What recent change was made to the tax treatment of dividends received by U.S. corporations from foreign subsidiaries?

A.The Tax Cut and Jobs Act fundamentally changes the treatment of foreign dividends effective 2018. Congress adopted a territorial tax system allowing domestic corporations to claim a 100% dividend received deduction for dividends received from a 5% or greater foreign subsidiaries with only foreign earnings. This change recognizes that host countries tax income earned locally.

B.A territorial system has been adopted, effective 2018. Dividends received by U.S. corporations from a 20% or greater foreign subsidiary are eligible for a dividend received deduction. The dividend received deduction is 100% if all of the subsidiary's accumulated earnings are from foreign sources, effectively exempting the income from the U.S. corporate income tax. The deduction is prorated if a portion of the subsidiary's earnings are from domestic sources. This recognizes that host countries tax locally earned income.

C.The Tax Cut and Jobs Act fundamentally changes the treatment of foreign dividends effective 2018. Congress adopted a territorial tax system allowing domestic corporations to claim a 100% dividend received deduction for dividends received from a 10% or greater foreign subsidiaries with only foreign earnings. This change recognizes that host countries do not tax income earned locally.

D.A territorial system has been adopted, effective 2018. Dividends received by U.S. corporations from a 10% or greater foreign subsidiary are eligible for a dividend received deduction. The dividend received deduction is 100% if all of the subsidiary's accumulated earnings are from foreign sources, effectively exempting the income from the U.S. corporate income tax. The deduction is prorated if a portion of the subsidiary's earnings are from domestic sources. This recognizes that host countries tax locally earned income.