Good News/Bad News on GILTI Exclusion for Highly Taxed Income

I noted in my February 23, 2018 posting that the taxation of GILTI under Code §951A does not apply to foreign base company income and insurance income that is excluded from Subpart F by reason of being highly taxed by a foreign country. The way the statute was drafted, income that was NOT foreign base company income or insurance income, but otherwise would be GILTI and subject to pass-through tax, could NOT use the high tax kickout to avoid tax. I noted that this appeared to me to be a statutory glitch and was inconsistent with the policy of allowing a high tax kickout and the overall purpose of the GILTI provisions.

Others have brought this issue to the attention of Treasury in regard to comments to the GILTI proposed regulations. The bad news is that while Treasury did take those comments under consideration, in enacting final regulations it declined to extend the high tax kickout to income other than foreign base company income and insurance income under Subpart F. See Treasury Decision 9866 (6/19/2019).

The good news is that Treasury. . .