The New Normal for International Tax: Finding the Right Tools to Answer the TCJA's Biggest Challenges.

• Author: Chung, Don
• Position: Tax Cuts and Jobs Act of 2017

The Tax Cuts and Jobs Act (TCJA) has dramatically changed how U.S. multinational corporations are taxed, forcing tax professionals to learn an entirely new rule set for offshore taxation. New provisions such as the tax on global intangible low-taxed income (GILTI), the base erosion and anti-abuse tax (BEAT), and the deduction for foreign-derived intangible income (FDII) have put the entire industry on high alert to develop new tax models and processes, not only to calculate this year's tax accurately, but also to discover a sense of what is normal on this new playing field. Further complicating matters is that the Internal Revenue Service has issued hundreds of pages of proposed regulations in the final weeks of 2018 to clarify matters, which still leave many uncertainties.

What Is the New Normal?

With all this change, U.S. tax professionals are immersing themselves in the new rules, developing new Excel models, and working through the calculations. With the help of skilled advisors, old models and processes are being revamped. Reporting deadlines are being met. Clarity is replacing confusion. But complexity remains.

As the dust settles on most tax departments after the year-end provision, the new rules now require a heightened focus on foreign operations. It is no longer the case that foreign calculations can be overlooked unless there is an inclusion. New GILTI rules now ensure that most foreign entities will have an inclusion. Nor can U.S. taxpayers in a net operating loss (NOL) position or in an excess foreign tax credit (FTC) position opt out of doing a U.S. FTC/tax calculation: new FTC basketing and FDII and BEAT rules ensure that all taxpayers run a U.S. FTC/U.S. tax calculation. Aside from the immediate focus on new systems and processes, a more dedicated effort quarterly and at year-end will be needed to run these calculations.

Are Old Workhorses Still Viable?

Historically, when it comes to the U.S. provision, U.S. multinationals have used Excel to calculate Subpart F, dividends, and the U.S. FTC. To manage recent tax reform updates, most have either updated their Excel models or outsourced them to advisors. But now that the year-end deadline has passed, does it still make sense to use Excel? Dynamic calculations such as rollup are now multiplied in the new rules through new GILTI, foreign branch, and payment-to-income (PTI) baskets. New data sets are needed to calculate taxable income, foreign and U.S. tangible assets, and base...