Companies Face Limited Options to Bypass IRS Attribution Change

U.S. companies that have foreign parents may have limited choices to plan around proposed changes from the IRS that would subject income from foreign subsidiaries to tax.

Restructuring or recharacterizing their operations to avoid the tax hit would be possible in some situations, but could also raise new problems, according to tax practitioners.

The proposed rules (REG–110059–20; RIN 1545–BP83), released Sept. 21, would narrow an exception from current U.S. tax for certain payments, like interest, between controlled foreign corporations under tax code Section 954(c)(6).

Under the proposed rules, that exception wouldn’t apply to transactions involving certain ...