International Tax Watch: Direct, Indirect, or Barely Connected: Rev. Proc. 2019-40 Provides Limited Relief to U.S. Persons Surprised by CFC Ownership

[...]if you know you have a CFC, how do you obtain the records and prepare the computations sufficient to report the relevant U.S. federal income tax attributes with respect to a Foreign-Controlled CFC, when U.S. persons do not actually control the CFC? After Code Sec. 958(b)(4) Repeal, the foreign corporation in the example above is a CFC even though it is a foreign corporation with only foreign owners. [...]in Diagram 1,5 ForCo is a CFC. [...]after the passage of the TCJA, matters stood in an odd place, where the statute provided for one result, while Congress had the impression that it had made a law providing for a different result. Since the beginning of 2019, there have been attempts by members of Congress to undo Code Sec. 958(b)(4) Repeal, none of which has gone very far.8 In post-TCJA guidance, including proposed regulations released on the same date as Rev. Proc. 2019-40,9 Treasury appears to have reached a view that the legislative history is not enough of a reason to change the outcome resulting from the plain interpretation of the statute. [...]a foreign corporation that is "controlled" by one or more U.S. shareholders solely as a result of the downward attribution of ownership from a foreign owner to a U.S. Entity (a "Foreign-Controlled CFC," as described above) is a CFC in all situations, even when the foreign owner is not related to any Code Sec. 958(a) Shareholder.