Page 161 - International Taxation IRS Training Guides

Participation Exemption

 Generally,
dividends from a foreign corporation to a

are subject to US tax
US shareholder

the DRD applied on the domestic-source (but not
• Before TCJA,
foreign-source)
portion of such dividends under IRC 245

under
 TCJA enacted a participation exemption system
which foreign-source earnings of
a foreign corporation

can be repatriated to a corporate US
shareholder
US tax
without

the foreign-source portion of dividends from certain
• 100% DRD for
foreign corporations
to certain 10% vote or value corporate US
under IRC 245A
shareholders

• Domestic
corporate shareholder cannot be a REIT, RIC, or S
corporation

• Effective for
dividends paid after Dec. 31, 2017

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