updated 2:11 PM CET, Oct 31, 2023

Treasury official reported to hint at plans to address GILTI concerns

The U.S. Department of the Treasury is planning to address a much-criticised aspect of the Tax Cuts and Jobs Act that currently would see individual American taxpayers facing potentially higher taxes on their overseas income, a report published on Thursday said, citing a Treasury official. 

The plan being considered is to enable individual U.S. taxpayers to elect to be treated as corporations, and thus eligible to receive an automatic 50% deduction on their so-called global intangible low-taxed income (GILTI) assessment, the report, published on the Law360 website,  noted, quoting Doug Poms, international tax counsel at the Treasury, who it said had made the comments during a conference in Washington on Wednesday. 

Currently, idividuals cannot receive the 50% GILTI deduction that corporations can, and thus have to make what use they can of other means to mitigate the effects of the new tax, which was included in the TCJA when President Trump signed it into law in late December, 2017.  The GILTI tax was designed to ensure that U.S. companies didn't take advantage of their overseas operations to shift their income to, as a means of avoiding U.S. tax, but it has created confusion and concern with respect to individual taxpayers with non-U.S. businesses.

"We have been receiving comments on 962 elections and GILTI, and we will be addressing that," the Law360 report quoted Poms as saying.

However, it said he didn't elaborate "on how the Treasury would rule on the issue, or which batch of regulations it would use." 

The Law360 report said Poms also said that the Treasury was planning to look for ways to address the disparity between individual and corporate treatment more broadly. 

'Step in right direction'

Word of Poms's comments quickly spread across the expatriate American tax and legal industry, where there had been considerable concern about many elements of the TCJA generally and the GILTI provisions in particular. Among the most outspoken of these critics has been Monte Silver, a U.S. tax attorney resident in Israel who is a partner and founder of the Tel Aviv-headquartered U.S. tax law firm, Silver & Co., and who, as reported, filed suit last month in a U.S. court against the Treasury Department and the U.S. Internal Revenue Service over certain elements of the TCJA, including the GILTI tax. 

In a statement today, Silver said: "The pressure our advocacy and lawsuit have applied appears to be working. In 2018, Treasury granted us temporary relief twice. This notice from Treasury relates to permanent relief of some kind.

"We do not know as of yet whether this relief will indeed happen, and how extensive it will be if it does. But it is a clear step in the right direction, and we all deserve credit for making it happen."