and Family Offices

32. What is FDII -- Overview Sales • Applies to U.S. Corporations • U.S. Corp. – obtains FDII deduction • Taxable income limitation • Does not apply to foreign branch income • Interaction with BEAT and GILTI • Benefits: lower ETR, increases cash flow permanent tax benefit, increases EPS • International concerns: WTO and BEPs preferential ax regime ForeignMarkets Services • Property sold, leased, licensed to non-US person for foreign use • Services provided to any person or with respect to property not located in US • Essentially third party activities CFC Tax Planning for U.S. Individuals and Family Offices

33. GILTI and FDII (§ 250 ) -- Reconciliation • GILTI and FDII: A “carrot” and “stick” approach – to reduce incentives for U.S. companies to shift IP offshore • GILTI: targeted to reducing tax benefits to U.S. taxpayers from operating in offshore tax havens or low-tax jurisdictions by imposing a minimum tax • FDII: targeted to increasing benefits for basing international operations in the US • GILTI/FDII establish tax parity between holding IP in the U.S. and holding IP in a foreign subsidiary in a territorial regime • GILTI: foreign tax rate to avoid U.S. residual tax : 13.125% (80% x 13.125% = 10.50%) • FDII: US tax rate: 13.125% • Both GILTI/FDII use similar computational approach to calculate income subject to preferential tax rate: • GILTI & FDII = Qualifying Net Income minus Qualified Business Asset Investment (QBAI) x 10% = income subject to preferential rates • Caveat. Benefits reduced through a taxable income limitation that applies to both provisions CFC Tax Planning for U.S. Individuals and Family Offices

34. Foreign Operations -- Tax Comparison Varying Structures/Rates for U.S. Corporation to Conduct Foreign Activities * Assume no taxable income limitation CFC Tax Planning for U.S. Individuals and Family Offices

35. Financial Modeling • Many TCJA provisions are intertwined and formulaic, not intuitive, requiring financial modeling to ascertain benefits and detriments of: • Interest Deduction Limitation • GILTI • FDII • "Check-the-Box" planning • FTCs (extremely complex, requires computer program) CFC Tax Planning for U.S. Individuals and Family Offices

36. CFC Investment in U.S. Property (§ 956) f • Reflects an investment in US property that, but for guidance in the Proposed Regulations, would result in an inclusion to US Co • Under recent guidance, no inclusion – to extent had CFC distributed an actual dividend to US Co – and US Co eligible to claim participation exemption US Co 100% CFC CFC deemed to invest untaxed E&P in US property, by collateralizing US Co's loan from an unrelated bank CFC Tax Planning for U.S. Individuals and Family Offices

37. CFC Investment in U.S. Property (§ 956) Impact on Tax Planning and M&A Transactions • The Section 956 Proposal Regulations should provide U.S. corporate borrowers with greater flexibility than under current law to provided enhanced collateral packages to lenders with respect to their foreign subsidiaries and thereby achieve better credit and loan condition; lenders, based on this new proposal, will likely require enhanced credit packages • Further, the IRS in the FTC Proposed Regulations denies the ability of a U.S. corporate shareholder from obtaining FTCs in connection with a deemed inclusion, which, is an additional limitation on FTC planning by U.S. MNCs • This new rule only applies to corporate shareholders and not to individuals or U.S. entities that would not be treated as a corporation CFC Tax Planning for U.S. Individuals and Family Offices

38. CFC Tax Planning for U.S. Individuals and Family Offices

39. Thank you! Alan Winston Granwell Holland & Knight, LLP alan.granwell@hklaw.com +1 202 378 0344 Paul G. Marcotte, Jr. Paley Rothman pmarcotte@paleyrothman.com +1 301 951 9368 Ted Zablocki Baker Tilly ted.zablocki@bakertilly.com +1 703 923 8557 CFC Tax Planning for U.S. Individuals and Family Offices