#gilti tax

[citizenshipsolutions]

Monte Silver's Lawsuit Opposing The Procedural Aspect of #GILTI Regs Lives On

In summary – Monte Silver’s lawsuit against GILTI lives on! On April 19, 2024 the U.S. Court Of Appeals released a decision which included: Plaintiffs had objected before the district court that the Anti-Injunction Act did not apply in light of South Carolina v. Regan, 465 U.S. 367 (1984), because they had no other way to litigate their claims. The defendants argued that the Act barred the suit…

[capitalism-and-analytics]

Some highlights from the proposed bill for those interested:

Highest Personal Income Tax Rate Since 1986 (combined Federal Tax rate of 45%)

Highest Capital Gains Tax Since 1978. A rate over twice as high as China’s capital gains tax rate.(nearly doubles rate from 20% to 39%)

Corporate Tax Rate Higher than Communist China. (A 31% increase, from 21% to 28%)

Unconstitutional Wealth Tax on Unrealized Gains

Quadrupled Tax on Stock Buybacks. This tax will hit every American with a 401K or IRA or union pension.

$31 Billion Tax on American Energy

32% Increase to Medicare Taxes

Carried Interest Tax on Capital Gains

$23 Billion Retirement Tax

$24 Billion Cryptocurrency Tax

Real Estate Tax Hike (wants to end 1031 Like-Kind Exchanges)

Doubles the Global Minimum Tax (Global Intangible Low-Tax Income (GILTI) from on U.S. multinational corporations from 10.5 to 21 percent, which after the disallowance of foreign tax credits would provide a top rate of 26.25 percent)

[adelitawilliam]

The Impact of Tax Reform on Small Business Accounting

Tax reform can have profound effects on small businesses, particularly when it comes to their accounting practices. Changes to tax laws can influence everything from deductions and credits to reporting requirements and tax rates. Understanding these changes is essential for small business owners to navigate their finances effectively and minimize tax liabilities. This article will explore the various ways tax reform impacts small business accounting.

Changes in Tax Rates

One of the most direct impacts of tax reform on small businesses is changes in tax rates. The Tax Cuts and Jobs Act (TCJA), passed in 2017, significantly reduced the corporate tax rate from 35% to 21%. For small businesses operating as corporations, this reduction means lower taxes on profits, leading to more available capital for reinvestment. However, small businesses organized as pass-through entities (S-corporations, partnerships, LLCs) were also affected by changes in the Qualified Business Income (QBI) deduction. Under the TCJA, eligible pass-through businesses can deduct up to 20% of their qualified business income, reducing their taxable income.

Modifications to Deductions and Credits

Tax reform also brought changes to available deductions and credits for small businesses. For example, the standard deduction for business owners was increased, allowing them to deduct more of their business-related expenses. The reform also limited certain deductions, such as the deductibility of interest on loans for businesses with large capital expenditures. Small businesses need to stay up to date with these changes to maximize the available tax benefits while avoiding the risk of missing out on potential savings.

Additionally, some credits that businesses previously relied on, such as the Work Opportunity Tax Credit (WOTC) or research and development (R&D) credits, were enhanced or expanded under the reform. This can incentivize small businesses to invest in growth opportunities, hire more employees, and engage in innovative projects.

Simplified Accounting Methods

Tax reform has also affected how small businesses can apply accounting methods. For smaller businesses, the reform increased the threshold for eligibility to use the cash-based method of accounting. Previously, businesses with gross receipts exceeding $5 million had to use the accrual method of accounting. After the reforms, this threshold was raised to $25 million, allowing many small businesses to adopt the cash method, which is simpler to manage for accounting purposes. This can simplify bookkeeping and reduce the burden of tracking inventory or dealing with accounts receivable and payable in a more complex manner.

Changes to Depreciation Rules

Another key change in tax reform is the adjustment to depreciation rules. The TCJA introduced "bonus depreciation," which allows businesses to immediately deduct 100% of the cost of qualified property in the year it is purchased, rather than depreciating it over several years. This provides immediate tax relief and can significantly improve cash flow for small businesses investing in equipment, machinery, or other long-term assets. This accelerated depreciation method, combined with the expensing options for certain business property, allows businesses to reduce their taxable income and reinvest the savings back into their operations.

International Tax Considerations

For small businesses engaged in international trade, tax reform also introduced changes that could impact their global operations. One of the major shifts was the shift toward a territorial tax system, where businesses are only taxed on their domestic income. Under the previous system, businesses were taxed on global income, but with reforms, this approach allows small businesses with international dealings to repatriate foreign earnings without facing double taxation. Furthermore, the introduction of the Global Intangible Low-Taxed Income (GILTI) provision requires small businesses to pay a minimum tax on foreign earnings, impacting those who operate globally.

Administrative and Reporting Requirements

Tax reforms often come with new administrative and reporting requirements. Small business owners may need to adjust their accounting systems and processes to comply with new rules. For example, businesses now have to keep a more detailed record of expenses to qualify for the QBI deduction or claim bonus depreciation. Additionally, more frequent reporting of business income and expenses may be necessary to take advantage of the expanded tax credits.

Conclusion

Tax reform has reshaped the landscape for small businesses, creating both opportunities and challenges for owners. To effectively navigate these changes, small businesses must stay informed and consult with accountants offering business accounting services in Orange, CA who understand the implications of the reform on their specific industries. 

By leveraging tax incentives, simplified accounting methods, and new deductions, small business owners can improve their financial standing, reinvest in their operations, and keep more of their earnings. However, staying compliant with new regulations and adjusting internal processes is essential to ensure the benefits of tax reform are fully realized.

[finlotax]

The Importance of Form 5471 for Controlled Foreign Corporations: What You Need to Know

Sharing ownership in a foreign corporation can be exciting and rewarding, but it has additional disclosure requirements by the IRS. Form 5471 is one of these disclosure requirements and applies to US citizens with ownership in a foreign corporation. If you share ownership in a foreign company, you must deal with the complexities of filing Form 5471. Understand the basics involved in filing Form 5471 below.

Form 5471 and controlled foreign corporations

Understanding Form 5471

Form 5471 is essentially an information statement and not a tax return. It is officially known as the Information Return of US Persons concerning Certain Foreign Corporations. It is meant to inform the IRS about US citizens’ holdings in foreign companies and prevent people from hiding such overseas assets. The IRS also needs to be informed about which countries these investments have been made. Failing to file Form 5471 can attract a penalty but not tax obligations, except in certain cases. These exceptions include shareholdings in a Controlled Foreign Corporation (CFC) which can attract the GILTI (Global Intangible Low-taxed Income) tax. However, you only need to file Form 5471 if you have 10% or more ownership in a foreign corporation. The law applies to any US citizen, partnership, trust, corporation, estate, etc.

IRS categorization for filing Form 5471

The IRS has categorized those required to file Form 5471 into five groups.

1. Category 1

This category includes US citizens who are shareholders of specified foreign corporations (SFCs) and are subject to transition tax under section 965.

 2. Category 2

This category includes US citizens who are officers and directors of foreign corporations with other US shareholders holding 10% of the company’s stock.

 3. Category 3

US citizens who have acquired or disposed of substantial holdings in a foreign corporation.

 4. Category 4

US citizens who had control over a foreign company for at least 30 days during the taxation year.

 5. Category 5

US citizens owning shares in a controlled foreign corporation (CFC)

Understanding what Controlled Foreign Corporations are

A foreign company in which US shareholders hold more than 50% of the stock and combined voting power is known as a controlled foreign corporation. Here, “US shareholder” implies a US citizen who owns 10% or more of the total combined voting power in the foreign corporation. If a US citizen owns less than 10% of the total combined voting power, his/her ownership will not be considered to deem a foreign corporation a controlled foreign corporation. If you hold stock in such a controlled foreign corporation you may be liable to pay GILTI tax.

Direct, indirect, and constructive stock ownership

The IRS has created a wide scope for Form 5471, requiring compliance by those with direct, indirect, and constructive foreign stock ownership. Direct foreign stock ownership is when you directly own 10% or more of a foreign company’s stock. Indirect ownership of a foreign company’s stock includes those who own shares in a foreign company through a complex network of entities which may include partnerships, other corporations, trusts, etc. If you own stock in a foreign company indirectly, and meet the 10% threshold, you are required to file form 5471.

Apart from these two forms of stock ownership, there is another form known as constructive ownership. The constructive ownership rules are based on the attribution rules of IRC Section 318, and permit the IRS to attribute certain forms of foreign stock ownership to you based on your connections or relationships. In such instances too you are required to file Form 5471.

Significance of Form 5471 for US shareholders of controlled foreign corporations

IRS rules for CFCs are complex, with different reporting implications for various shareholding scenarios. The main reason behind reporting in form 5471 is that the IRS needs to know whether US taxpayers are involved in a Controlled Foreign Corporation. Form 5471 Is generally submitted along with the yearly tax return form 1040. Form 5471 is a crucial and complicated component of the tax returns of a US citizen with holdings in a controlled foreign corporation. Depending on the taxpayer’s category, he/she will have to file different schedules under form 5471. In its entirety, the form must include details about the identity of the controlled foreign company; its share structure; the shareholdings of its US shareholders; directors and officers who are US citizens; balance sheet and income statement; particulars of financial transactions between the company and its US shareholders; changes in shareholdings of any US shareholders.

Penalty

Failing to file form 5471 on time can attract steep penalties. The IRS can levy a penalty of $10,000 on each failure for every applicable accounting year plus an additional $10,000 for every month that the failure to comply continues, beginning 90 days after the taxpayer has been notified of the delinquency and extending up to a maximum of $60,000 per return.

Filing Form 5471 is a complex and daunting process for shareholders of controlled foreign corporations, irrespective of whether you hold shares directly, indirectly, or through constructive ownership. If you own shares in more than 1 controlled foreign corporation, you must file a separate form 5471 for each such corporation. Failing to comply with the provisions of Form 5471 can attract high penalties.

Finlotax: An efficient taxation firm in CA

We are Finlotax, experts you can count on for all your tax needs in CA. Avail our unmatched services in bookkeeping, tax prep, tax planning, payroll, and compliance solutions. If you need to deal with the complexities of Form 5471, just reach out to us at 4088229406 and we will guide you through the entire process of filing your returns. Trust us for a hassle-free and smooth return filing process!

[gary232]

Joe Biden’s Proposed Budget for Fiscal Year 2024:

Business Taxes:

Increase the corporate income tax rate to 28 percent.

Raise the global intangible low-taxed income (GILTI) tax rate from 10.5 percent to 21 percent and repeal the reduced tax rate on foreign-derived intangible income (FDII).

Repeal the base erosion and anti-abuse tax (BEAT) and replace it with an undertaxed profits rule (UTPR) consistent with the OECD/G20 global minimum tax model rules.

Expand the net investment income tax to nonpassive business income.

Raise taxes on the fossil fuel industry.

Capital Gains and Dividend Taxes: Tax long-term capital gains and qualified dividends at ordinary income tax rates for taxable income above $1 million.

Tax unrealized capital gains at death above a $5 million exemption ($10 million for joint filers).

Tax carried interest as ordinary income.

Impose a minimum effective tax rate of 20 percent on an expanded measure of income, including unrealized capital gains, for households with net wealth above $100 million.

Credits, Deductions, and Exemptions: Make the Child Tax Credit permanently refundable.

Increase the Child Tax Credit to $3,600 for young children and $3,000 for older children (temporarily).

IRS Funding:

The Biden administration proposes an additional $29.1 billion in funding for the Internal Revenue Service (IRS). This investment is expected to increase compliance and enforcement, resulting in an extra $105 billion of revenue on the net and $13.4 billion from reducing the tax gap12.

Modernization Goals:

Despite a $20 billion cut to the IRS modernization fund in FY 2024, the agency still has roughly $60 billion

[tempobowl0]

Reporting Foreign Real Estate Rental Income

This form is due by 15th day of the 3rd month after the end of the trust’s tax year. irs form 8865 U.S. citizens and U.S. residents who are the tax owners of a Foreign Disregarded Entity are responsible for filing Form 8858, Information Return of U.S. U.S. persons with assets located outside the United States may be subject to additional reporting. Starting in tax year 2013, the form had to be filed by any individual who had a PFIC value that exceeds the specific exemption/exclusion amounts. The U.S Government takes a very heavy hand against taxpayers on issues involving the reporting of foreign mutual funds. If you are out of compliance for failing to report foreign assets to the IRS, IRS Offshore Voluntary Disclosure is one of the best and safest methods for getting back into compliance. Finally, do keep in mind that the value of these specified foreign (non-Canadian) properties need to be reported both in Canadian dollars and in the foreign currency. The exchange rate to be used to convert from the foreign currency to Canadian dollars should be based on the exchange rate in effect at the time of the transaction. That is, at the time the income was received from the property, or the exchange rate on the date the property was purchased. For income received from the specified foreign property an average exchange rate may be used. However, while you should be careful with your FBAR filing, do not let the process intimidate you. Consider consulting a tax expert, especially one with experience in international tax compliance. It is also worth noting that the due date for the FBAR recently changed. The term “offshore accounts” is often used as shorthand to suggest that such account holders are trying to dodge tax responsibilities. Individuals can file the form electronically for the 2014 taxation year. The T1135 for a corporation cannot yet be filed electronically with the tax return, but must be sent by mail. It can be attached to the tax return or partnership information return, and mailed to your tax centre, or can be mailed separately to the Ottawa Technology Centre. Individuals can file the form electronically for the 2015 taxation year. The tax calculation on unreported PFIC income is both onerous and complicated. Expats with foreign real estate rental income are required to report their rental income as part of their worldwide income on form 1040. Previously, the form was only filed if income was actually received. In addition, the revised form seeks information on first year of receipt of FDI/ODI and disinvestment. The foreign asset reporting requirement extends to trusts outside India where the ROR is a trustee, a settlor or a beneficiary. As with bank accounts, details for each investment and/ or investment account needs to be reported separately. Schedule FA also specifically requires reporting of details in relation to bank accounts where the individual has a signing authority. The reporting requirement for bank accounts include name and address of the bank, account number, name of the account holder, date of opening, peak balance during the year and interest earned. Owning shares of a passive foreign investment company, or PFIC, subjects U.S. taxpayers to a complicated set of rules enacted in the 1980s in order to eliminate beneficial tax treatment for certain offshore investments. Under the current rules, in most cases PFIC distributions are taxed as ordinary income, rather than as long-term capital gains or dividends. Judging by the sheer number of questions on the Intuit website regarding foreign interest income this amendment would be time well spent. Again, thanks to TTML for the helpful clarification and explanation. A trust is a collection of assets that are handled by a third party, the “trustee,” whose objective is to manage the assets on behalf of the trust fund’s beneficiary. The difference between a domestic trust and a foreign trust is that a foreign trust is neither under the jurisdiction of a U.S. court, nor do U.S. persons control major decisions about the trust. Further, a domestic trust can become a foreign trust after its establishment. (I suspect that what the wording meant to say is "later" in a different section, not in the current 1099INT section). Even the "learn more" link for 1099INT does not mention that foreign interest income should be input in this section. The 1099INT section has a graphic image of the top of a 1099INT form as well as questions about various boxes on the 1099INT form, all of which creates the impression that without a 1099INT you are in the wrong place. The other alternative was to assume that foreign interest income might be input into the field for "foreign accounts" but again the TT software does not allow you to do this . The easy solution would be to amend the wording on the 1099INT page to state that even without a 1099INT, foreign interest income should be added in this section. It seems quite simple to correct this (time consuming!) impression with a few extra words or some additional info in the "learn more" link. This is because the IRS wants to make sure they get their chance to tax the foreign mutual fund in accordance with the PFIC anti-deferral of tax regime. A foreign trust with a U.S. owner must file Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Can something be done to amend the TT software to remove the confusing and misleading language? When entering interest income the website says that if you have interest from something else - which would clearly seem to include foreign interest which is not on a 1099INT - it will be added later. Despite this statement, the software does not provide the option to add foreign interest later. Previously, he worked in the corporate accounting department at Motorola where he oversaw financial reporting and tax preparation for the firm’s mobile division of Eastern Europe. The form will seek investor-wise direct investment and other financial details on fiscal year basis as hitherto, where all reporting entities are required to provide information on FATS related variables . Curious about how the recent Tax Cuts and Jobs Act of 2017 impacts FBAR? Largely, foreign reporting requirements remain unchanged, despite tax reform. Kunal helped us with a successful streamlined filing disclosure of foreign assets. He came across as very knowledgeable and answered all our questions…He was efficient and quick in completing the process after we had put together all our documentation. Peak balance refers to the maximum account balance during the year and not the balance at the end of the year. Even where an ROR does not have any taxable income in India, a tax filing requirement arises if the individual has any assets outside of India. Foreign financial accounts maintained on a United States military banking facility. in which the U.S. person has a greater than 50% direct or indirect present beneficial interest in the trust’s assets, or receives 50% of the income. While the Foreign Account Tax Compliance Act has provided U.S. persons with foreign assets guidance on how to get compliant with the IRS since 2009, the Treasury Department has demanded their compliance via the Banking Secrecy Act since 1970. In addition to the penalties already discussed, if you fail to file Form 8938, fail to report an asset, or have an underpayment of tax, you may be subject to criminal penalties. Do all of these foreign account disclosure rules and regulations seem unnecessarily burdensome or duplicative? However, these same rules and regulations define the present state of "foreign" account disclosure and reporting required, as a function of United States law. Passive Foreign Investment Companies sound like an exotic and highly specialized investment and it’s easy to assume that you don’t own any. However, this conclusion would be a mistake as PFICs include hedge funds, money market accounts, mutual funds, private equity funds and a long list of other foreign investments.

[citizenshipsolutions]

Part 45 - "Some" examples where the U.S. creates unrealized "foreign income" before a realization event in the source country

Let There Be Income And There Was Income! The United States has an increasing propensity to create “deemed income” in circumstances where the taxpayer has received no income to pay the tax. In some cases the “deemed income” created is “foreign source” income. In other cases it is purely domestic source. When the “deemed income” is “foreign source” income over which the other country has primary…

[adelitawilliam]

Unpacking The Latest Tax Law Changes: What They Mean For Your Business

Tax law changes can have significant implications for businesses, impacting their tax liabilities, reporting requirements, and overall financial strategies. Staying informed about the latest tax law changes is crucial for businesses to ensure compliance and optimize their tax positions. Here's a breakdown of the latest tax law changes and what they mean for your business:

Corporate Tax Rate Reductions: One of the most significant recent tax law changes is the reduction in corporate tax rates. In many jurisdictions, including the United States, corporate tax rates have been lowered to stimulate economic growth and encourage business investment. For businesses subject to corporate income tax, lower tax rates can result in reduced tax liabilities and increased after-tax profits.

Pass-Through Deduction: Another notable tax law change is the introduction of the pass-through deduction, which allows certain pass-through entities, such as partnerships, S corporations, and sole proprietorships, to deduct up to 20% of their qualified business income from their taxable income. This deduction can provide significant tax savings for eligible businesses and may influence business structuring decisions.

Bonus Depreciation and Expensing: Recent tax law changes have expanded bonus depreciation and expensing provisions, allowing businesses to deduct the cost of qualified property purchases immediately or over a shorter period. These provisions incentivize businesses to invest in capital assets and equipment, stimulating economic growth and productivity.

Changes to Deductions and Credits: Tax law changes may also impact deductions and credits available to businesses. For example, changes to the deductibility of business expenses such as entertainment, meals, and travel may affect business spending and expense management practices. Similarly, modifications to tax credits, such as research and development credits or energy efficiency incentives, can influence businesses' investment decisions and financial planning strategies.

International Tax Reform: Recent tax law changes have introduced significant reforms to international tax rules, particularly aimed at preventing profit shifting and tax avoidance by multinational corporations. These reforms include provisions such as global intangible low-taxed income (GILTI) and base erosion and anti-abuse tax (BEAT), which may impact the tax treatment of foreign income and transactions for multinational businesses.

State and Local Tax Changes: In addition to federal tax law changes, businesses must also consider state and local tax law changes that may affect their tax liabilities and compliance obligations. State and local tax laws vary widely across jurisdictions and may include changes to income taxes, sales taxes, property taxes, and other levies that impact businesses operating in those jurisdictions.

Compliance and Reporting Requirements: Tax law changes often result in new compliance and reporting requirements for businesses. It's essential for businesses to stay updated on these requirements and ensure timely and accurate filing of tax returns and related documentation. Failure to comply with new tax reporting obligations can result in penalties and fines for businesses.

Tax Planning Opportunities: While tax law changes may pose challenges for businesses, they also present opportunities for tax planning and optimization. Businesses can work with tax advisors and accountants to assess the impact of tax law changes on their operations and identify strategies to minimize tax liabilities, maximize deductions and credits, and optimize their overall tax positions.

In conclusion, accounting companies in Oklahoma City OK play a crucial role in helping businesses navigate the complexities of tax law changes. By leveraging their expertise and insights, businesses can adapt to recent tax reforms, optimize their tax planning strategies, and ensure compliance with evolving tax regulations.

[corporatetaxaccountant]

Global Intangible Low-Taxed Income and Canadian Corporations

If you are a U.S. person and shareholder of a Canadian corporation, especially Canadian controlled private corporation (CCPC) or professional corporation, you might be struggling around GILTI.

What is GILTI?

How is GILTI calculated?

How to avoid GILTI?

If you are having all these questions, you are not alone! Let’s simplify the GILTI for you. If you need a more detailed but simplified understanding of GILTI and how it affects the U.S. shareholders of Canadian corporations, read here.

GILTI is a complex tax topic and ideally should be dealt by a cross border tax accountant in Toronto. However, you can avoid the GILTI altogether by one simple decision – Pay yourself Salary from your Canadian corporation!

Yes, by paying yourself salary you can remove the earnings from the corporation. The income is reported as an employment income on your Canadian income tax return. Foreign tax credit against the income tax credits paid in Canada are available to apply against US income tax liability of this foreign income. Personal Income tax rates in Canada are generally higher than the U.S. ones so you don’t end up paying taxes in U.S. Another way to optimize your GILTI tax lability is to file section 962 election. This election allows you to treat income of your foreign controlled corporation as a domestic corporation so apply 21% corporate tac rate. The down side is when you take dividends from Canadian corporation, you will pay additional 15% tax on dividend income. However, you will eb able to claim foreign tax credits at both corporation and individual level. BY far this is the best option for many small business owners.

GILTI is taxed at the highest marginal rate for the individuals. For corporate taxpayers, it is taxed at 21% and a sec 250 deduction brings it down to 10.5%.

Maroof HS CPA Professional corporation are cross border tax experts in Canada.

Source: https://uscanadataxaccountant.wordpress.com/2021/04/19/global-intangible-low-taxed-income-and-canadian-corporations/

[calcbench]

GILTI Tax Data: Yeah, We Got That

No branch of financial data is too obscure for Calcbench to go full nerd, and today we demonstrate that commitment by returning to the world of tax data for a look at one of the newest tax disclosures out there.

Today we look at Global Intangible Low Tax Income, otherwise known as the GILTI tax.

GILTI was created by the U.S. tax reform law enacted at the end of 2017. It’s supposed to be a tax on certain types of foreign earnings, to dissuade U.S. companies from relocating their corporate headquarters (or other valuable intellectual property) to low-tax jurisdictions overseas.

Basically GILTI sets a minimum tax of 10.5 to 13.125 percent on the average foreign tax rate U.S. companies pay around the world. Spoiler: in the two years since its creation, GILTI hasn’t quite had that “keep your valuable asses here” effect lawmakers desired — but then, unintended consequences are nothing new to the U.S. tax code.

Calcbench isn’t interested in the perverse incentives stuff anyway. We just wanted to know how one can find GILTI tax data, so you can do whatever research is on your mind.

Here’s what we did.

First, GILTI turns up in a company’s tax reconciliation. That’s the breakdown every company provides explaining the difference between what it’s supposed to pay according to statutory corporate tax rates, and what it actually pays after various deductions and credits. So if you want to find GILTI payments, start there.

We used our Interactive Disclosure database, our Segments and Breakouts page, and our Raw XBRL Query tool to search those disclosures for “GILTI.” We found 27 companies that reported a reconciliation item related to GILTI. Table 1, below, shows the firms that reported an actual GILTI amount.

Here comes the tricky part. Firms can reconcile their tax disclosures in several ways. Some reconcile by dollar amount; others reconcile by tax rate. A few even reconcile both ways, which is nice.

But this does mean if you want a holistic look at all GILTI disclosures, you need to do some calculations. For example, Merck & Co. ($MRK) reported a GILTI tax payment of $336 million in 2019. Laboratory Corp. of America ($LH), meanwhile, reported that GILTI payments were 1.1 percent of total tax payments — so if you wanted to calculate the dollar amount, you’d need to look at what Lab Corp paid in taxes and do some math.

Financial analysts have another issue: U.S. Generally Accepted Accounting Principles don’t have a standard tag to apply to GILTI payments. That is, all firms report revenue using the same XBRL tag — and ditto for operating income, inventory, future lease payments, and so forth. You can easily find all companies’ disclosure of those items by searching for that tag.

GILTI has no such standard tag. Instead, each company still uses its own extension tag, and that can vary from one firm to the next. We found “GILTI tax,” “GILTI expense,” “GILTI net of foreign tax credits,” and lots of other examples.

In the fullness of time, GAAP might define a GILTI tag that applies to all companies. Today, analysts must still search disclosures and XBRL tags for “GILTI” or closely related terms.

That’s OK. Calcbench still has the data, and the database functionality to find those numbers — quickly and accurately.

[dragoni]

99%: “Death and TAXES” #GrabYourWallet #VoteThemOut

1%: Using their free tax money to buy politicians & laws

Taxpayers were upset with the $1.5 Trillion in Republican tax cuts when they should have been MAD AS HELL about the LIFE LONG TAX BREAKS for the Super Rich and corporations. 

To make things worst, the Super Rich are already finding ways to avoid paying taxes according to the new tax laws of “BEAT” and “GILTI”.

BONUS ROUND: Trump’s hand picked head of the IRS, Charles Rettig spent a lifetime fighting the IRS, helping the Super Rich avoid paying taxes and avoid being audited.  ¯\_(ツ)_/¯ Rigging the system from within.

“Racing for a Win”

Dictators Playbook: “5. Using state power to reward corporate backers and punish opponents.“

Republicans were racing to secure a legislative victory during Mr. Trump’s first year in office — a period marked by the administration’s failure to repeal Obamacare and an embarrassing procession of political blunders.

To speed things along, Republicans used a congressional process known as “budget reconciliation,” which blocked Democrats from filibustering and allowed Republicans to pass the bill with a simple majority.

“The overhaul of the federal tax law in 2017 was the signature legislative achievement of Donald J. Trump’s presidency.”  #Corporatocracy  #Kleptocracy

Multinational Corporations and their Lobbyists

The biggest change to the tax code in three decades, the law slashed taxes for big companies, part of an effort to coax them to invest more in the United States and to discourage them from stashing profits in overseas tax havens.

But big companies wanted more — and, not long after the bill became law in December 2017, the Trump administration began transforming the tax package into a greater windfall for the world’s largest corporations and their shareholders. The tax bills of many big companies have ended up even smaller than what was anticipated when the president signed the bill.

“One consequence is that the federal government may collect hundreds of billions of dollars less over the coming decade than previously projected.”

The budget deficit has jumped more than 50 percent since Mr. Trump took office and is expected to top $1 trillion in 2020, partly as a result of the tax law.

The lobbyists targeted a pair of major new taxes that were supposed to raise hundreds of billions of dollars from companies that had been avoiding taxes in part by claiming their profits were earned outside the United States.

The blitz was led by a cross section of the world’s largest companies, including Anheuser-Busch, Credit Suisse, General Electric, United Technologies, Barclays, Coca-Cola, Bank of America, UBS, IBM, Kraft Heinz, Kimberly-Clark, News Corporation, Chubb, ConocoPhillips, HSBC and the American International Group.

“Through a series of obscure regulations, the Treasury carved out exceptions to the law that mean many leading American and foreign companies will owe little or nothing in new taxes on offshore profits”

according to a review of the Treasury’s rules, government lobbying records, and interviews with federal policymakers and tax experts. Companies were effectively let off the hook for tens if not hundreds of billions of taxes that they would have been required to pay.

“It is largely the top 1 percent that will disproportionately benefit — the wealthiest people in the world.”,  Bret Wells, tax law professor

“Shifting Money”

Two of the biggest new taxes were supposed to apply to multinational corporations, and lawmakers bestowed them with easy-to-pronounce acronyms — BEAT and GILTI — that belie their complexity.

The BEAT aimed to make that less lucrative. Some payments that companies sent to their foreign affiliates would face a new 10 percent tax.

The other big measure was called GILTI: global intangible low-taxed income.... the law imposed an additional tax of up to 10.5 percent on some offshore earnings.

Long read - there’s more:

Built-In Loopholes

An Exhaustive Lobbying Campaign

Helping Foreign Banks

Read the top comments chosen by the NYTimes; “NYT Picks”

[citizenshipsolutions]

Part 44 - The Moore's, Unrealized Income And The U.S. Extraterritorial Tax Regime

Exporting U.S. taxes, forms and penalties to the residents of other countries "The Little Red Transition Tax Book" – Everything you need to know about the 965bmandatory repatriation tax but didn't know to ask. A horrific abuse of #Americansabroad in a @citizenshiptax and #FATCA world! https://t.co/j7v1Asreek — U.S. Transition Tax – Subpart F and #GILTI (@USTransitionTax) June 26, 2023 In the…

[phroyd]

Democrats criticized the legislation, originally known as the Tax Cuts and Jobs Act of 2017, but officially called An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018, but Republicans defended the law as a necessary overhaul to previous tax laws and a means to provide economic relief for the middle class.

The dueling partisan narratives left many taxpayers with a murky understanding of the law’s impact.

To gain a better grasp on the intricacies of the 2017 Act, professors David Kamin, Lily Batchelder, and Daniel Shaviro—tax law experts from the New York University School of Law—cowrote a paper analyzing the sweeping legislation which appears in the Minnesota Law Review.

According to the authors, “Many of the new changes fundamentally undermine the integrity of the tax code and allow well-advised taxpayers to game the new rules through strategic planning.”

Here, the authors describe how some may take advantage of the new system, and how changes to the tax laws may affect the US economy.

‘CRACKING AND PACKING’

David Kamin: One of the largest tax cuts in the legislation goes to “pass-through” businesses—where income is taxed at the level of the owner rather than the business. But, to be eligible for this tax cut, owners need to meet certain very complex criteria.

For those with higher incomes, this includes being in the “right” line of business. That means being an architect (eligible) and not a lawyer (not eligible). Selling skincare products (eligible) but not being a dermatologist (not eligible). The formalistic and largely arbitrary lines then allow for much gaming, including what we—borrowing from the election law context—call “cracking and packing,” pulling apart and combining businesses.

For instance, a dermatologist office might “crack” apart a skincare products business run out of the same office, share overhead expenses, and then try to assign as much of those overhead expenses as possible to the dermatology practice to maximize profits eligible for the deduction. Possibly abusive? Yes, but very hard for the IRS to catch.

Lily Batchelder: The bill creates large incentives for the wealthy to convert their labor income into business income. This was already an issue in the tax code because of the carried interest loophole and loopholes in the payroll tax. But the bill makes a bad situation much, much worse.

If a wealthy individual hires an elite tax advisor to make their labor income look like pass-through business income, they can cut their marginal tax rate by more than 7 percentage points. And if they don’t need to spend the income anytime soon and treat it as corporate income, they can cut their tax rate by 20 percentage points.

Theoretically, middle class families could engage in the same games but they are much less likely to do so for at least three reasons. First, middle class families would receive much smaller tax benefits from such gaming and in many cases, none. Second, they often have little leverage over their employers to restructure their compensation and, even if they did, probably would have to give up all of their employee benefits in exchange. This includes their health insurance, 401(k), and disability insurance. Last, they are less likely to be able to afford a tax advisor with the expertise to structure this kind of arrangement in the first place!

GAMING THE SYSTEM

Daniel Shaviro: One of the many disappointing aspects of the 2017 act was its failure to address the opportunities for sheltering labor income from tax at full individual rates, through use of the corporate tax. Pre-2017, the top corporate rate was far closer to the top individual rate than it is post-2017. The main rationale for the corporate rate reduction pertained to global tax competition for scarce capital. This has no bearing on the case where the owner-employee of a corporation pays herself far less than the market value of her work.

For example, suppose I create a wildly successful new start-up and pay myself zero salary, despite my becoming, in net worth terms, a billionaire via the stock appreciation. The income that my efforts yield will show up in the corporate tax base, and be taxed at only 21 percent. True, I would face a second level of tax on paying myself dividends or selling my stock, but even this would be at a reduced rate. And what’s more, I may not need to make such payments if I am sufficiently financially liquid, e.g., by reason of borrowing against the value of the stock.

Opinions in the “biz” differ on how frequently taxpayers will find it worthwhile to do this, given the difficulty of extracting funds from one’s company tax-free. What is plain, however, is that Congress in 2017 deliberately did nothing to prevent this from happening. Indeed, the final version of the 2017 Act reduced the efficacy of a provision in the House bill that would have slightly addressed the problem by setting the tax rate for “personal service corporations” (PSCs) at 25 percent rather than just 21 percent. In the final act that rate is just 21 percent, like the general corporate rate, causing the PSC rules to be close to meaningless as a defense against using corporations as a tax shelter for labor income.

Shaviro: In the international realm, the 2017 Act may actually have improved the law marginally. At a minimum, it created a new regime that could be tweaked by future Congresses to yield a better system than the previous one. However, the main new international rules that it added to the code unnecessarily created multiple opportunities for game-playing. Just to give some quick examples without getting too deep into the weeds:

The foreign-derived intangible income (FDII) rules, which provide a special deduction for exports by companies, such as Apple and Facebook, that have valuable intellectual property, create incentives for “round-tripping” goods—e.g., selling them to a foreign taxpayer, then buying them back with just enough bells and whistles to prevent the entire transaction from being disregarded.

Both FDII and the global intangible low-taxed income (GILTI) rules can create incentives to locate business assets abroad rather than at home.

The base erosion anti-avoidance tax (BEAT) can be gamed through such means as restructuring supply chains so one is purchasing sale items for customers from one’s foreign affiliates. The BEAT can also be gamed by adding lots of extra deductions (offset by lots of extra income so the sum total is a wash), so that so-called “base erosion tax benefits” will fall below an arbitrary “floor” (as a percentage of total deductions) that the BEAT imposes for no discernible reason.

VIOLATING THE WTO TREATY?

Shaviro: The FDII rules almost certainly violate the World Tax Organization treaty, of which the US is a signatory. They are expressly an export subsidy, and the WTO makes export subsidies illegal. If other treaty signatories challenge the FDII rules, there is a very high probability that they’ll be held illegal, with the consequence that peer countries will be authorized to respond with targeted provisions of their own.

In the last 30 or so years, the US has enacted illegal export subsidy rules on three separate occasions. Each time the rule was held violative and the US backed down. Why do this again? I think the main answer was cynicism, but ironically the prospect of an overturn makes the US companies that wanted favorable tax treatment more leery than they would otherwise have been of setting up complex structures to take maximum advantage of the FDII rules.

‘AN ARRAY OF MISTAKES’

Kamin: The legislation was written at an extremely rapid clip, leaving an array of mistakes—some minor and some large. An early one to emerge was the “grain glitch.” In attempting to apply the pass-through deduction to businesses organized as cooperatives, especially prevalent in agriculture, legislators wrote in an even larger loophole by accident. Effectively, farmers selling to these cooperatives (think Ocean Spray cranberries) could potentially entirely wipe out their tax liability because of the glitch.

This one was large enough—and was causing sufficient chaos in the agricultural sector—that it was fixed. But most haven’t been. So, take another: one of the largest revenue raisers in the legislation was limiting the deductibility of state and local taxes for individuals to $10,000. However, the letter of the law seems to fail to apply that to another form of cooperative, a housing cooperative.

So, owners of pricey cooperatives in NYC may be able to deduct their property taxes without limit; by contrast, owners of traditional condominiums and houses will not. And the list could go on.

MAJOR TAKEAWAYS

Batchelder: The bill is heavily tilted towards the wealthy. According to the official Congressional budget scorekeepers, this year the average millionaire will get a tax cut of more than $27,000 on their personal tax return, compared to a tax cut of $431 for an average middle-class family earning $40,000 to $50,000. Even as a share of their after-tax income, the tax cut for the average millionaire is three times as large.

It is also a very costly bill. The Congressional Budget Office estimates that it will increase our national debt by $1.9 trillion by 2028, even after including its effects on the economy. These large tax cuts will eventually have to be paid for. If Congress pays for them by raising revenues in proportion to income, the vast majority of middle class and low-income families will end up worse off. These families will be hit even harder if the bill is paid for by cuts to programs like Social Security, Medicare, and Medicaid.

Shaviro: It’s often said that tax legislation should be judged by four main criteria: fairness, efficiency, complexity, and revenue adequacy. The 2017 Act, despite having good particular rules here and there, egregiously failed on all four counts.

It was an act of class warfare benefiting those at the top relative to everyone else, for the most part it reduced economic efficiency by creating perverse incentives and arbitrary distinctions between different activities, it made tax planning more complicated for those who can afford sophisticated tax advice, and it will probably lose on the order of $2 trillion of net revenue over 10 years, even if all supposedly expiring provisions are actually allowed to expire.

It was also the sloppiest, most poorly drafted tax legislation that I have ever seen, despite all the talent and effort deployed by hard-pressed staffers, because the process was so secretive and rushed.

Source: New York University

Phroyd

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How to change foreign rules with fm editor

The amended return must be filed prior to the date of filing the federal income tax return for the following tax year. 481(a) adjustment or, alternatively, amending the prior- year income tax return. 2021- 26 favorably allows taxpayers changing from an impermissible non- ADS method for property placed in service in the tax year immediately preceding the year of change ( one- year property) the option of filing a Form 3115, Application for Change in Accounting Method, with a Sec. As noted, the change applies regardless of whether the present depreciation methods are impermissible or permissible tax methods of accounting. The CFC must own the property at the beginning of the year of change. 168(g) for purposes of determining the CFC's gross and taxable income and E&P. 168(f) to the ADS method, convention, and recovery period under Sec. 2021- 26:Įligible changes: The change permits a CFC to change its method of accounting for depreciation for property described in Sec. Highlighted below are key provisions of Rev. 2021- 26 provides a new automatic change, for a limited period, permitting a CFC on an impermissible non- ADS method as well as a CFC on a permissible non- ADS method to obtain automatic consent to change its method of accounting to the ADS method for certain tangible property used predominantly outside the United States. New temporary automatic ADS method change for CFCs 2021- 26, the focus here, provides the procedural guidance for automatic method changes discussed in the preamble to the final GILTI regulations. The IRS further stated its intention to issue guidance expanding the availability of automatic consent procedures to facilitate such depreciation changes. 9866) issued on June 21, 2019, the IRS noted that CFCs not otherwise required to compute income and E&P using ADS depreciation methods may want to change to the ADS method, given the requirement to use the ADS method to determine QBAI. In the preamble of the final GILTI regulations (T.D. 951A(d)(3) provides that the adjusted basis in any property for purposes of calculating QBAI shall be determined by using ADS under Sec. shareholder determines GILTI using a formula based on certain items of each CFC that the shareholder owns, including tested income, tested loss, and qualified business asset investment (QBAI), if any. (Definitions of relevant terms are found in Sec. shareholder of any controlled foreign corporation (CFC) that owns the CFC's stock for any tax year to include the shareholder's GILTI in gross income for such tax year. shareholders in which or with which such tax years of foreign corporations end. 951A, apply to tax years of foreign corporations beginning after Dec. The revenue procedure also modifies certain special rules applicable to foreign corporations under existing method change procedures.

The automatic procedures are intended to reduce the tax- compliance burden associated with implementing the global intangible low- taxed income (GILTI) final regulations by enabling taxpayers to more easily conform their income, earnings and profits (E&P), and GILTI computations. 2021- 26, which contains procedures for certain foreign corporations to obtain automatic consent to change their methods of accounting for depreciation to the alternative depreciation system (ADS). You will still be able to use the other features of the editor, as this download does not replace anything, as the Advanced Panel is only being activated.On May 11, 2021, the IRS issued Rev. It is situated below the File Panel, which includes the About and Details sub-panels. When you run your editor you will now have access to the Advanced Panel. Open the rar file, and extract all the contents into the default folder (WinRAR sets this to football manager 2010/ tools/editor/data/format' (the format folder tells the editor how to behave)'. Once downloaded, navigate to your installed path for Football Manager (Typically C:/Program Files(x86)/Sports Interactive/Football Manager 2010 OR C:/Program Files (x86)/Steam/steam apps/common/football manager 2010) then navigate to tools/editor/data/, and place the rar file in there. You can either manually edit the xml files to do this, or alternatively you can download this file. If you are thinking about using the advanced panel, you need to activate it first. You can also contribute and ask questions at the thread on the SI forums (registration required) ( click here to view ).Įssential Downloads (How to activate the Advanced Panel) Please ensure you have downloaded the advanced panel file for all settings to be activated ( click here to download ). It is not easy to use, so I am writing this guide to help. The Advanced Panel is a hidden section of the editor that allows you to create competitions using very flexible and advanced rules. This is a guide on how to use the Advanced Panels in the Football Manager editor.

[onlyexplorer]

Why the Global Minimum Tax is Joe Manchin's worst flip yet

Why the Global Minimum Tax is Joe Manchin’s worst flip yet

Manchin also now appears to oppose the increase in US foreign income tax I mentioned earlier from a maximum of 13% to 15%. The tax, known as GILTI (for “Global Intangible Low Tax Income”), targets foreign returns above 10%. It was signed into law under President Donald Trump to discourage companies from moving facilities to low-tax jurisdictions overseas. It did not work. Offshoring under Trump…