Reinstatement of CFC look-through rules

There is a welcome provision under the newly enacted Act signed by President Obama this afternoon. There are various exceptions to the inclusion of subpart F income. A significant one was the CFC look-through rule which expired on December 31, 2009. Under this rule, dividends, interest, rent and royalties received or accrued from a related CFC are not treated as foreign personal holding company income(FPHCI) and hence not subject to inclusion in taxpayer’s income currently. This rule generally applies only to the extent attributable to income that is not subpart F income and not effectively connected income.

The expired provision is now reinstated for calendar years 2010 and 2011.

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