Details of Public Law 119-21, section 70351 , One Big Beautiful Bill Act

This provision makes permanent the look-thru rules for related CFCs. For purposes of this provision, foreign base company income for a taxable year consists of foreign personal holding company income, which includes passive income such as dividends, interest, rents, royalties and annuities, foreign base company sales income, and foreign base company services income (Internal Revenue Code (IRC) section 954).

The look-thru rules for related CFCs do not treat dividends, interest, rents, and royalties received or accrued from a CFC from a related party as foreign personal holding company income to the extent the income is attributable and properly allocable to the income of the related person with is neither subpart F income (IRC section 951) or income treated as effectively connected of trade of business in the United States (IRC section 864(c)).

California does not conform to subpart F (sections 951 to 965) of the IRC, relating to CFCs, except to the extent applicable with respect to filings under a water’s-edge election. As a result, California does not conform to the changes made by this provision.