August 2020: Latest SEC, FASB & Tax Updates & COVID-19 Related Updates from the SEC, IRS, Etc.

We are pleased to release MaloneBailey's August 2020 issue of The Crunch, our newsletter highlighting recent accounting, regulatory and tax updates. Please note that the updates provided in this newsletter are not a comprehensive list.

We encourage you to visit the SEC, FASB and IRS websites for more information as well as a complete list of updated rules, regulations and proposals. We invite you to contact us should you have any questions about the information provided in this issue. Please visit our website to review archived versions of this newsletter containing past accounting, regulatory and tax updates.

The MaloneBailey Team

www.malonebailey.com

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COVID-19 Related Updates

COVID-19 – GASB Publishes Technical Guidance on Accounting and Reporting Related to the CARES Act and COVID-19
COVID-19 – SEC Chief Accountant Emphasizes the Continued Need for High Quality Financial Reporting
COVID-19 – SEC Staff Publishes Statement on Paper Document Requirements for Non-Form 144 Documents
COVID-19 – SEC Chairman Provides Update on SEC Relief
Forms 144 – SEC Staff Publishes Statement on Paper Copies of Forms 144
Payroll Protection Program Lenders – AICPA Issues Accounting Guidance for PPP Lenders
Employee Benefit Plans – AICPA Publishes ERISA Employee Benefit Plan Financial Statement Audit Special Considerations for COVID-19
COVID-19 – SEC Staff Provides Guidance on COVID-19 Related Disclosures
COVID-19 – GASB Proposes Application Guidance on Cares Act and COVID-19 Assistance

Recent Accounting & Regulatory Updates

Recent FASB & AICPA Updates

Audit Evidence – AICPA Releases New Evidence Standard
Insurance Contracts – IASB Issues Amendments to IFRS 17
Financial Instruments – IASB Issues Amendments to IFRS 9
Revenues and Expenses – GASB Issues Preliminary Views on Revenue and Expense Recognition Models
Deferred Compensation – GASB Issues New Statement on Certain Component Unit Criteria and Deferred Compensation Plans
Insurance Accounting – FASB Discusses Insurance Accounting Implementation

Recent SEC & PCAOB Updates

ESG – SEC Commissioner Roisman Discusses Environmental, Social and Governance Factors
Volker Rule – Financial Regulators Modify Volcker Rule
Financial Reporting – SEC Chief Accountant Emphasizes the Continued Need for High Quality Financial Reporting
Release No. BHCA-9: Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships With, Hedge Funds and Private Equity Funds
Release No. 33-10765A: Updated Disclosure Requirements and Summary Prospectus for Variable Annuity and Variable Life Insurance Contracts; Correction

Tax Updates

IRS Issued Final and Proposed Regulations on Income Subject to a High Rate of Foreign Tax

Extra Crunch

A Few Minutes with FINRA

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SEC Adopts Amendments to Improve Financial Disclosures about Acquisitions and Dispositions of Businesses

Summary - In this episode of “Everybody Counts”, Caroline Rosen, Marketing and Communications Manager and Shelby Stevens, Human Resources Generalist, discuss the dos and don'ts for candidates to consider during their virtual interviews.

For this podcast and many more, please visit the Resources section of the MaloneBailey website.

COVID-19 Related Updates

COVID-19 – GASB Publishes Technical Guidance on Accounting and Reporting Related to the CARES Act and COVID-19

Summary - The Governmental Accounting Standards Board (GASB) has released Technical Bulletin 2020-1, Accounting and Financial Reporting Issues Related to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and Coronavirus Diseases.

Technical Bulletin 2020-1 provides guidance for applying existing standards to transactions related to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and certain outflows incurred in response to the coronavirus. The Technical Bulletin clarifies the application of existing recognition requirements to resources received from certain programs established by the CARES Act. It also clarifies how existing presentation requirements apply to certain inflows of CARES Act resources and to the unplanned and additional outflows of resources incurred in response to the coronavirus disease.

The Technical Bulletin is set up in question and response. These questions address specific questions raised by the GASB’s stakeholders. The questions include matters related to:

Resources received from the Coronavirus Relief Fund;
The government entity’s loss of revenue attributable to the effects of COVID-19;
Subsequent events and the effect of amendments to the CARES Act and financial statements;
Reporting requirements of forgivable loans under the Paycheck Protection Program (PPP) when a governmental entity determines that the loan will be forgiven in a subsequent period;
Operating or nonoperating revenue presentation; and
Special or extraordinary item presentation for outflows of resources incurred in response to coronavirus disease.

For more information, click here.

COVID-19 – SEC Chief Accountant Emphasizes the Continued Need for High Quality Financial Reporting

Summary - SEC Chief Accountant Sagar Teotia has published a statement emphasizing the continued importance of high-quality financial reporting for investors in light of COVID-19. Teotia indicates that as “many public companies now prepare for their next reporting cycle (e.g., second quarter financial reporting), we emphasize that the participants in the financial reporting system continue to play an important role in the functioning of our markets and in our collective national effort to mitigate the COVID-19 pandemic. We look forward to our financial reporting system continuing to provide a steady flow of timely, decision-useful information to investors and our public capital markets.”

Topics discussed by Teotia include:

OCA’s Engagement and Work Related to High-Quality Financial Reporting;
Engagement with the FASB and the PCAOB;
Engagement with International Standard Setters and Other Regulators; and
Engagement with and the Vital Role of Audit Committees.

For more information, click here.

COVID-19 – SEC Staff Publishes Statement on Paper Document Requirements for Non-Form 144 Documents

Summary - The staff of the Division of Corporation Finance (Corp Fin) has published a Statement Regarding Requirements for Certain Paper Documents (other than Forms 144) in Light of COVID-19 Concerns. Corp Fin is aware of logistical difficulties submitting certain forms (other than Forms 144) in paper given the spread of COVID-19. In light of ongoing health and safety concerns related to COVID-19, the staff is providing the following statement to those affected by COVID-19 regarding forms listed in the statement. This staff statement is temporary and covers those who submit the following forms until the staff provides public notice that it no longer will be in effect; that notice will be published at least two weeks before the announced termination date.

For more information, click here.

COVID-19 – SEC Chairman Provides Update on SEC Relief

Summary - SEC Chairman Jay Clayton provided an updated on SEC relief provided in light of COVID-19. The update provides a summary of current targeted, temporary relief and assistance provided by the SEC and staff, along with the staff’s views on whether and, if so, how that relief should be adjusted taking into account market outreach and observations. Clayton indicates that it “is clear that the need for certain relief remains, such as relief to ensure continued remote operations and to provide flexibility in light of continued market volatility.”

For more information, click here.

Forms 144 – SEC Staff Publishes Statement on Paper Copies of Forms 144

Summary - Corp Fin has published a Statement Regarding Requirements for Form 144 Paper Filings in Light of COVID-19 Concerns. Corp Fin is aware of logistical difficulties of submitting Forms 144 on paper given the spread of COVID-19. In light of ongoing health and safety concerns related to COVID-19, the staff is providing the following statement to those affected by COVID-19 regarding Forms 144. This staff statement is temporary and covers those who submit Forms 144 until the staff provides public notice that it no longer will be in effect; that notice will be published at least two weeks before the announced termination date.

For more information, click here.

Payroll Protection Program Lenders – AICPA Issues Accounting Guidance for PPP Lenders

Summary - The AICPA and its Depository Institutions Expert Panel (DIEP) has released several Technical Questions and Answers (TQA) to help depository institutions, credit unions, credit card companies, broker-dealers, insurance companies and other lenders appropriately account for the loans they distribute under the Paycheck Protection Program (PPP).

The new TQAs include questions and answer questions under Q&A Section 2130, Receivables, and address how creditors may restructure loans made in response to COVID-19 that result in restructurings that are not troubled debt restructurings and include periods of reduced payments, including payment deferrals, fee waivers, extension of repayment terms or delays in payment. They also answer other related questions regarding the PPP, loan origination fees, and the SBA guarantee.

“Given the unique nature of the PPP, lenders have had many questions about how to account for these types of loans and report on their arrangements. These TQAs provide answers to technical accounting questions that are important for the appropriate financial reporting of PPP program loans and any concessions granted in light of the recent pandemic,” said Jason Brodmerkel, CPA, AICPA Senior Manager, Accounting Standards —Depository and Lending Institutions.

The TQAs include the following:

Section TQA 2130.41 Determination of the Effective Interest Rate;
Section TQA 2130.42 Classification of Advances Under the Paycheck Protection Program;
Section TQA 2130.43 Consideration of the SBA Guarantee Under the Paycheck Protection Program; and
Section TQA 2130.44 Accounting for the Loan Origination Fee Received From the SBA.

For more information, click here.

Employee Benefit Plans – AICPA Publishes ERISA Employee Benefit Plan Financial Statement Audit Special Considerations for COVID-19

Summary - The AICPA has published ERISA employee benefit plan financial statement audit special considerations—2020: COVID-19 environment implications and financial statement disclosures. This non authoritative tool is intended to help auditors identify whether there are any unique situations to consider from an employee benefit plan audit and/or financial reporting perspective for plan calendar years ending on December 31, 2019.

For more information, click here.

COVID-19 – SEC Staff Provides Guidance on COVID-19 Related Disclosures

Summary - The staff in the SEC’s Division of Corporation Finance (Corp Fin) has issued CF Disclosure Guidance Topic: COVID-19 Disclosure Considerations Regarding Operations, Liquidity, and Capital Resources. This guidance provides additional Corp Fin views regarding operations, liquidity, and capital resources disclosures companies should consider with respect to business and market disruptions related to COVID-19.

Corp Fin indicates that it “continues to monitor how companies are disclosing the effects and risks of COVID-19 on their businesses, financial condition, and results of operations and is supplementing CF Disclosure Guidance Topic No. 9 with guidance regarding additional disclosure considerations. We continue to encourage companies to provide disclosures that allow investors to evaluate the current and expected impact of COVID-19 through the eyes of management and to proactively revise and update disclosures as facts and circumstances change. These disclosures should enable an investor to understand how management and the Board of Directors are analyzing the current and expected impact of COVID-19 on the company’s operations and financial condition, including liquidity and capital resources.”

For more information, click here.

COVID-19 – GASB Proposes Application Guidance on Cares Act and COVID-19 Assistance

Summary - The Governmental Accounting Standards Board (GASB) has released the proposed staff Technical Bulletin, Accounting and Financial Reporting Issues Related to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) of 2020 and Coronavirus Diseases. The GASB is proposing the technical guidance as part of its continuing efforts to assist state and local governments during the COVID-19 pandemic.

The proposal contains application guidance related to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) of 2020 and certain outflows incurred in response to the coronavirus. The Technical Bulletin, if adopted in its present form, addresses questions raised with the GASB by its stakeholders. The Exposure Draft of the proposal clarifies the application of existing recognition requirements to resources received from certain programs established by the CARES Act. It also clarifies how existing presentation requirements apply to certain inflows of CARES Act resources and to the unplanned and additional outflows of resources incurred in response to the coronavirus disease.

Because the GASB is working to issue this guidance as quickly as practicable, the comment deadline for the Exposure Draft is June 25, 2020. The GASB is scheduled to review stakeholder feedback and consider clearing a final Technical Bulletin on June 30.

For more information, click here.

Recent FASB & AICPA Updates

Audit Evidence – AICPA Releases New Evidence Standard

Summary - The Auditing Standards Board (ASB) of the AICPA has issued its new evidence standard, Statement on Auditing Standards No. (SAS) 142, Audit Evidence. The SAS modernizes private company auditing standards by recognizing the critical value technology and information bring to today’s audit procedures.

“Our substantially revised standard addresses the evaluation of audit evidence and has been modernized to reflect our current business environment,” said Bob Dohrer, AICPA Chief Auditor. “It recognizes the use of automated tools and techniques such as audit data analytics, AI and remote observation tools to obtain audit evidence.”

What SAS 142 Does

New SAS 142 addresses the evolving nature of business, audit services and issues that have arisen since the ASB originally issued existing AU-C Section 500, Audit Evidence. The standard addresses:

Emerging technologies used by both preparers and auditors;
The application of professional skepticism;
The expanding sources of information to be used as audit evidence; and
The accuracy, completeness, relevance and reliability of audit evidence.

SAS 142 enhances’ the auditor’s assessment of whether sufficient and appropriate audit evidence has been obtained and establishes a multi-faceted consideration of attributes and factors in evaluating such audit evidence. It will primarily amend AU-C Section 500 in AICPA Professional Standards.

“The new standard is based on the premise that the auditor should evaluate information to be used as audit evidence notwithstanding the source from which it is obtained, or the procedures used to obtain the information,” explained Dohrer. “New attributes of information for the auditor to consider include, whether the information is corroborative or contradictory to management assertions, the authenticity of the evidence and its susceptibility to bias.”

Effective Date

SAS 142 will be effective for audits of financial statements for periods ending on or after December 15, 2022.

For more information, click here.

Insurance Contracts – IASB Issues Amendments to IFRS 17

Summary - The IASB has issued amendments to IFRS 17, Insurance Contracts, aimed at helping companies implement the Standard and making it easier for them to explain their financial performance.

The fundamental principles introduced when the IASB first issued IFRS 17 in May 2017 remain unaffected. The amendments, which respond to feedback from stakeholders, are designed to:

Reduce costs by simplifying some requirements in the Standard;
Make financial performance easier to explain; and
Ease transition by deferring the effective date of the Standard to 2023 and by providing additional relief to reduce the effort required when applying IFRS 17 for the first time.

The IASB has also issued an amendment to the previous insurance contracts Standard, IFRS 4, so that eligible insurers can still apply IFRS 9, Financial Instruments, alongside IFRS 17.

The deferral of the effective date by two years, to annual reporting periods beginning on or after 1 January 2023, is intended to allow time for an orderly adoption of the amended IFRS 17 by jurisdictions around the world. This should enable more insurers to implement the new Standard at the same time.

For more information, click here.

Revenues and Expenses – GASB Issues Preliminary Views on Revenue and Expense Recognition Models

Summary - The Governmental Accounting Standards Board (GASB) issued for public feedback the Preliminary Views, Revenue and Expense Recognition. Comments are due by February 26, 2021.

The GASB has added this project to its technical agenda to:

Develop guidance applicable to topics for which existing guidance is limited;
Improve existing guidance that has been identified as challenging to apply;
Consider inclusion of a performance obligation approach in the GASB’s authoritative literature; and
Assess existing and proposed guidance based on the conceptual framework.

The GASB intends this Preliminary Views to present its current thinking about the development of a comprehensive, principles-based model that establishes categorization, recognition, and measurement guidance applicable to a wide range of revenue and expense transactions, which, if adopted as standards, is expected to enhance the usefulness of information governments report on their revenues and expenses.

The GASB introduced in the Preliminary Views a new methodology for categorizing transactions, which is then used as a basis for applying recognition proposals. Determining the transaction category would be based on the assessment of specific characteristics that a binding arrangement may or may not contain. This categorization methodology is intended to identify transactions with performance obligations.

If a transaction is determined to have a performance obligation based on the categorization characteristics, the associated revenue or expense would be recognized based on the satisfaction of the performance obligation. For transactions that are determined not to have a performance obligation, the GASB proposed specific recognition guidance based on the various subcategories of transactions (for example, derived taxes, such as income and sales taxes and imposed taxes, such as property taxes).

The GASB has tentatively scheduled a series of public hearings and user forums on the Preliminary to enable stakeholders to share their views with the GASB.

For more information, click here.

Deferred Compensation – GASB Issues New Statement on Certain Component Unit Criteria and Deferred Compensation Plans

Summary - The Governmental Accounting Standards Board (GASB) has issued Statement No. 97, Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans. This new guidance is designed to reduce costs and increase the consistency and comparability of reporting state and local governments’ fiduciary component units.

A primary goal of Statement 97 is to mitigate costs associated with reporting certain defined contribution pension plans, defined contribution other postemployment benefit (OPEB) plans, and other employee benefit plans, such as certain Section 457 plans. Another important goal of the Statement is to improve the reporting of Section 457 deferred compensation plans that meet the definition of a pension plan and for benefits provided through those plans.

Statement 97 requires that, for purposes of determining whether a primary government is financially accountable for a potential component unit (except for a potential component unit that is a defined contribution pension plan, a defined contribution OPEB plan, or other employee benefit plan), the absence of a governing board should be treated the same as the appointment of a voting majority of a governing board if the primary government performs the duties that a governing board typically performs. Appointment of a voting majority is a criterion in existing standards used to determine whether a legally separate entity should be incorporated into the government’s financial statements.

Under certain circumstances, a financial burden on a government also is a criterion in existing standards used to determine whether a legally separate entity should be incorporated into the government’s financial statements. After further considering the perceived costs associated with applying existing standards (specifically, paragraph 7 of Statement No. 84, Fiduciary Activities), the GASB, in Statement 97, decided to limit the application of the financial burden criterion regarding contributions to postemployment benefit plans to only defined benefit pension plans and defined benefit OPEB plans that are administered through trusts.

Prior standards presumed that all Section 457 plans were not pension plans and, therefore, were not subject to pension plan reporting requirements; similarly, benefits provided through Section 457 plans were not reported as pension benefits. Under Statement 97, however, Section 457 plans should be classified as either a pension plan or other employee benefit plan, depending on whether the plan meets the definition of a pension plan. It also clarifies that Statement 84, as amended, should be applied to all arrangements organized under IRC Section 457 to determine whether those arrangements should be reported as fiduciary activities.

For more information, click here.

Insurance Accounting – FASB Discusses Insurance Accounting Implementation

Summary - As reported in its “Summary of Board Decisions” publication, the FASB met on June 10, 2020, and discussed two agenda requests regarding the effective date of Accounting Standards Update (ASU) No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts.

The FASB decided to:

Add a project to the technical agenda to amend the effective date of the amendments in ASU 2018-12.
Propose a one-year deferral of the effective date of the amendments in ASU 2018-12 for all insurance entities.
Propose a change to the early application provisions of ASU 2018-12 whereby the early application transition date would be the beginning of the prior period.

For more information, click here.

Recent SEC & PCAOB Updates

ESG – SEC Commissioner Roisman Discusses Environmental, Social and Governance Factors

Summary - SEC Commissioner Elad L. Roisman recently provided his thoughts on aspects of Environmental, Social and Governance (ESG) factors.

Specifically, Roisman discussed:

Calls for mandated ESG disclosure for public companies; and
ESG disclosure by asset managers.

Roisman indicated that an “obvious problem with mandating ESG disclosure is that the issues under this enormous umbrella of a term are usually subjective and constantly evolving based on current events. Because of this evolution, requiring prescriptive disclosure would be difficult.”

For more information, click here.

Volcker Rule – Financial Regulators Modify Volcker Rule

Summary - The SEC and four other federal regulatory agencies finalized a rule modifying the Volcker rule’s prohibition on banking entities investing in or sponsoring hedge funds or private equity funds—known as covered funds. The final rule is broadly similar to the proposed rule from January 2020.

The Volcker rule generally prohibits banking entities from engaging in proprietary trading and from acquiring or retaining ownership interests in, sponsoring, or having certain relationships with a hedge fund or private equity fund.

Like the proposal, the final rule modifies three areas of the rule by:

Streamlining the covered funds portion of rule;
Addressing the extraterritorial treatment of certain foreign funds; and
Permitting banking entities to offer financial services and engage in other activities that do not raise concerns that the Volcker rule was intended to address.

The rule will be effective on October 1.

For more information, click here.

Financial Reporting – SEC Chief Accountant Emphasizes the Continued Need for High Quality Financial Reporting

Topics discussed by Teotia include:

OCA’s Engagement and Work Related to High-Quality Financial Reporting;
Engagement with the FASB and the PCAOB;
Engagement with International Standard Setters and Other Regulators; and
Engagement with and the Vital Role of Audit Committees.

For more information, click here.

Release No. BHCA-9: Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships With, Hedge Funds and Private Equity Funds

Like the proposal, the final rule modifies three areas of the rule by:

Streamlining the covered funds portion of rule;
Addressing the extraterritorial treatment of certain foreign funds; and
Permitting banking entities to offer financial services and engage in other activities that do not raise concerns that the Volcker rule was intended to address.

The rule will be effective on October 1.

For more information, click here.

Release No. 33-10765A: Updated Disclosure Requirements and Summary Prospectus for Variable Annuity and Variable Life Insurance Contracts; Correction

Summary - The SEC has published technical corrections to amendments to disclosure requirements and summary prospectus for variable annuity and variable life insurance contracts previously adopted in March 2020.

Specifically, this document amends Instructions 15(d) and 18(b) published in the previous release. Instruction 15(d) is amended to redesignate Note 2 to rule 405 of Regulation S-T as Note 1 to rule 405 of Regulation S-T, and Instruction 18(b) is amended to replace the reference to Item 3 of Form N-14 with a reference to Item 5(c) of Form N-14.

These technical corrections are effective July 1, 2020.

For more information, click here.

Tax Updates

IRS Issued Final and Proposed Regulations on Income Subject to a High Rate of Foreign Tax

Authored by Tabitha Ford, Tax Senior, MaloneBailey, LLP

Summary - The Department of the Treasury and the Internal Revenue Service on July 20th issued a final regulation regarding the treatment of income earned by certain foreign corporations that is subject to a high rate of foreign tax, such as global intangible low-taxed income and subpart F income provisions. These changes relate to the changes made by the Tax Cuts and Jobs Act, which was enacted in 2017. The final regulations allow taxpayers to exclude certain high-taxed income of a controlled foreign corporation from their Global Intangible Low Taxed Income (GILTI) computation on an elective basis. They also issued a proposed regulation regarding the high-tax exception with the GILTI high-tax exclusion, which proposes to generally conform the rules implementing subpart F high-tax exception to the rules implementing the GILT high-tax exclusion set forth in the final regulations mentioned above. Updates on the TCJA can be found on the Tax Reform page of IRS.gov.

An overview of the most significant changes found in the final and proposed regulations are as follows:

Calculation of the effective foreign tax rate
Effective foreign tax rate – The 2019 proposed regulations apply the GILTI high-tax exclusion by comparing the effective foreign tax rate with 90 percent of the rate that would apply if the income were subject to the maximum rate of tax, which is in agreement with the final regulations; However, the proposed regulations are based on a QBU-by-QBU basis, whereas the final regulations adopt a “tested unit” standard that replaces the QBU standard. Generally, the final regulations provide that the effective rate at which taxes are imposed for a taxable year is the U.S. dollar amount of foreign income taxes paid or accrued with respect to a tentative net tested income item, 2 over the sum of the U.S. dollar amount of the tentative net tested income item and the amount of foreign income taxes paid or accrued with respect to the tentative net tested income item. A tentative net tested income item is generally determined by taking into account certain items of gross income attributable to a QBU, less deductions (also determined under federal income tax principles) allocated and apportioned to such gross income.

Tested unit - Unlike the QBU standard that serves as a proxy for being subject to foreign tax, the tested unit approach generally applies to the extent an entity, or the activities of an entity, are actually subject to tax, as either a tax resident or a permanent establishment (or similar taxable presence), under the tax law of a foreign country.
3 Categories of a tested unit:
Includes a CFC. (consistent with proposed)
Generally includes an interest in a pass-through entity held, directly or indirectly, by a CFC. 2 Requirements are necessary to be met in order to for the interest to be considered a tested unit.
Includes a branch, or a portion of a branch, the activities of which are carried on directly or indirectly by a CFC, provided that either
The branch gives rise to a taxable presence in the country in which the branch is located, or
The branch gives rise to a taxable presence under the owner’s tax law, and the owner’s tax law provides an exclusion, exemption, or other similar relief.

Rules regarding the election
Consistency - The 2019 proposed regulations generally provide that if a CFC is a member of a controlling domestic shareholder group (“CFC group”), 5 a GILTI high-tax exclusion election (or revocation) is either made with respect to each member of the CFC group or is not made for any member of the CFC group. The GILTI high-tax exclusion election and the subpart F high-tax exception election should apply consistently and, as noted in part I of this Summary of Comments and Explanation of Revisions, have determined that the subpart F high-tax exception should be conformed to the GILTI high-tax exclusion, as discussed in the preamble to the 2020 proposed regulations.
Duration – Effective for the CFC inclusion year for which it is made and all subsequent CFC inclusion years, unless the election is revoked.
Because the final regulations adopt a tested unit-by-tested unit approach and retain the consistency requirement in the proposed regs, the 60-month restriction is not necessary to prevent abuse. Accordingly, the final regs do not include this restriction.

Determination of Tax - the amount of foreign income taxes paid or accrued by a CFC with respect to a tentative tested income item is the U.S. dollar amount of the controlled foreign corporation’s current year taxes that are allocated and apportioned to the related tentative gross tested income.

Effective Dates - Consistent with the applicability date in the 2019 proposed regulations, the final regulations provide that the GILTI high-tax exclusion applies to taxable years of foreign corporations beginning on or after July 23, 2020, and to taxable years of U.S. shareholders in which or with which such taxable years of foreign corporations end.

The foreign tax laws are complex and require professional guidance. If you have questions or would like guidance navigating these laws, please feel free to contact our Senior Tax Manager, Nicole Zhao.

For more information on tax relief, click here.

Extra Crunch

A Few Minutes With FINRA

Summary - FINRA provides a library of brief video segments in which senior FINRA staff discuss timely regulatory topics and respond to comments from firms on specific areas of concern.

These videos are available on the FINRA website. The topics are diverse and offer different perspectives on topics regarding accounting regulations.

For more information, please click here.

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Should you be interested in a complimentary estimate for audit, consulting and tax services, please contact Caroline Rosen at crosen@malonebailey.com or 713.343.4286.

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