David Rosenbloom Speaks to Bloomberg Law on GILTI

Treasury Narrows Reach of Foreign Income Levy to Fix 2017 Law

The Treasury Department has narrowed the reach of a new tax aimed at technology and pharmaceutical companies with overseas income, wiping out an unintended consequence of President Donald Trump’s 2017 tax overhaul.

The tax law, aimed at discouraging companies from using intellectual property to shift profits out of the U.S., created the so-called GILTI levy, which stands for global intangible low-tax income. It required companies that paid foreign taxes at a rate below 13.125% to pay an additional 10.5% GILTI tax. But the hastily written law unintentionally hit some companies paying foreign taxes well above that 13.125% rate.

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Companies might want to exclude their high-tax income in order to maximize their deductions, according to H. David Rosenbloom, a tax lawyer at Caplin & Drysdale and a former Treasury official. The proposed rule says that once a company makes its final choice whether to exclude income from a foreign subsidiary, it’s stuck with its choice—and whatever the tax consequences may be—for five years.

Read the full article at Bloomberg Law.