IRS Issues Guidance Related to the Filing Obligations Resulting from the New CFC Downward Attribution Rules

The Tax Cuts and Jobs Act (the “Act”) changed the stock attribution rules that are used to determine whether a non-U.S. corporation is a “controlledforeign corporation” (or “CFC”) and whether a U.S. person is a “United States shareholder” of the CFC for U.S. federal income tax purposes. Among the changes made by the Act, was the elimination of a previous limitation on so-called “downward attribution.” Prior to the Act, any shares in a non-U.S. corporation that were owned by a non-U.S. person were not attributed down to any U.S. partnership, corporation, trust or estate in which such non U.S. person held an interest. The Act has eliminated this limitation on “downward attribution.” As a result, a U.S. partnership, corporation, trust or estate will be deemed to own any stock in a non-U.S. corporation that is owned by a non-U.S. partner, shareholder or beneficiary, respectively.

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