Press Room

18 Jul 2019

GILTI regs improve position for partnerships owning CFCs

This article was written by Michael Hirschfeld of Andersen LLC, United States.

  • Under final regulations, GILTI inclusions are not determined at the partnership level—domestic partnerships are instead treated as an aggregation of their partners for purposes of GILTI.
  • Any U.S. person that is a partner in a domestic partnership would need to be a U.S. shareholder of a controlled foreign corporation (CFC) owned by the partnership in order to have a GILTI inclusion with respect to such CFCs, and, if so, would determine its GILTI amount at the partner level.
  • The final regulations are applicable for taxable years of foreign corporations beginning after December 31, 2017.
  • Domestic partnership and partner returns already filed taking into account GILTI inclusions for CFCs owned by the partnership should be re-evaluated to determine whether to amend.


The final GILTI regulations published in the Federal Register on June 21, 2019, adopted an approach that treats a domestic partnership as an aggregate for purposes of determining the level (that is, partnership or partner) at which a GILTI inclusion amount is calculated and included in gross income. Specifically, the final regulations provide that, in general, for purposes of Sec. 951A and the Sec. 951A regulations, and for purposes of any other provision that applies by reference to Sec. 951A or Sec. 951A regulations (for instance, Secs. 959, 960, and 961), a domestic partnership is not treated as owning stock of a foreign corporation within the meaning of Sec. 958(a).

Rather, the partners of a domestic partnership are treated as owning proportionately the stock of any CFCs owned by the partnership in the same manner as if the partnership were a foreign partnership under Sec. 958(a)(2). Because a domestic partnership is not treated as owning stock for purposes of Sec. 951A, a domestic partnership does not have a GILTI inclusion amount and thus no partner in the domestic partnership receives a distributive share of any GILTI inclusion amounts. Instead, partners of the domestic partnership are individually required to determine if they have a GILTI inclusion. However, because only a U.S. shareholder (a 10% or more owner of foreign corporation) can have a GILTI inclusion, a partner that is not a U.S. shareholder of a CFC owned by the partnership will not have a GILTI inclusion.

The takeaway

Partners in private equity and domestic partnerships will benefit from the final regulations to the extent that they do not own directly, indirectly or constructively 10% or more of the stock of the foreign corporation and thus will not be required to have a GILTI inclusion. The final regulations are applicable for tax years beginning after December 31, 2017. To the extent you have already filed partnership returns and issued Schedule K-1’s to shareholders who, indirectly, own less than 10% of the CFC, you should consider filing amended returns.

Julian Nelberg

Julian is Head of the Private Client group at Andersen LLP. His clients include international high net worth individuals, senior executives, trusts and companies.

Email: Julian Nelberg