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Additionally, on Dec. 14, 2018, the to Sec. 951(a)(1)(A) inclusions as investments in excess passive
IRS released Notice 2019-1, which under Subpart F. assets.
provided guidance on the treatment ● If it is identified that any income ● Column (e)(iv) and column (d):
of PTEP and the ordering rules under under Subpart F is reclassified as  PTEP originally attributable
Sec. 959. While Notice 2019-1 goes Sec. 956 income as investments to inclusions under Sec. 951A
beyond the scope of this item, it is im- in U.S. property, any PTEP GILTI and reclassified as
portant to note that appropriately ac- attributable to Sec. 951(a)(1)(A) investments in U.S. property
counting for a CFC’s E&P and PTEP inclusions would alternatively under Sec. 965.
related to U.S. inclusions directly affects be reported in column (c) rather ● Column (e)(v) and column (e)
any and all subsequent distributions than column (j). consist of three subgroups:
made out of a CFC and, ultimately, the Sec. 956 income: E&P amounts  PTEP attributable to hybrid
taxable income of a U.S. shareholder. identified as inclusions to U.S. share- dividends under Sec. 245A(e)(2)
Note that the descriptions and holders under Sec. 956 CFC invest- and reclassified as investments
examples below refer to the December ments in U.S. property are calculated at in U.S. property under Sec. 965;
2020 revised versions of Schedules J the CFC level. Columns (e)(i) through  PTEP attributable to Sec. 1248
and P and the accompanying tax year (e)(v) and columns (a) through (e) of amounts under Sec. 959(e) and
2021 Form 5471 instructions. The Schedules J and P, respectively, are used reclassified as investments in
following discussion highlights how to track any PTEP related to inclusions U.S. property under Sec. 965;
Schedules J and P are used with specific under Sec. 956. and
types of foreign income inclusions. ■ Schedules J and P:  PTEP attributable to Sec.
Subpart F: E&P amounts identi- ● Column (e)(i) and column (a): 1248 amounts from the gain
fied as inclusions to U.S. shareholders  Track PTEP originally at- on the sale of foreign corpo-
under Subpart F are calculated at the tributable to inclusions under ration stock by a CFC and
CFC level. Generally, income inclusions Sec. 965(a) transition tax and reclassified as investments in
to U.S. shareholders under Subpart F reclassified as investments in U.S. property.
require that E&P be reclassified to one U.S. property (Sec. 959(c)(1)(A) It is apparent that to the extent a
of several columns related to tracking amounts). CFC does not have Sec. 956 income, the
PTEP on Schedules J and P. ● Column (e)(ii) and column (b): first five columns related to tracking and
■ Schedule J:  E&P treated as PTEP under reporting PTEP of the CFC on Sched-
● CFC income identified as Sec. 965(b)(4)(A) of deferred ules J and P are likely not relevant.
Subpart F income must be reclas- foreign income corporations GILTI: E&P amounts identified as
sified from post-2017 E&P not and reclassified as investments inclusions to U.S. shareholders under
previously taxed (column (a) of in U.S. property. Sec. 951A GILTI are calculated at the
the form) to column (e)(x), which ● Column (e)(iii) and column (c) U.S. shareholder level. GILTI is also not
represents PTEP attributable to consist of three subgroups: subject to E&P limitation and may
Sec. 951(a)(1)(A) inclusions.  PTEP attributable to, or reclas- result in income inclusions even if E&P
● If it is identified that any income sified as, investments in U.S. deficits are present across the CFCs
under Subpart F is also subject property that would have been the U.S. shareholder owns. Because
to Sec. 956 as income related to deferred if not for Sec. 956; inclusions related to GILTI take an
investments in U.S. property, any  PTEP attributable to Sub- aggregated net tested income and loss
PTEP attributable to part F income inclusions (not approach across all the CFCs, the ques-
Sec. 951(a)(1)(A) inclusions described in any other column) tion arises as to how a GILTI inclusion
would alternatively be reported in and reclassified as investments of U.S. shareholders should be allocated
column (e)(iii) of the form rather in U.S. property under Sec. 956; back to each CFC for purposes of
than in column (e)(x). and tracking E&P and PTEP balances on
■ Schedule P:  PTEP attributable to inclu- Form 5471, Schedules J and P. Should a
● CFC income identified as sions under previous taxpayer reclassify all net CFC tested in-
Subpart F should be reported Sec. 951(a)(1)(C) passive come for each CFC to PTEP regardless
under Sec. 951(a)(1)(A) PTEP foreign investment compa- of whether the CFC was in a net tested
in column (j) of the form, which nies (PFICs) and Subpart F income or a net tested loss position, or
represents PTEP attributable income inclusions reclassified should the taxpayer choose a CFC at

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