Multinational businesses have had to figure out if they’re affected by modifications to the downward attribution rules caused by the repeal of Section 958(b)(4) in the Tax Cuts and Jobs Act of 2017. These rules deem that any stock owned by an individual or a corporation are also owned by partnerships, corporations, trusts, and estates in which the stock owner has a certain interest.
There are steps businesses can take if they’re subject to downward attribution in years for which they’ve already filed returns, or if they’re planning new investment structures to prevent downward attribution and the triggering of controlled foreign corporation stock reporting requirements.
To determine whether they’re subject to downward attribution, multinationals should review the entire global structure of parents and subsidiaries; identify the full legal ownership of the entire structure, with a focus on the tax residency of the upper-tier investors; and evaluate the structures in the lower tiers to see if they meet the requirements for attribution.
