International Tax Watch: The Difference Between Now and Never

As international tax practitioners get their bearings post-TCJA, disregarded transactions are emerging as a problem of fresh significance for US multinational companies. In the pre-reform world, payments between a regarded controlled foreign corporation (CFC) owner and its disregarded subsidiary--and the foreign taxes imposed on such payments--were easily dealt with under the pooling system of Code Sec. 902 and the (mostly) two-basket limitation system under Code Sec. 904. Here, Weber et al outline the general operation of Code Secs. 960(a) and 960(d) to assign foreign tax credits to subpart F and global intangible low-taxed income inclusions, and how Code Sec. 904 works in tandem to basket those foreign taxes. In particular, we address the treatment of foreign taxes imposed on disregarded payments at the CFC level under the new framework of Code Secs. 904 and 960 and the regulations thereunder, and the treatment of such disregarded transactions as "timing differences" under the Code Sec. 904 regulations.