Proposed Regs: Passive foreign investment companies (PFICs) and PFIC insurance exception

The Treasury Department and IRS has released proposed regulations (REG-105474-18) regarding passive foreign investment companies (PFICs) and specifically concerning legislative changes made by the Tax Cuts and Jobs Act of 2017 with regard to the “PFIC insurance exception.” The Regs summary is as follows:

This document contains proposed regulations under sections 1291, 1297, and 1298 of the Internal Revenue Code (“Code”) regarding the determination of ownership in a passive foreign investment company within the meaning of section 1297(a) (“PFIC”) and the treatment of certain income received or accrued by a foreign corporation and assets held by a foreign corporation for purposes of section 1297. The regulations provide guidance regarding when a foreign corporation is a qualifying insurance corporation (“QIC”) under section 1297(f) of the Code and the amounts of income and assets that a QIC excludes from passive income and assets pursuant to section 1297(b)(2)(B) (“PFIC insurance exception”) for purposes of section 1297(a).

The regulations also clarify the application and scope of certain rules that determine whether a United States person that directly or indirectly holds stock in a PFIC is treated as a shareholder of the PFIC, and whether a foreign corporation is a PFIC. The regulations affect United States persons with direct or indirect ownership interests in certain foreign corporations.

For full proposed regulations, click Proposed Regs: Passive foreign investment companies (PFICs) and PFIC insurance exception.

Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal..

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