Internal Revenue Service
CC:PA:LPD:PR (REG-101828-19)
Room 5203, Post Office Box 7604
Ben Franklin Station
Washington, DC 20044

Re: GILTI Regulations

Ladies and Gentlemen:

This letter provides comments on behalf of the Securities Industry and Financial Markets Association (“SIFMA”)1 regarding the regulations under section 951A that were issued on June 21, 2019.2 The final regulations address many of the concerns that taxpayers had raised regarding the prior proposed regulations. We commend the drafters for their efforts to take account of taxpayer comments.

This letter focuses primarily on the provisions of the proposed regulations that confirm that the high-tax exclusion will be available in respect of all income that is subject to foreign tax at a rate greater than 18.9%. This determination represents an appropriate and sensible exercise of the drafters’ regulatory authority, and will bring the GILTI rules into closer conformity with what we believe Congress to have intended.3

We have technical and practical concerns regarding the mechanics of the exclusion, and particularly regarding the extent to which the proposed regulations would diverge from the longstanding statutory provision on which it is based: the elective exclusion for subpart F purposes, commonly referred to as the “high-tax kickout”.4 Our recommendations regarding the high-tax exclusion are set out in paragraphs 1 through 5 of this letter. We have noted a couple of small comments regarding other issues in paragraphs 6 and 7.

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