Share with your friends

Regulations: Dividends received deduction limitation when from certain foreign corporations

Regulations: Dividends received deduction limitation

The U.S. Treasury Department and IRS this afternoon released for publication in the Federal Register final temporary regulations (T.D. 9865) and, by cross-reference, proposed regulations (REG-106282-18) concerning the section 245A limitation on a deduction for dividends received from certain foreign corporations and amounts eligible for the look-through exception under section 954.


Related content

Read the temporary regulations [PDF 335 KB] (27 pages) and the proposed regulations [PDF 194 KB] as published in the Federal Register on June 18, 2019.

The U.S. tax law enacted in December 2017—(Pub. L. No. 115-97) the law that is at times referred to as the “Tax Cuts and Jobs Act” (TCJA)—added new section 245A to establish a participation exemption system for the taxation of foreign income. Section 245A allows a domestic corporation that is a U.S. shareholder (as defined in section 951(b)) of a specified 10% foreign corporation a 100% dividends received deduction (DRD) for the foreign-source portion of dividends received from the foreign corporation (a 100% DRD). The 100% DRD is available only to domestic C corporations that are neither real estate investment trusts nor regulated investment companies.

The regulations released today provide guidance under section 245A that limits the dividends received deduction available for certain dividends received from current or former controlled foreign corporations.

  • The temporary regulations also include rules that limit the applicability of the exception to foreign personal holding company income for certain dividends received by upper-tier controlled foreign corporations from lower-tier controlled foreign corporations as well as guidance to facilitate administration of certain rules.
  • These regulations concern U.S. domestic corporations that receive certain dividends from current or former controlled foreign corporations and United States shareholders of upper-tier controlled foreign that receive certain dividends from lower-tier controlled foreign corporations.

These regulations are scheduled to be published in the Federal Register on June 18, 2019.

The purpose of this report is to provide text of the regulations.

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us


Want to do business with KPMG?


loading image Request for proposal