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Amending for GILTI HTE Election

There’s still time to amend calendar-year 2020 U.S. corporation income tax returns to make the GILTI HTE election. Read on for details.
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With the tax deadline quickly approaching for 2022 corporate taxpayers, keep in mind there’s still time to amend calendar-year 2020 U.S. corporation income tax returns to make the global intangible low-taxed income (GILTI) high tax exception (HTE) election. Regulation Section 1.951A-2(c)(7)(viii)(A)(2)(ii) states that the election must be made or revoked on an amended federal return filed within 24 months of the unextended due date of the federal tax return. As the 2020 corporate and individual deadline for calendar-year taxpayers was April 15, 2021, this deadline is rapidly approaching on April 18, 2023.

What Is GILTI?

The GILTI regime is an anti-deferral regime that was codified in the Tax Cuts and Jobs Act in 2017 to tax controlled foreign corporation (CFC) income. GILTI income for U.S. taxpayers is the net tested income of all a U.S. shareholder’s CFCs less 10% of the CFCs’ depreciable, tangible business assets. Tested income or loss is CFC taxable income or loss calculated under U.S. tax principals. GILTI is calculated on a U.S. shareholder basis and tested loss from one CFC can offset tested income from another CFC.

What Is HTE?

As a refresher, the GILTI HTE election applies only if GILTI is subject to foreign income tax at an effective rate greater than 90% of the highest U.S. corporate tax rate (18.9% for the 2020 tax year). The effective tax rate is calculated on a test-unit basis. However, as GILTI is currently calculated on a U.S. shareholder basis, if the election is made, all tested units with an effective tax rate of at least 18.9% have their income excluded from the GILTI calculation. It’s not eligible to be made on a tested unit by tested unit basis.

There’s still time to amend 2020 returns where a GILTI HTE may have been missed or, after further evaluation, there’s a better option for the taxpayer. If your 2020 return needs to be amended, please reach out to a professional at Forvis Mazars.

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