The New Foreign Tax Credit Proposed Regulations – An Executive Summary

Fenwick & West LLP

Released on November 30, 2018, the foreign tax credit proposed regulations provide a comprehensive new framework for calculating the foreign tax credit in light of several changes made by the Tax Cuts and Jobs Act (TCJA or the Act). With respect to changes made by the TJCA, the new regulations are proposed to be effective generally for taxable years beginning after the enactment of TCJA. 

The remaining rules are proposed to be effective generally for taxable years ending on or after December 4, 2018, the date the proposed regulations were published in the Federal Register. Thus, nearly the entire package, once finalized, can be expected to apply to 2018 for calendar year filers. U.S.-based companies will need to get up to speed very quickly on a whole host of new rules, including the following:

  • Expense allocations to GILTI and other § 904(d) baskets, including the very complex § 904(b)(4) allocation rule enacted in the TCJA
  • Basketing of Foreign Tax Credit carryovers arising from before the Act, and carrybacks from 2018 to the last year before the Act
  • Whether the § 904(d) “look-through rule” will continue to provide general basket treatment of intercompany royalties and interest payments
  • How income and taxes are allocated to the newly created foreign branch basket
  • Calculation of the indirect credit on CFC-level taxes with respect to subpart F income and GILTI now that multi-year pools have been repealed

In providing a comprehensive new framework for the post-TCJA foreign tax credit, the proposed regulations are important to U.S. multinational companies planning for the utilization of foreign tax credits in the new regime.

Expense Allocation

The proposed regulations make a number of conforming changes to the existing regulations on the allocation and apportionment of expenses, Treas. Reg. §§ 1.861-8 to 1.861-17.

Allocation of Expenses to GILTI

The proposed regulations provide much-anticipated guidance on the extent to which expenses must be allocated to GILTI basket income. Several commentators suggested that U.S. parent companies should not have to allocate any expenses to the GILTI basket. This would have allowed GILTI to operate as a worldwide minimum tax at 13.125%, as described in the TCJA committee reports.

Treasury and the IRS rejected these comments and generally apply the existing expense allocation rules to determine taxable income in the GILTI basket. However, the proposed regulations treat a U.S. corporation’s GILTI gross income as exempt income subject to § 864(e)(3) to the extent it is reduced by the § 250 deduction, and they treat the GILTI portion of CFC stock as an exempt asset in the same proportion. In general, 50% of GILTI gross income and 50% of the GILTI portion of CFC stock are treated as exempt. In effect, the proposed regulations “split the baby” between full expense allocation and the 13.125% minimum tax approach noted above. 

As such, the portion of GILTI sheltered by the § 250 deduction and the related assets are eliminated from both the numerator and the denominator of the § 861 expense apportionment fraction. This has the effect of reducing the portion of expenses that are allocated to the GILTI basket (though not by 50%). A similar adjustment is made to assets that generate FDII, generally resulting in a 37.5% reduction in FDII and FDII-producing assets for § 904 expense apportionment purposes. 

Rules for Assigning CFC Stock to Multiple Baskets

The proposed regulations provide detailed rules for apportioning CFC stock to § 904(d) baskets when the stock generates income in more than one basket. These rules reflect the fact that the GILTI basket does not include any income at the CFC level. Thus, a CFC may generate general basket income that gives rise to GILTI basket income in the hands of the U.S. parent.

Under proposed § 1.861-13, CFC stock is first assigned to a basket under the existing rules, using either the asset method or the modified gross income method. Next, a portion of the stock that is initially characterized as producing gross tested income is assigned to the GILTI basket. Importantly, only the portion of the stock so characterized equal to the § 960(d)(2) “inclusion percentage” is assigned to the GILTI basket, since the rest of the CFC’s gross tested income is offset at the U.S. shareholder level by other CFCs’ tested losses and by the net deemed tangible income return (NDTIR). The remaining gross tested income is assigned to the general, passive or other applicable basket.

Special Allocation Rule When CFCs Have non-GILTI, non-Subpart F Income

The proposed regulations also implement § 904(b)(4), a new special rule added by the TCJA for apportioning expenses that are attributable to producing dividend income eligible for the dividends received deduction under § 245A. Under proposed § 1.861-13(a)(5), the portion of CFC stock assigned to the general, passive and U.S. source categories is subdivided between a § 245A subgroup and a non‑§ 245A subgroup. CFC stock in a category is assigned to the § 245A subgroup to the extent the stock is initially characterized as producing gross tested income but is not assigned to the GILTI basket. This portion of the stock is not treated as an exempt asset. 

Under proposed § 1.904(b)-3, a U.S. corporation’s foreign source income in a separate basket and worldwide taxable income are then determined without regard to any deduction attributable to CFC stock in a § 245A subgroup. Similarly, in the case of expense allocations on the basis of income, separate basket foreign source income and worldwide taxable income are determined without regard to any dividend for which a § 245A DRD is allowed or any deductions allocated to gross income in the § 245A subgroup in that basket. 

Because § 904(b)(4) and proposed § 1.904(b)-3 require adjustments to both the numerator and the denominator of the § 904(a) fraction, it is no longer possible to determine the FTC limitation in a separate category by simply multiplying the foreign source income in that category by the U.S. tax rate. Instead, each element of the § 904(a) formula must be determined separately in each § 904(d) basket. The regulations provide a detailed example to this effect. This example is summarized in the Appendix at the end of this article.

Other Changes to the Expense Allocation Rules

Existing regulations under § 1.861-17 address the allocation of research and experimental (R&E) expense to foreign source income. This expense is allocated generally using the worldwide sales of the taxpayer and its affiliates (the sales method), or upon the making a five-year binding election, the gross income of the taxpayer (the gross income method). The proposed regulations provide a one-time election, solely for the first TCJA taxable year, to change from the gross income method to the sales method before the five-year period has ended. Taxpayers that have recently adopted the gross income method should consider the election to go back to the sales method in light of the impact of the repeal of deferral and current inclusion of most CFC income on the U.S. tax return as GILTI.

The proposed regulations also contain rules addressing several expense allocation issues that are not unique to the TCJA. These include a new rule on the allocation of interest expense with respect to a loan made between a partnership and its U.S. corporate partner; revisions to the “debt-netting rules” of § 1.861-10 where the U.S. corporation lends to its CFC using hybrid debt; and clarifications to the rules for determining CFC stock basis for interest expense allocation, including the E&P adjustment. The proposed rules would clarify, for example, that the E&P taken into account in making the adjustment includes previously taxed income (PTI). As noted above, these new expense allocation rules are proposed to be effective for taxable years beginning after December 22, 2017, and/or taxable years ending on or after December 4, 2018. Thus, all of the rules can be expected to apply for calendar 2018.

More Guidance Forthcoming?

Finally, the preamble to the proposed regulations states that many of the existing expense allocation rules have not been significantly modified since 1988, and for taxable years beginning after December 31, 2020, groups will be able to elect worldwide interest expense apportionment under § 864(f). Therefore, Treasury and the IRS expect to reexamine the existing approaches to the expense allocation rules, including in particular the apportionment of interest, R&D, stewardship and G&A expenses, as well as the CFC netting rule in Treas. Reg. § 1.861-10. Treasury and the IRS request comments in this regard. 

Rules on the New Foreign Branch Basket:

Definition of a “Foreign Branch”

The proposed regulations provide that foreign branch income means the gross income of a United States person (other than a pass-through entity) that is “attributable to” foreign branches held directly or indirectly through disregarded entities by the United States person. Foreign branch category income under the proposed regulations also includes a United States person’s (other than a pass-through entity’s) distributive share of partnership income that is attributable to a foreign branch held by the partnership. Therefore, partnerships are treated as aggregates for purposes of determining foreign branch income.

The proposed regulations define a foreign branch by reference to the §989 regulations by providing that a foreign branch is a QBU described in Treas. Reg. § 1.989(a)-1(b), with the added requirement that the QBU must carry on a trade or business outside the United States. In general, the activities of a corporation, partnership, trust, estate or individual qualify as a separate QBU if the activities constitute a trade or business, and a separate set of books and records is maintained with respect to the activities. Activities that constitute a permanent establishment in a foreign country are presumed to constitute a trade or business. Since the proposed regulations follow Section 989, rather than Section 987, a question arises whether a financing or holding company DRE constitutes a “foreign branch” for this purpose.

A foreign branch may consist of activities conducted through a partnership or trust that constitute a trade or business conducted outside the United States, but for which no separate set of books and records is maintained. An example illustrating this point provides that P, a domestic corporation, is a partner in PRS, a domestic partnership. PRS conducts activities constituting a trade or business solely in Country A (the Country A Business) whose income and expenses are reflected on the books and records of PRS’s home office. PRS owns FDE1, a disregarded foreign entity organized in Country B. FDE1 conducts activities constituting a trade or business in Country B, whose income and expenses are reflected on a set of books and records separate from those of PRS. FDE1 owns FDE2, a disregarded foreign entity organized in Country C. FDE2 conducts activities constituting a trade or business in Country C, whose income and expenses are reflected on a set of books and records separate from those of PRS and FDE1. 

The example concludes that even though PRS does not maintain a separate set of books and records with respect to the Country A business, the Country A business’s activities are nevertheless treated as a QBU. Accordingly, the activities of the Country A business constitute a foreign branch, and PRS is the foreign branch owner. Further, the activities of the Country B and C businesses each constitute a foreign branch, and PRS is the foreign branch owner of each of the Country B and C businesses.

Attribution of Income to a Branch – General Rules

The proposed regulations generally look to a foreign branch’s books and records in classifying foreign branch income. There are a number of exceptions to this rule, as follows:

  • Foreign branch income does not include items arising from activities carried out in the United States.
  • Foreign branch income does not include items of gross income arising from stock, including dividend income, income included under section 951(a)(1), 951A(a), or 1293(a) or gain from stock dispositions.
  • Foreign branch income does not include gain realized by a foreign branch owner on the disposition of an interest in a disregarded entity or an interest in a partnership or other pass-through entity, unless the gain is reflected on the books and records of a foreign branch and the interest is held in the ordinary course of the foreign branch owner’s trade or business. 

Thus, in contrast to the dual consolidated loss rules, gain or loss on sale of a disregarded entity is generally not “pushed down” to the branch basket. The proposed regulations provide, however, that a branch’s sale of an interest in a disregarded entity engaged in the same line of business is considered to arise in the ordinary course of business. 

The proposed regulations also contain anti-abuse rules reflecting a Treasury and IRS concern that in certain cases gross income items could be inappropriately recorded on the books and records of a foreign branch or a foreign branch owner. Accordingly, gross income is reattributed if a principal purpose of recording, or failing to record, an item on the books and records of a foreign branch is the avoidance of Federal income tax or avoiding the purposes of §904 or §250.

Treatment of Disregarded Transactions

Foreign branch income that is not passive must be adjusted to reflect certain transactions that are disregarded for Federal income tax purposes. This rule applies to transactions between a foreign branch and its foreign branch owner, as well as transactions between or among foreign branches, involving payments that would be deductible or capitalized if the payment were regarded for Federal income tax purposes. For example, a payment made by a foreign branch to its foreign branch owner may, to the extent allocable to non-passive income, result in a downward adjustment to foreign branch income and an increase in general category income. Each payment in a series of disregarded back-to-back payments—for example, a payment from one foreign branch to another foreign branch followed by a payment to the foreign branch owner—must be accounted for separately, resulting in potentially complex calculations to determine foreign branch income.

The proposed regulations provide a special rule where a foreign branch owner transfers IP to the branch. The amount of gross income attributable to the branch must be reduced, and general basket income must be increased, to reflect any payments for the IP that would have been required under § 482 or § 367(d) if the branch were a CFC. 

Other New Rules Concerning the Section 904 Limitation

Section 78 Gross-Up on GILTI

As expected based on IRS commentary, the proposed regulations provide that the § 78 gross‑up for indirect foreign tax credits on GILTI is allocated to the GILTI basket for § 904 purposes. This rule avoids a potential whipsaw that would have resulted if the foreign tax credits were allocated to GILTI but the related § 78 gross-up were allocated to the general basket. 

Basket Rules for Section 986(c) Currency Gain or Loss

The proposed regulations, § 1.904-4(p), provide that § 986(c) currency gain or loss with respect to a distribution of previously taxed earnings and profits (PTEP) is assigned to the same basket as the E&P from which the distribution is made. This is a very important rule, given the large amounts of PTEP CFCs have and will continue to have. Because CFC E&P cannot be in the GILTI basket, under the proposed rule, § 986(c) gain or loss also could not be in the GILTI basket. In most cases, § 986(c) gain or loss would be general or passive basket, and thus could increase or reduce the FTC limitations in those baskets.

Transition rules for FTC Carryovers and Carrybacks and Overall Foreign Loss and Similar Accounts

The proposed regulations, § 1.904-2(j), provide that if unused foreign taxes paid or accrued or deemed paid with respect to a separate category of income are carried forward to a taxable year beginning after December 31, 2017, those taxes generally are allocated to the same post-2017 separate category as the pre-2018 separate category from which the unused foreign taxes are carried. This is important since the Act itself did not provide any transition rules for assigning carryforwards of unused foreign taxes to a different basket, including the new GILTI and foreign branch baskets. Under the new rule, general basket FTC carryovers arising before the TCJA will ordinarily carry forward in the general basket.

The proposed regulations, however, allow taxpayers to elect to assign certain unused pre-2018 general basket taxes to the foreign branch basket to the extent the taxes would be attributable to the branch basket under the new rules. Unused general basket foreign taxes in the general category arising in those prior years are allocated and apportioned under § 1.904‑6 between the general category and the foreign branch category. The taxpayer may make this election on either a timely filed original return or an amended return.

The proposed regulations provide that any unused foreign taxes with respect to the general basket or branch basket in a post-2017 taxable year that are carried back to a pre-2018 taxable year are allocated to the general basket. The proposed regulations also provide that any excess foreign taxes with respect to passive income or income in a specified separate basket (i.e., treaty resourced income) in a post-2017 taxable year that are carried back to a pre-2018 taxable year are allocated to the same pre-2018 separate category.

The proposed regulations provide similar transition rules for recapture in a post-2017 taxable year of an overall foreign loss (OFL), separate limitation loss (SLL) or overall domestic loss (ODL) arising in a year before the Act. Generally, OFL, ODL and SLL accounts are recaptured in the same separate category that would have resulted prior to TCJA.

(Partial) Retention of the Section 904(d) Look-Through Rules

Under the proposed regulations § 904(d)(3) look-through treatment applies solely for payments allocable to the passive category. Any other payments are assigned based on the general rules in § 1.904-4. Thus, the result ordinarily will be the same as under the existing regulations. Importantly, look-through payments that are allocated by a CFC against tested income remain in the general basket, and are not characterized as GILTI.

The proposed regulations treat GILTI inclusions in the same manner as subpart F inclusions under the look-through rules. Therefore, GILTI inclusions are treated as passive category income to the extent the amount included is attributable to passive tested income of the CFC. This rule will be rarely applied since most passive income is subpart F income and thus excluded from GILTI.

Other Guidance on the New Baskets of Income

In light of the new baskets for GILTI and branch income, the proposed regulations provide additional rules addressing the allocation of certain income to different baskets. Export financing interest and high-taxed income will be categorized under § 904 based on whether the income otherwise meets the definition of foreign branch, GILTI, or general basket income, based on the general rules in Reg. § 1.904-4.

The proposed regulations revise the grouping rules of the high-tax kick-out, § 1.904-4(c)(4), to group passive income from dividends, subpart F and GILTI inclusions from each foreign corporation, and passive income derived from each foreign QBU, under the grouping rules in §1.904-4(c)(3), rather than by reference to the source of the corporation’s or QBU’s income. Also, the proposed regulations further provide that any financial services income not treated as branch or GILTI basket income is treated as general basket income. § 1.904-4(e). This is an important clarification since the addition of the foreign branch and GILTI baskets take precedence over the pre-TCJA treatment of financial services income as general basket income.

Income Resourced by a Treaty

Proposed § 1.904-4(k) requires taxpayers to segregate income treated as foreign source under each treaty and then compute a separate foreign tax credit limitation for income in each separate category. The proposed regulations also provide that income resourced under treaties that are solely applicable to U.S. citizens who are residents of the other Contracting State is not subject to separate basket treatment. In addition, separate basket treatment applies to items of income resourced pursuant to a competent authority agreement.

The Base Differences Rule

The proposed regulations would modify the existing rules of § 1.904-6(a)(1)(iv) to provide that “base differences” arise only in limited circumstances, such as life insurance proceeds or gifts, which are excluded from income for Federal income tax purposes but are taxed as income under foreign law. In contrast, a computational difference attributable to differences in the amounts does not give rise to a base difference. These computational differences would be treated as timing differences. The proposed regulations clarify that taxes arising from a timing difference are assigned to the basket to which they would have been assigned if the income had been recognized in the year the tax was imposed.  

In the limited circumstances where a base difference does exist, the proposed regulations state that the taxes are assigned to the “separate category described in Section 904(d)(2)(H)(i).” As commentators have noted, the TCJA did not update the cross-reference in the statutory base difference rule (Section 904(d)(2)(H)(i)) to refer to section § 904(d)(1)(D), the updated statutory location of the general basket. Rather, read literally, Section 904(d)(2)(H)(i) on its face now assigns such taxes to the branch basket, § 904(d)(1)(B). The proposed regulations do not explicitly address this issue. In any event, base differences are defined so narrowly under the proposed regulations that this issue will rarely arise.

Rules on the Indirect Credit under § 960

Section 78 Gross-Up as a “Dividend”

The existing regulations treat the § 78 gross-up as a “dividend” for various tax purposes. The proposed regulations modify this rule to provide that a § 78 gross-up is not, however, considered to be a “dividend” for purposes of § 245A. This change is immediately effective for CFCs and U.S. shareholders with a fiscal year, including for fiscal years beginning before and ending after December 31, 2017. 

The Indirect Credit

With the repeal of § 902 and the old post-1986 pools of earnings and foreign income taxes, the indirect credit will now be calculated on a current-year basis. The proposed regulations provide much needed guidance on how to determine the foreign income taxes “attributable to” a GILTI or subpart F income inclusion. The main features of the new indirect credit calculation under the proposed regulations include the following:

  • Only “current year taxes” are eligible to be deemed paid. These are foreign income taxes accrued by the CFC in the current year or treated as so accrued under the relation-back doctrine.
  • Generally, current year taxes are allocated first to the existing Section 904 categories (general and passive) and then allocated among different income groups: (1) subpart F income; (2) tested income; and (3) the residual category. This allocation is done using the rules of § 1.904-6.
  • The subpart F income group is separated into categories consisting of each “item” of subpart F income described in § 1.954-1(c)(1)(iii). The foreign tax credit is calculated separately for each such group. For example, foreign base company sales income and foreign base company services income now constitute separate items of subpart F income for foreign tax credit purposes, notwithstanding that both items are in the general basket. This change could have a material impact on the application of the subpart F high-taxed exception, for example. 
  • The tested income group consists of all tested income and taxes of the CFC, broken down by general basket tested income and (in unusual cases) passive basket tested income.
  • Any taxes that are not allocated to the subpart F income or tested income groups default to a “residual group.” This could include income that meets an exception from tested income and subpart F income, such as the high-taxed exception. No indirect credits can be claimed at any time for taxes assigned to the residual group.  See § 1.960-1(e). 
  • Taxes imposed on CFC income as to which there is a “base difference” under § 1.904-6 are assigned to the residual group, and thus, are not creditable. 

Under proposed § 1.960-2, the indirect credit with respect to a subpart F income group is generally equal to the same proportion of the current year taxes within that group as the portion of the subpart F income in that group which gives rise to an inclusion to the shareholder. The current E&P limitation reduces both the numerator and denominator of the inclusion fraction. 

The indirect credit for the tested income / GILTI group under § 960(d) is generally the proportionate share of the CFCs’ taxes in the tested income group equal to tested income times the shareholder’s inclusion percentage.

The proposed regulations would provide that no foreign income taxes are creditable under § 960(a) with respect to an amount included under § 956 of the Code.  Together with the proposed regulations released on October 31, 2018, suspending the operation of § 956 for most U.S. multinational corporations, this change would prevent taxpayers from using § 956 to access high-taxed foreign earnings.

The High-Taxed Exception

The high-taxed exception regulation (§ 1.954-1(d)) generally remains the same. However, as noted above, the changes to the indirect credit under § 960 will affect the high-taxed exception. Under the new regime, the high-taxed exception would only take into account current-year taxes. Also, in contrast to prior law, where all subpart F income in the general basket was combined into a single item of income, the new proposed regulations require the high-taxed exception to apply separately to each type of general or passive basket income.

A limited change was made to the high-taxed exception to address cases where foreign income taxes imposed on the CFC are “reasonably certain” to be refunded as a result of a distribution to the CFC’s shareholders. In such cases, the relevant taxes are disregarded for purposes of the high-taxed exception. It can be expected this change will rarely apply.

Section 960(b) Taxes on Distributions of PTI

The proposed regulations also provide guidance on the creditability of withholding taxes and CFC-level taxes associated with distribution of PTI up to the US shareholder. Given the large amounts of PTI that will now be in the system, Section 960(b) credits are important. 

For purposes of the § 960(b) credit, the proposed regulations require the shareholder to maintain for each CFC, up to 10 annual accounts of previously taxed earnings and profits and related foreign income taxes (PTEP Groups).  (Whereas before § 959(c)(1) and (c)(2) E&P was referred to as “PTI,” the proposed regulations seem to favor the “PTEP” acronym.) The 10 accounts relate to the different types of § 959(c)(1) and (c)(2) PTI (or PTEP) attributable to different inclusions, such as under Subpart F, § 965, GILTI and § 956. PTI in one PTEP Group may be reclassified as PTI in another PTEP Group as a result of a § 956 investment. 

The proposed regulations require each PTEP Group and related foreign income taxes be maintained in annual layers. As PTI is distributed up the chain and withholding taxes are incurred, the E&P remains in the same PTEP Group and annual layer in the hands of the recipient as it was in the hands of the distributing corporation. For example, if during 2020, CFC1 makes a distribution of 2018-year PTI to CFC2, the PTI and any taxes will be assigned to CFC2’s 2018 PTEP Account layer. The proposed regulations provide an example of this mechanism, § 1.960-3(e), Example 2. 

The preamble to the proposed regulations states that the PTEP Groups and annual layers may be simplified if forthcoming § 959 regulations or that guidance may dispense with the requirement of maintaining annual layers in favor of pooling.


The following example from the proposed regulations illustrates the complex new calculation required to characterize assets as partially exempt and non-exempt in light of new § 250 of the Code:

Example:  USP owns assets with a basis of 1,000 that generate U.S. source income, including 200 of assets that generate FDII. USP also owns CFC with a stock basis of 1,000 (after the E&P adjustment under § 864(e)(4)). CFC earns GILTI tested income of 100, which has not been subject to foreign tax. USP’s other CFCs generate tested losses of 30, and USP’s NDTIR is 10. Thus, USP’s GILTI inclusion is 60, and the GILTI portion of its § 250 deduction is 30. All of CFC’s income is general basket. USP’s stock basis in each of its other CFCs is zero. USP’s U.S. source income (before deducting interest expense) is 150. USP has a 50-interest expense deduction that must be apportioned.

Analysis:  USP’s U.S. assets include 200 that generate FDII, resulting in a 37.5% deduction under § 250. Thus, 37.5% of 200, or 75 of USP’s U.S. assets are treated as exempt. All of CFC’s stock is initially assigned to the general basket gross tested income category. USP’s inclusion percentage is 60%, and so 600 of the 1,000 CFC stock value is assigned to the GILTI basket. Of that 600, 50%, or 300 is treated as an exempt asset. The remaining 400 of the CFC stock is assigned to the general basket and to the § 245A subgroup within the general basket. This 400 portion is not an exempt asset.

For purposes of apportioning USP’s 50 interest deduction, USP’s exempt assets are eliminated from both the numerator and the denominator of the apportionment fraction. USP’s remaining assets are 925 of U.S. assets, 300 of CFC stock assigned to the GILTI basket, and 400 of CFC stock assigned to the general basket and the § 245A subgroup within the general basket. Expenses must be apportioned initially to the CFC stock in the § 245A subgroup, along with USP’s other non-exempt assets.

As a result, USP’s interest expense deduction of 50 is apportioned as follows: 24.62% (400 / 1,625), or 12.31 to the general basket, § 245A subgroup; 18.46% (300 / 1,625), or 9.23 to the GILTI basket; and 56.92% (925 / 1,625), or 28.46 to U.S. source income.

USP’s FTC limitations in the general and GILTI baskets can now be determined. USP’s pre-credit U.S. tax liability is 27.30 (taxable income of 130, multiplied by 21%). USP has no gross income in the general basket, and a deduction of 12.31 of interest expense. However, USP’s general basket taxable income and worldwide taxable income are determined without regard to this interest expense deduction. USP’s general basket FTC limitation is therefore zero (equal to 27.30 x 0 / 142.31) since USP has no gross income in the general basket.

USP has 60 of gross income in the GILTI basket, a deduction of 30 under § 250, and a deduction of 9.23 of interest expense. USP’s GILTI basket taxable income is therefore 20.77. USP’s worldwide taxable income is again determined without regard to its 12.31 interest deduction apportioned to the general basket, § 245A subgroup. USP’s GILTI basket FTC limitation is therefore 3.98 (27.30 x 20.77 / 142.31).

Written by:

Fenwick & West LLP

Fenwick & West LLP on:

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  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at:

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit
  • New Relic - For more information on New Relic cookies, please visit
  • Google Analytics - For more information on Google Analytics cookies, visit To opt-out of being tracked by Google Analytics across all websites visit This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at:

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This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.