House Bill

Senate Bill

Conference Bill

Participation Exemption Regime

• Exempts dividends paid by foreign subs to U.S. corporations that hold at least 10% of the stock of the foreign subsidiary as of January 1, 2018
• Cannot use direct/indirect foreign tax credit ("FTC") to offset U.S. taxes on exempt dividends
• Holding period requirement of 180 days during 361 day period the middle of which is the ex-dividend date

• Mirrors House Bill except holding period requirement (365 days during 731 day period the middle of which is the ex-dividend date)

• Mirrors Senate Bill

Foreign Tax Credit

• Repeals indirect FTC
• Direct FTC remains
• Deemed paid credit for Subpart F inclusions apply on current basis and only on items of income treated as Subpart F income

• Mirrors House Bill

• Mirrors House and Senate Bill

Deemed Repatriation

• Imposed on 10% U.S. shareholders of either 10-50 companies or CFCs
• Inclusion is based on E&P as of either November 2, 2017 or December 31, 2017, whichever is greater
• 12% on cash and cash equivalents
• 5% on noncash amounts
• FTC fully available for carryforwards
• Partial FTC on taxes triggered by repatriation
• Election to pay tax over (up to) 8 year period in equal installments

• Imposed on 10% U.S. shareholders of either 10-50 companies or CFCs
• Inclusion is based on E&P as of either November 9, 2017 or December 31, 2017, whichever is greater
• 14% on cash and cash equivalents
• 7% on noncash amounts
• FTC disallowed on 71.4% of mandatory inclusion for cash and 85.7% for remainder
• Election to pay over 8 year period (not in equal installments)
• Mandatory inclusion generally reduced by foreign E&P deficits

• Mirrors Senate Bill except:
• Rates are 15.5% and 8% for cash and cash equivalents and noncash amounts, respectively
• Inclusion is based on E&P as of either November 2, 2017 or December 31, 2017, whichever is greater
• In the case of individuals subject to the Mandatory Inclusion, rates would be 17.5% and 9.05%, respectively

Subpart F – Constructive Ownership Rules and CFC Testing

• Makes CFC status more likely by providing that if a foreign parent holds at least 50% of the stock of U.S. Corporation, the U.S. Corporation is treated as constructively holding stock held by the foreign parent
• Eliminates ownership threshold for CFC status requiring control for uninterrupted 30 day period

• Mirrors House Bill but adds provision expanding U.S. shareholder definition to include both vote and value test

• Mirrors Senate Bill

Subpart F – Taxation of Intangible Income

• U.S. shareholders in CFCs taxed on 50% of CFC's "foreign high return amount," representing a routine return on the basis of depreciable tangible property (adjusted for interest expense); foreign tax credits limited to 80% and may only offset high return income

• Creates new categories of subpart F income – Global Intangible Low Taxed Income ("GILTI") and Foreign Derived Intangible Income (FDII). GILTI inclusion is the excess of "net CFC tested income" for the year over "net deemed tangible income return" (i.e., 10% of the shareholder's pro rata share of the aggregate bases of depreciable tangible business property of each CFC with respect to which it is a U.S. shareholder). FDII is the portion of the company's intangible income derived from serving foreign markets
• 80% deemed paid FTCs available on GILTI income
• Creates new foreign tax credit basket specifically for GILTI
• To incentivize U.S. R&D development, in connection with the GILTI inclusion, corporate U.S. shareholders would be allowed a deduction for 50% of any GILTI and 37.5% for FDII. The net effect of this would be a 10.5% and 13.125% "innovation box" that would impose tax on a CFC's net income that exceeds a routine rate of return on the CFC's tangible depreciable trade or business assets. The 10.5% tax rate would be reduced by a portion of the foreign tax credits paid on the income in question. The rates increase to 13.125% and 16.406% respectively in 2026.

• Mirrors Senate Bill with slight modifications
• With higher corporate tax rate of 21%, effective rate of GILTI would be 10.5% for GILTI and 13.125% for FDII prior to 2026

New General Limit on Business Interest Deduction

• Limits deductions for net business interest expense to 30% EBITDA (5-year carryforward) and EBIT for tax years beginning on or after January 1, 2022
• provides for exemption for taxpayers with average annual gross receipts of $25 million or less for three most recent tax years

• Limits deductions for net business interest expense to 30% EBIT (unlimited carryforward)

• Mirrors Senate Bill except limits deductions for net business interest expense to 30% EBITDA (unlimited carryforward), and 30% EBIT for tax years beginning on or after January 1, 2022
• Adopts House Bill provision allowing for exemption for taxpayers with average annual gross receipts of $25 million or less for three most recent tax years

New Limit on Interest Deduction by U.S. Corp in International Financial Reporting Group

• Limit deduction to 110% of member's share of group's global EBITDA (5-year carryforward); applies to international groups with consolidated annual gross receipts of  >$100 million

• Limit deduction for net interest expense based on "excess domestic indebtedness" of U.S. members applied on a group basis (unlimited carryforward); applies to worldwide affiliated groups with no small group exemption

• Does not adopt Senate or House Bill provision

Anti-Base Erosion Provisions

• 20% excise tax on covered payments from U.S. corporation to non-U.S. affiliate in same international financial reporting group
• Exception if non-U.S. affiliate reports as effectively connected income
• Covered payments—amounts deductible or includable in cost of goods sold, inventory, basis of depreciable/amortizable asset
• Interest, payments for certain services provided at cost and payments in certain commodities/securities transactions not covered payments

• Does not impose an excise tax provision, but adds a base erosion minimum tax (the "base erosion and anti-abuse tax," or "BEAT") equal to the excess of 10% (5% for 2018 and 12.5% for taxable years beginning after December 31, 2025) of U.S. corporations' "modified taxable income" over the amount of regular tax liability, subject to certain adjustments. Modified taxable income is determined by calculating net income without deductions for "base erosion payments" to related foreign parties
• Regular tax liability for BEAT purposes is reduced by the excess of credits against such liability over the amount of the R&D credit
• BEAT applies where a U.S. corporation has average annual gross receipts of more than $500 million over the most recent three year period and has a ratio of base eroding deductible payments of 4% or more. If a U.S. corporation's modified taxable income exceeds regular taxable income, it must pay an additional 10% tax on this excess; no credits are allowed against this tax
• Another provision denies deduction for any disqualified related party interest or royalties paid or accrued by/to a hybrid entity or in hybrid transaction

• Follows Senate Bill, with following modifications:
• Lowers the Senate Bill's 4% threshold to 3% (i.e., BEAT applies where a U.S. corporation has average annual gross receipts of more than $500 million over the most recent three year period and has a ratio of base eroding deductible payments of 3% or more)
• The BEAT calculation of regular tax liability is reduced by the amount of credits against such liability minus the total of (1) R&D credits along with (2) 80% of certain other section 38 credits, subject to a further limitation based on a percentage of the base erosion minimum tax
• Beginning in 2026, section 38 credits, including renewable energy credits and R&D credits, will no longer be accounted for in the calculation of regular tax liability

New rules for sales of 10-percent owned foreign corporations

• U.S. corporations must reduce the basis of their stock in foreign subsidiaries by the amount of dividends received from those foreign subsidiaries, but only for the purpose of determining losses on sales and exchanges of subsidiary stock

• Mirrors House Bill with respect to loss sales but allows sales of CFC stock at a gain to qualify for the Participation Exemption

• Mirrors Senate Bill

Taxation of Sale or Exchange of Partnership Interests Engaged in U.S. Trade or Business

• No Provision

• Non-U.S. partners who sell their partnership interest must report gain as effectively connected income to extent their distributive share of gain on liquidation of partnership's assets at fair market value would have resulted in effectively connected income

• Mirrors Senate Bill