Subpart F and GILTI
To prevent the abuse of non-U.S.-source income tax treatment, the US Code requires Subpart F income to be included in the current year taxable income of CFC’s United states shareholder whether or not such income is distributed in the current year.
Subpart F includes insurance income, foreign base company income, international boycott factor income, illegal bribes and kickbacks and income derived from certain designated terrorism-sponsoring countries.
GILTI provision was enacted in order to subject a CFC’s “active” income from intangibles to U.S. tax on a current basis similar to the treatment of a CFC’s subpart F income.
GILTI is all of the gross income of a CFC that excludes Subpart F income, ECI (effectively connected income), certain dividends received from a related person, and certain foreign oil and gas income.