SECTION 10. TREATMENT OF

GLOBAL INTANGIBLE LOW- TAXED INCOME

Commenters have asked whether an exempt organization must include GILTI (included in gross income under § 951A) in the calculation of UBTI. In particular, these commenters have questioned whether GILTI is treated in the same manner as an inclusion of subpart F income under § 951(a)(1)(A) for pur

poses of the unrelated business income tax under § 511.

The IRS treats an inclusion of subpart F income as a dividend for purposes of § 512(b)(1). Accordingly, subpart F income generally is excluded from the calculation of UBTI. Congress approved of the IRS’s long-standing position when it enacted § 512(b)(17) as part of the Small Business Job Protection Act of 1996, Public Law 104–188 (110 Stat. 1755 (1996)). See H.R. Rep. No. 105–586, at 136 (1996) (stating that “income inclusions under subpart F have been characterized as dividends for unrelated business income tax purposes” and citing several private letter rulings issued by the IRS taking this position). Although an inclusion of subpart F income under § 951(a)(1)(A) is generally excluded from the calculation of UBTI as a dividend under § 512(b)(1), § 512(b)(17) requires any amount included in gross income under § 951(a)(1)(A) that is attributable to insurance income (as defined in § 953) which, if derived directly by the organization, would be treated as gross income from an unrelated trade or business to be included in the calculation of UBTI.

GILTI is not an inclusion of subpart F income under § 951(a)(1)(A), but instead is a separate inclusion under § 951A(a). Nonetheless, an inclusion of GILTI is generally treated in a manner similar to an inclusion of subpart F income for other purposes of the Code. See H.R. Rep. No. 115–446, at 641 (stating that, “[u]nder the provision, a U.S. shareholder of any [controlled foreign corporation] must include in gross income for a taxable year its

[GILTI] in a manner generally similar to inclusions of subpart F income”). The Treasury Department and the IRS have determined that an inclusion of GILTI under § 951A(a) should be treated in the same manner as an inclusion of subpart F income under § 951(a)(1)(A) for purposes of § 512(b)(1) and (4). Accordingly, an inclusion of GILTI will be treated as a dividend which is generally excluded from UBTI under § 512(b)(1).

Commenters have also questioned whether § 512(b)(17) will apply to treat as UBTI an inclusion of GILTI to the extent attributable to insurance income (as defined in § 953) that does not constitute subpart F income. The Treasury Department and the IRS note that Congress made

September 4, 2018 416 Bulletin No. 2018–36

additional considerations that should be given to how § 512(a)(6) applies within the context of § 512(a)(3) (section 7 of this notice); and the calculation and ordering of pre-2018 and post-2017 NOLs and the treatment of pre-2018 NOLs that will expire in a given tax year if not taken before post-2017 NOLs (section 9 of this notice). Comments should be submitted on or before December 3, 2018 . Please include Notice 2018–67 on the cover page. Comments should be sent to the following address:

Internal Revenue Service CC:PA:LPD:PR (Notice 2018–67), Room 5203 P.O. Box 7604 Ben Franklin Station Washington, DC 20044

Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to:

Internal Revenue Service Courier’s Desk 1111 Constitution Ave., N.W. Washington, DC 20224 Attn: CC:PA:LPD:PR (Notice 2018–67)

Submissions may also be sent electronically to the following e-mail address:

Notice.Comments@irscounsel.treas.gov. Please include “Notice 2018–67” in the subject line. All comments will be available for public inspection and copying.