EY’s Global Tax Alert provides the latest US updates, noting the following:
- Regarding the TCJA’s foreign derived intangible income (FDII) provision, a Treasury official was quoted as saying the Government is actively looking at how to apply the disqualification for related-party services that are substantially similar to services provided by the related party to US taxpayers.
- A senior IRS official said the legislative history and the purpose of the provision strongly suggests that the Internal Revenue Code Section 78 GILTI gross-up should be placed in the GILTI basket. The official conceded that that interpretation is not in the statute, however.
Reflecting on the base erosion anti-abuse tax (BEAT), the official said Treasury is presently undecided if including a markup disqualifies the entire charge or just the amount of the markup for related-party services, that otherwise qualifies for the services cost method exception.
The noted highlights are very critical in estimating the impact on financial statements, as well as compliance and planning opportunities. To the extent timely guidance is not provided this year, there will be additional uncertainties in how to measure the effects of the complex Tax Act provisions.