Regulations: Dividends received deduction limitation when from certain foreign corporations (text of regulations)

June 14, 2019

The U.S. Treasury Department and IRS this afternoon released for publication in the Federal Register final temporary regulations (T.D. 9865) and, by cross-reference, proposed regulations (REG-106282-18) concerning the section 245A limitation on a deduction for dividends received from certain foreign corporations and amounts eligible for the look-through exception under section 954.

Read the temporary regulations [PDF 495 KB] (105 pages) and the proposed regulations [PDF 210 KB] (eight pages).

The U.S. tax law enacted in December 2017—(Pub. L. No. 115-97) the law that is at times referred to as the “Tax Cuts and Jobs Act” (TCJA)—added new section 245A to establish a participation exemption system for the taxation of foreign income. Section 245A allows a domestic corporation that is a U.S. shareholder (as defined in section 951(b)) of a specified 10% foreign corporation a 100% dividends received deduction (DRD) for the foreign-source portion of dividends received from the foreign corporation (a 100% DRD). The 100% DRD is available only to domestic C corporations that are neither real estate investment trusts nor regulated investment companies

The regulations released today provide guidance under section 245A that limits the dividends received deduction available for certain dividends received from current or former controlled foreign corporations.

  • The temporary regulations also include rules that limit the applicability of the exception to foreign personal holding company income for certain dividends received by upper-tier controlled foreign corporations from lower-tier controlled foreign corporations as well as guidance to facilitate administration of certain rules.
  • These regulations concern U.S. domestic corporations that receive certain dividends from current or former controlled foreign corporations and United States shareholders of upper-tier controlled foreign that receive certain dividends from lower-tier controlled foreign corporations.

These regulations are scheduled to be published in the Federal Register on June 18, 2019.

The purpose of this report is to provide text of the regulations.

The information contained in TaxNewsFlash is not intended to be "written advice concerning one or more Federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230, as the content of this document is issued for general informational purposes only, is intended to enhance the reader’s knowledge on the matters addressed therein, and is not intended to be applied to any specific reader’s particular set of facts. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. Applicability of the information to specific situations should be determined through consultation with your tax adviser.
KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.
Direct comments, including requests for subscriptions, to Washington National Tax. For more information, contact KPMG’s Federal Tax Legislative and Regulatory Services Group at + 1 202.533.4366, 1801 K Street NW, Washington, DC 20006-1301.
To unsubscribe from TaxNewsFlash-United States, reply to Washington National Tax.
Privacy | Legal