UF Tax Incubator: Gutting Subpart F? 

Abstract

The UF Tax Incubator, a group of primarily tax advisors of major law and accounting firms and some in-house tax professionals, all of whom have to some extent an agenda to help their multinational clients and employers, have issued a series of recommendations on possible tax law changes. In their July 2024 Tax Notes Federal paper, Subpart F and GILTI Recommendations, they made a number of suggestions that would encourage and help multinationals secure their profit-shifting structures by emasculating the current subpart F foreign base company sales and services income rules.

In this paper, I set out in detail how this group's seriously problematic recommendations would emasculate, or completely eliminate, certain subpart F tools that exist to prevent profit shifting. For example, they recommend eliminating the FBCSI branch rule. The recent Whirlpool case and the response of the National Association of Manufacturers to that case is strong evidence of how important the branch rule is. It must be retained, and this UF Tax Incubator group wants to blithely delete it from the Code.

Keywords: subpart F, International Taxation, Profit-Shifting, BEPS, Base Erosion and Profit Shifting

JEL Classification: H21, H25, K34, E62