PTEP: Recent Guidance on Inbound Transactions and Looking Ahead

The previously taxed earnings and profits (PTEP) regime is generally intended to prevent double taxation, so that a U.S. shareholder is not taxed twice on controlled foreign corporation (CFC) income—once when earned under the subpart F or global intangible low-taxed income (GILTI) and again when distributed to the U.S. shareholder. While this policy intent is clear, there are numerous fact patterns where the result under the statute and existing regulations is not, a major issue in the post-TCJA world where most CFC income is PTEP. The government helpfully addressed two of these fact patterns in 2023, and Treasury and the ...