Reg. § 1.250(a)-1 Deduction for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI).
(a) Scope This section provides rules for determining the amount of a domestic corporation's deduction for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI). of this section provides general rules for determining the amount of the deduction. of this section provides definitions relevant for determining the amount of the deduction. of this section provides reporting requirements for a domestic corporation claiming the deduction. of this section provides a rule for determining the amount of the deduction of a member of a consolidated group. of this section provides examples illustrating the application of this section.
(b) Allowance of deduction
(1) In general A domestic corporation is allowed a deduction for any taxable year equal to the sum of—
(i) 37.5 percent of its foreign-derived intangible income for the year; and
(ii) 50 percent of—
(A) Its global intangible low-taxed income for the year; and
(B) The amount treated as a dividend received by the corporation under section which is attributable to its GILTI for the year.
(2) Taxable income limitation In the case of a domestic corporation with a section amount for a taxable year, for purposes of applying of this section for the year—
(i) The corporation's FDII for the year (if any) is reduced (but not below zero) by an amount that bears the same ratio to the corporation's section amount that the corporation's FDII for the year bears to the sum of the corporation's FDII and GILTI for the year; and
(ii) The corporation's GILTI for the year (if any) is reduced (but not below zero) by the excess of the corporation's section amount over the amount of the reduction described in of this section.
(3) Reduction in deduction for taxable years after 2025 For any taxable year of a domestic corporation beginning after December 31, 2025, of this section applies by substituting—
(i) 21.875 percent for 37.5 percent in of this section; and
(ii) 37.5 percent for 50 percent in of this section.
(4) Treatment under section 4940 For purposes of section , a deduction under section is not treated as an ordinary and necessary expense paid or incurred for the production or collection of gross investment income.
(c) Definitions The following definitions apply for purposes of this section.
(1) Domestic corporation The term domestic corporation has the meaning set forth in section , but does not include a regulated investment company (as defined in section ), a real estate investment trust (as defined in section ), or an S corporation (as defined in section ).
(2) Foreign-derived intangible income (FDII) The term foreign-derived intangible income or FDII has the meaning set forth in .
(3) Global intangible low-taxed income (GILTI) The term global intangible low-taxed income or GILTI means, with respect to a domestic corporation for a taxable year, the corporation's GILTI inclusion amount under for the taxable year.
(4) Section 250(a)(2) amount The term section amount means, with respect to a domestic corporation for a taxable year, the excess (if any) of the sum of the corporation's FDII and GILTI (determined without regard to section and of this section), over the corporation's taxable income. For a corporation that is subject to the unrelated business income tax under section , taxable income is determined only by reference to that corporation's unrelated business taxable income defined under section .
(5) Taxable income
(i) In general The term taxable income has the meaning set forth in section determined without regard to the deduction allowed under section and this section.
(ii) [Reserved]
(d) Reporting requirement Each domestic corporation (or individual making an election under section ) that claims a deduction under section for a taxable year must make an annual return on Form 8993, “Section Deduction for Foreign-Derived Intangible Income (FDII) and Global Intangible Low-Taxed Income (GILTI)” (or any successor form) for such year, setting forth the information, in such form and manner, as Form 8993 (or any successor form) or its instructions prescribe. Returns on Form 8993 (or any successor form) for a taxable year must be filed with the domestic corporation's (or in the case of a section election, the individual's) income tax return on or before the due date (taking into account extensions) for filing the corporation's (or in the case of a section election, the individual's) income tax return.
(e) Determination of deduction for consolidated groups A member of a consolidated group (as defined in ) determines its deduction under section and this section under the rules provided in .
(f) Example: Application of the taxable income limitation The following example illustrates the application of this section. For purposes of the example, it is assumed that DC is a domestic corporation that is not a member of a consolidated group and the taxable year of DC begins after 2017 and before 2026.
(1) Facts For the taxable year, without regard to section and of this section, DC has FDII of $100x and GILTI of $300x. DC's taxable income (without regard to section and this section) is $300x.
(2) Analysis DC has a section amount of $100x, which is equal to the excess of the sum of DC's FDII and GILTI of $400x ($100x + $300x) over its taxable income of $300x. As a result, DC's FDII and GILTI are reduced, in the aggregate, by $100x under section and of this section for purposes of calculating DC's deduction allowed under section and of this section. DC's FDII is reduced by $25x, the amount that bears the same ratio to the section amount ($100x) as DC's FDII ($100x) bears to the sum of DC's FDII and GILTI ($400x). DC's GILTI is reduced by $75x, which is the remainder of the section amount ($100x−$25x). Therefore, for purposes of calculating its deduction under section and of this section, DC's FDII is $75x ($100x−$25x) and its GILTI is $225x ($300x−$75x). Accordingly, DC is allowed a deduction for the taxable year under section and of this section of $140.63x ($75x × 0.375 + $225x × 0.50).
[T.D. 9901, 85 FR 43080, July 15, 2020]