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IRS compromises on Gilti tax rules

On Behalf of | Dec 5, 2018 | IRS Issues

If a company based in Georgia or anywhere else has a foreign tax bill of less than 13.125 percent, it will owe a 10.5 global intangible low-tax income tax. This tax is otherwise known as Gilti, and businesses had lobbied the IRS to make changes to how it is assessed. For instance, they wanted to avoid allocating domestic expenses to foreign subsidiaries, but the IRS ruled that half of such expenses must be allocated to foreign subsidiaries.

Previously, the IRS intended for all domestic expenses related to interest payments, administration and research to be allocated here. However, business interests claimed that it would make foreign tax credits less valuable. According to the U.S. Chamber of Commerce, the rule as it has been amended would still create an issue of double taxation. Technology companies and banks are most likely to be impacted by the Gilti tax as they tend to have equipment that can be used to lower their bill.

The impact of the Gilti measure is unclear, but it is thought that General Motors decided to move operations offshore because of it. As with other types of income taxes, companies are generally required to make quarterly estimated payments. Many companies are bracing for the possibility that they will be off on these payments even as the IRS offers more guidance about how they apply.

If an individual or corporate entity fails to pay taxes, it could lead to a variety of financial and other penalties. In some cases, it could result in an individual losing assets or a company having a levy placed on corporate property. Those who face a tax issue may wish to consult with an attorney about reducing or eliminating fines and the possibility of jail or prison time.