On October 3, 2008, the President signed H.R. 1424 into law, which includes the Emergency Stabilization Act of 2008, the Energy Improvement and Extension Act of 2008, and the Tax Extenders and AMT Relief Act of 2008. Significantly, the provision to further delay the implementation of the worldwide allocation election to 2013 was not included in the bills as a result of the Senate action.
As part of the Tax Extenders and AMT Relief Act, the following subpart F provisions have been extended for another year to January 1, 2010.
Subpart F "Look-Thru" Provision under Section 956(c)(6)
This provision permits the movement of cash among a U.S. multinational's controlled foreign corporations without current tax and permits continued foreign tax credit planning designed to repatriate high tax income. Companies that had restructured to take advantage of the provision now have another year in which to benefit from this provision.
Subpart F Active Financing Income
This exception is beneficial for the banking and insurance industries. Prior to the introduction of this exception, any income from banking and insurance offshore activities was treated as subpart F personal holding company income under section 954 and taxed on a current basis to the U.S. company.
For a copy of our prior legal alert that discusses the bill becoming law, please click here.