The passage of the Protecting Americans From Tax Hikes Act of 2015 (“Tax Extenders”) by Congress provides some amount of long-awaited certainty, as well as some important changes, to U.S. international taxation of various types of taxpayers. We have highlighted a few of these tax extenders below.

International Tax Extenders:

• Extension through year 2019 of look-through rule for payments between related controlled foreign corporations.
• Permanent extension of subpart F exception for active financing income.
• Permanent extension of exemption for Regulated Investment Companies (RIC) interest-related dividends and short-term capital gains dividends.
• Dividends from RICs and Real Estate Investment Trusts (REITs) no longer treated as dividends from domestic corporations for purposes of the dividend-received deduction.
• Foreign Investment in Real Property Tax Act (FIRPTA) Related Items:
  • Increase of withholding rate applied to dispositions of US real property interests, with limited exceptions, from 10% to 15%.
  • Ownership threshold for foreign shareholders of certain publicly-traded corporations for purposes of FIRPTA exemption raised from 5% to 10%.
  • Permanent extension of treatment of a RIC as a qualified investment entity for purposes of FIRPTA withholding with respect to dispositions of US real property interests by foreign persons.
  • Exclusion from FIRPTA of any U.S. real property interest held directly by a qualified foreign pension fund, including an entity which interests are entirely owned by the fund.
  • RICs or REITs no longer excluded from definition of US Real Property Interest.

If you have any questions about how these changes to legislation may affect you, please contact a member of the KLR Global Tax Services Team.

For more on the PATH Act and the additional tax extenders signed into law, read our blog: Just In: President Signs Tax Extenders Into Law.