Latest news with #CFCs
Forbes
22-07-2025
- Business
- Forbes
OBBBA Revises Existing GILTI Tax Rules For U.S. Shareholders Of CFCs
WASHINGTON, DC - JULY 04: U.S. President Donald Trump, joined by Republican lawmakers, signs the ... More One, Big Beautiful Bill Act into law during an Independence Day military family picnic on the South Lawn of the White House on July 04, 2025 in Washington, DC. After weeks of negotiations with Republican holdouts Congress passed the One, Big Beautiful Bill Act into law, President Trump's signature tax and spending bill. The bill makes permanent President Donald Trump's 2017 tax cuts, increase spending on defense and immigration enforcement and temporarily cut taxes on tips, while cutting funding for Medicaid, food assistance and other social safety net programs. (Photo by) On July 4, 2025, President Trump signed into law Pub. L. No. 119-21, also known as the 'One Big Beautiful Bill Act' or 'OBBBA'. The OBBBA makes substantial revisions to many parts of the Internal Revenue Code of 1986, as amended (the 'Code'), including notable changes to the existing Global Intangible Low-Tax Income ('GILTI') inclusion rules. These revisions are discussed more below. The GILTI Regime Prior to the enactment of the Tax Cuts and Jobs Act of 2017 ('TCJA'), many U.S. shareholders with interests in controlled foreign corporations ('CFCs') enjoyed income tax deferral on the CFC's non-passive or 'active' trade or business income. Instead of paying income tax on the CFC's business income each year, U.S. shareholders paid income tax only when the funds earned from the CFC's business were repatriated to them in the form of a dividend. The TCJA modified the deferral rules, requiring U.S. shareholders to report most active business income of a CFC as a GILTI inclusion (regardless of whether the funds are repatriated to the U.S.). Section 951A of the Code contains the GILTI inclusion rules. The provision is complex and chock full of statutory definitions and exclusions. At its basics, U.S. shareholders of a CFC include GILTI as income based on the CFC's 'tested income' with certain deductions. In turn, tested income is defined broadly to include most types of active business income earned overseas that are not already subject to U.S. income tax (e.g., tested income excludes subpart F income and income that is effectively connected with a U.S. trade or business). The current GILTI regime includes two significant reductions to the GILTI inclusion. First, a U.S. shareholder may reduce the GILTI inclusion by a 'net deemed tangible income return' or 'NDTIR.' Very generally, shareholders compute their NDTIR as 10% of the shareholder's allocable share of 'qualified business asset investment,' i.e., the CFC's depreciable trade or business assets. Second, a U.S. shareholder who is a domestic corporation or an individual who has made a valid election to be treated as a domestic corporation under Code section 962 may receive an additional GILTI deduction under Code section 250. For the 2025 tax year, the Code section 250 deduction is 50% of the GILTI inclusion. Prior to enactment of the OBBBA, this 50% rate was scheduled to be reduced to 37.5% starting in the 2026 tax year. Example: Domestic Corporation ('DC') owns 100% of Foreign Corporation ('FC'), a CFC. In 2023, FC earned $1 million of trade or business income from non-passive activities outside the U.S. Also in 2023, FC had an average quarterly qualified business asset investment of $500,000. To compute the GILTI inclusion, DC starts with the $1 million of active trade or business income and reduces that amount by the NDTIR, which is 10% of $500,000, or $50,000. With the 50% section 250 deduction of $475,000 ($950,000 x 50%), DC has a GILTI inclusion of $475,000. With current corporate tax rates of 21%, DC must pay U.S. tax of $99,750 with respect to the GILTI inclusion. OBBBA's GILTI Revisions The OBBBA makes several important revisions to the existing GILTI regime. As an initial matter, it eliminates the GILTI inclusion reduction for NDTIR and renames the GILTI inclusion 'Net CFC Tested Income.' Because foreign corporations no longer receive a NDTIR for eligible depreciable assets, U.S. shareholders should be mindful of the potential tax increases in 2026 when the OBBBA provisions become effective. Although the removal of the NDTIR may increase some U.S. shareholders' Net CFC Tested Income, there are some taxpayer-friendly rules in the OBBBA. As mentioned previously, the Code section 250 deduction—currently 50% of the GILTI inclusion—was scheduled for a reduction of 37.5% in 2026. Under the OBBBA, the Code section 250 deduction is revised to 40% without any further reductions planned in the immediate future. Example: Same facts as the example above except DC and FC are now subject to the OBBBA. With the removal of the NDTIR, DC may no longer claim a reduction in GILTI of $50,000 for FC's qualified business asset investment. In addition, DC's section 250 deduction is now 40% of the Net CFC Tested Income, or $400,000. Accordingly, DC must pay income tax of $126,000 (i.e., 21% of $600,000). OBBBA's Foreign Tax Credit Revisions Foreign tax credits often mitigate the U.S. income tax consequences of foreign business activities. Under GILTI, a U.S. corporate shareholder (or an individual shareholder who made a Code section 962 election) can claim deemed foreign tax credits against U.S. income taxes associated with the GILTI inclusion. However, GILTI limited the allowable foreign tax credits to 80% of the foreign taxes associated with the inclusion (subject to an income gross up). The OBBBA also permits U.S. corporate shareholders (or individual shareholders with a Code section 962 election) to claim a deemed foreign tax credit with respect to the Net CFC Tested Income amounts. However, the OBBBA permits these shareholders to claim an increased 90% of the foreign taxes allocable to the income. Summary The U.S. tax rules associated with CFCs are complex and nuanced (e.g., the IRS Form 5471 filing obligation). Because these rules will change for the 2026 tax year, U.S. shareholders with interests in CFCs should consult with their tax advisors to determine the impact of the changes on their unique tax circumstances.
Mint
17-07-2025
- Business
- Mint
Britains Ocado says priority is to turn cash flow positive in 2025/26
LONDON (Reuters) -Ocado's priority is to generate cash in its next financial year, the high-spending British online supermarket and technology group said on Thursday, as it reported a 77% rise in first-half underlying earnings, sending its shares higher. The group runs an online supermarket through a joint venture with Marks & Spencer, though its market value is mainly driven by the sale of its cutting-edge robotic warehouse technology to retailers around the world. It said its core priority was to turn cash-flow positive during its 2025/26 year - which starts in December - by reducing costs, and to be full-year cash positive in the following year. Finance chief Stephen Daintith told Reuters Ocado was "well on target" to achieve this, highlighting 93 million pound lower cash outflows in its first half to June 1 versus the previous corresponding period, a falling cost base, and a 15% increase in revenue in the key technology division. Shares in Ocado were up 13%, paring 2025 losses to 12% that reflect market anxiety at the pace of new site openings for its grocery retail partners and a lack of new technology deals. Ocado's most important partner, Kroger in the United States, has slowed its roll-out of automated warehouses, or customer fulfilment centres (CFCs) as Ocado calls them, while last year its Canadian partner Sobeys paused the opening of a fourth warehouse. Last month, Ocado did, however, expand its partnership with Spanish supermarket group Bon Preu. Ocado has a further eight CFCs due to go live over the next three years. CEO Tim Steiner said he expected to sign up new grocery clients as exclusivity terms with existing partners end in multiple markets towards the end of this year. Bernstein analyst William Woods said this "may not be helpful to some of the long-term relationships or could be seen as a sign that the partnerships have deteriorated to a point where there is little chance of improvement". Ocado made first half adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of 91.8 million pounds, up from 52.0 million. Revenue rose 13.2% to 674 million pounds. It swung to a statutory first half-profit of 611.8 million pounds versus a loss of 153.3 million pounds a year earlier, reflecting changes to the way it accounts for its stake in the Ocado Retail joint venture with M&S. The group said its expectations for the full year were unchanged. (Reporting by James Davey. Editing by Paul Sandle, Mark Potter, Philippa Fletcher)
The Star
11-07-2025
- Science
- The Star
In Indonesia, a start-up captures coolants to stop global warming
JAKARTA (AFP): In the basement of a Jakarta housing complex, surrounded by the silver piping of the air-conditioning system, Indonesian technician Ari Sobaruddin is doing his part to tackle climate change. Ari and his colleagues will spend 12 hours capturing AC refrigerant to stop this "super-pollutant" -- thousands of times more potent than carbon dioxide -- from leaking into the atmosphere. It is plodding, sweaty work, but Ari, a member of climate startup Recoolit, does not mind. "I love it because it's about preserving nature, saving nature," the 30-year-old technician told AFP. Recoolit began working in Indonesia in 2021 to tackle what it considers an often-overlooked contributor to climate change: refrigerants. These gases found in air-conditioners, fridges and cars are an old environmental problem. In the 1970s, research showed refrigerants called chlorofluorocarbons (CFCs) were destroying the ozone layer. Countries agreed to phase them out under a deal that came into force in 1989. While their replacements, particularly hydrofluorocarbons (HFCs), are less harmful to the ozone layer, they still have major climate-warming properties. "And those are in AC units, in the form of refrigerant banks... everywhere in developing countries right now," said Recoolit's head of operations Yosaka Eka Putranta. - 'Growing problem' - There are international agreements to phase out HFCs too, but, particularly in developing countries, they will be in use for decades yet. Demand is increasing as climate change fuels record temperatures and expanding middle classes seek cooling and refrigeration. "It is a growing problem because we need our indoor environments to be more resilient to climate change," said Robyn Schofield, associate professor of atmospheric chemistry at the University of Melbourne. HFCs are expected to account for between 7 and 19 percent of greenhouse gas emissions by 2050, according to the United Nations. The risk comes during maintenance or disposal, when refrigerants like the HFC Ari is capturing can be released accidentally or on purpose. In Indonesia, as in most countries, this venting is illegal, but enforcement is limited. "It's odourless, we cannot trace it. (Capturing) it takes so much resources. The machine, the people," said Recoolit's senior business development manager Erik Cahyanta. "So some people just release it." Recoolit trains, equips and incentivises technicians to capture refrigerant so it can be destroyed. Technicians get 50,000 rupiah ($3) per kilogram of recovered refrigerant, which Recoolit sends to a government-approved cement kiln or municipal incinerator to be destroyed. While refrigerant can be recycled or reused, Recoolit argues this is imperfect. "Who's going to guarantee that when the refrigerants are injected again... they are going to stay there without another venting?" said Yosaka. - Big tech interest - Recoolit sells carbon credits based on the amount of refrigerant it destroys, priced at $75 a unit. Carbon credits have faced criticism in recent years, and Benja Faecks of Carbon Market Watch warned that "offsetting" can give the impression "that emissions can simply be erased through financial transactions". This allows "polluters to claim 'carbon neutrality' or 'negating ongoing emissions' without actually reducing their own emissions," she told AFP. Recoolit argues its carbon credits are robust because it measurably destroys a climate-warming gas. While many carbon credits are sold on exchanges with third-party verification, Recoolit sells directly to buyers and uses a credit methodology developed by the Carbon Containment Lab, a nonprofit spun out from Yale University. Yosaka said canisters are sampled, and analysis is then done by the region's only qualified lab, in Malaysia, to confirm the contents are refrigerants. Destruction facilities pass a "trial burn test" confirming they can break down refrigerants. Recoolit also pays less than the market price for coolants to avoid creating a market for new refrigerants. Refrigerant destruction remains a relatively small part of the carbon market. Existing players include US-based Tradewater, which grew out of California's state-level emissions caps and has worked in Latin America and Africa. But Recoolit has attracted attention from one of the market's biggest corporate players: Google. Earlier this year, the tech giant announced a partnership with Recoolit and a second company to prevent emissions equivalent to one million tons of carbon dioxide. Google says it wants to help Recoolit scale up operations and expand outside Indonesia. Some critics say refrigerant capture should simply be enforced by government policy, but Recoolit argues it is filling a real-world gap unlikely to be addressed otherwise. And Schofield said the need for refrigerant capture is significant. "As a climate action... it's a very good one," she said. "I wish we had more of it." - AFP
The Hindu
11-07-2025
- Science
- The Hindu
In Indonesia, a start-up captures coolants to stop global warming
In the basement of a Jakarta housing complex, surrounded by the silver piping of the air-conditioning system, Indonesian technician Ari Sobaruddin is doing his part to tackle climate change. Mr. Ari and his colleagues will spend 12 hours capturing AC refrigerant to stop this "super-pollutant" — thousands of times more potent than carbon dioxide — from leaking into the atmosphere. It is plodding, sweaty work, but Mr. Ari, a member of climate startup Recoolit, does not mind. "I love it because it's about preserving nature, saving nature," the 30-year-old technician told AFP. Recoolit began working in Indonesia in 2021 to tackle what it considers an often-overlooked contributor to climate change: refrigerants. These gases found in air-conditioners, fridges and cars are an old environmental problem. In the 1970s, research showed refrigerants called chlorofluorocarbons (CFCs) were destroying the ozone layer. Countries agreed to phase them out under a deal that came into force in 1989. While their replacements, particularly hydrofluorocarbons (HFCs), are less harmful to the ozone layer, they still have major climate-warming properties. "And those are in AC units, in the form of refrigerant banks... everywhere in developing countries right now," said Recoolit's head of operations Yosaka Eka Putranta. 'Growing problem' There are international agreements to phase out HFCs too, but, particularly in developing countries, they will be in use for decades yet. Demand is increasing as climate change fuels record temperatures and expanding middle classes seek cooling and refrigeration. "It is a growing problem because we need our indoor environments to be more resilient to climate change," said Robyn Schofield, associate professor of atmospheric chemistry at the University of Melbourne. HFCs are expected to account for between 7 and 19% of greenhouse gas emissions by 2050, according to the United Nations. The risk comes during maintenance or disposal, when refrigerants like the HFC Ari is capturing can be released accidentally or on purpose. In Indonesia, as in most countries, this venting is illegal, but enforcement is limited. "It's odourless, we cannot trace it. [Capturing] it takes so much resources. The machine, the people," said Recoolit's senior business development manager Erik Cahyanta. "So some people just release it." Recoolit trains, equips and incentivises technicians to capture refrigerant so it can be destroyed. Technicians get 50,000 rupiah ($3) per kilogram of recovered refrigerant, which Recoolit sends to a government-approved cement kiln or municipal incinerator to be destroyed. While refrigerant can be recycled or reused, Recoolit argues this is imperfect. "Who's going to guarantee that when the refrigerants are injected again... they are going to stay there without another venting?" said Yosaka. Big tech interest Recoolit sells carbon credits based on the amount of refrigerant it destroys, priced at $75 a unit. Carbon credits have faced criticism in recent years, and Benja Faecks of Carbon Market Watch warned that "offsetting" can give the impression "that emissions can simply be erased through financial transactions". This allows "polluters to claim 'carbon neutrality' or 'negating ongoing emissions' without actually reducing their own emissions," she told AFP. Recoolit argues its carbon credits are robust because it measurably destroys a climate-warming gas. While many carbon credits are sold on exchanges with third-party verification, Recoolit sells directly to buyers and uses a credit methodology developed by the Carbon Containment Lab, a nonprofit spun out from Yale University. Yosaka said canisters are sampled, and analysis is then done by the region's only qualified lab, in Malaysia, to confirm the contents are refrigerants. Destruction facilities pass a "trial burn test" confirming they can break down refrigerants. Recoolit also pays less than the market price for coolants to avoid creating a market for new refrigerants. Refrigerant destruction remains a relatively small part of the carbon market. Existing players include U.S.-based Tradewater, which grew out of California's state-level emissions caps and has worked in Latin America and Africa. But Recoolit has attracted attention from one of the market's biggest corporate players: Google. Earlier this year, the tech giant announced a partnership with Recoolit and a second company to prevent emissions equivalent to one million tons of carbon dioxide. Google says it wants to help Recoolit scale up operations and expand outside Indonesia. Some critics say refrigerant capture should simply be enforced by government policy, but Recoolit argues it is filling a real-world gap unlikely to be addressed otherwise. And Schofield said the need for refrigerant capture is significant. "As a climate action... it's a very good one," she said. "I wish we had more of it."
Int'l Business Times
10-07-2025
- Science
- Int'l Business Times
In Indonesia, A Start-up Captures Coolants To Stop Global Warming
In the basement of a Jakarta housing complex, surrounded by the silver piping of the air-conditioning system, Indonesian technician Ari Sobaruddin is doing his part to tackle climate change. Ari and his colleagues will spend 12 hours capturing AC refrigerant to stop this "super-pollutant" -- thousands of times more potent than carbon dioxide -- from leaking into the atmosphere. It is plodding, sweaty work, but Ari, a member of climate startup Recoolit, does not mind. "I love it because it's about preserving nature, saving nature," the 30-year-old technician told AFP. Recoolit began working in Indonesia in 2021 to tackle what it considers an often-overlooked contributor to climate change: refrigerants. These gases found in air-conditioners, fridges and cars are an old environmental problem. In the 1970s, research showed refrigerants called chlorofluorocarbons (CFCs) were destroying the ozone layer. Countries agreed to phase them out under a deal that came into force in 1989. While their replacements, particularly hydrofluorocarbons (HFCs), are less harmful to the ozone layer, they still have major climate-warming properties. "And those are in AC units, in the form of refrigerant banks... everywhere in developing countries right now," said Recoolit's head of operations Yosaka Eka Putranta. There are international agreements to phase out HFCs too, but, particularly in developing countries, they will be in use for decades yet. Demand is increasing as climate change fuels record temperatures and expanding middle classes seek cooling and refrigeration. "It is a growing problem because we need our indoor environments to be more resilient to climate change," said Robyn Schofield, associate professor of atmospheric chemistry at the University of Melbourne. HFCs are expected to account for between 7 and 19 percent of greenhouse gas emissions by 2050, according to the United Nations. The risk comes during maintenance or disposal, when refrigerants like the HFC Ari is capturing can be released accidentally or on purpose. In Indonesia, as in most countries, this venting is illegal, but enforcement is limited. "It's odourless, we cannot trace it. (Capturing) it takes so much resources. The machine, the people," said Recoolit's senior business development manager Erik Cahyanta. "So some people just release it." Recoolit trains, equips and incentivises technicians to capture refrigerant so it can be destroyed. Technicians get 50,000 rupiah ($3) per kilogram of recovered refrigerant, which Recoolit sends to a government-approved cement kiln or municipal incinerator to be destroyed. While refrigerant can be recycled or reused, Recoolit argues this is imperfect. "Who's going to guarantee that when the refrigerants are injected again... they are going to stay there without another venting?" said Yosaka. Recoolit sells carbon credits based on the amount of refrigerant it destroys, priced at $75 a unit. Carbon credits have faced criticism in recent years, and Benja Faecks of Carbon Market Watch warned that "offsetting" can give the impression "that emissions can simply be erased through financial transactions". This allows "polluters to claim 'carbon neutrality' or 'negating ongoing emissions' without actually reducing their own emissions," she told AFP. Recoolit argues its carbon credits are robust because it measurably destroys a climate-warming gas. While many carbon credits are sold on exchanges with third-party verification, Recoolit sells directly to buyers and uses a credit methodology developed by the Carbon Containment Lab, a nonprofit spun out from Yale University. Yosaka said canisters are sampled, and analysis is then done by the region's only qualified lab, in Malaysia, to confirm the contents are refrigerants. Destruction facilities pass a "trial burn test" confirming they can break down refrigerants. Recoolit also pays less than the market price for coolants to avoid creating a market for new refrigerants. Refrigerant destruction remains a relatively small part of the carbon market. Existing players include US-based Tradewater, which grew out of California's state-level emissions caps and has worked in Latin America and Africa. But Recoolit has attracted attention from one of the market's biggest corporate players: Google. Earlier this year, the tech giant announced a partnership with Recoolit and a second company to prevent emissions equivalent to one million tons of carbon dioxide. Google says it wants to help Recoolit scale up operations and expand outside Indonesia. Some critics say refrigerant capture should simply be enforced by government policy, but Recoolit argues it is filling a real-world gap unlikely to be addressed otherwise. And Schofield said the need for refrigerant capture is significant. "As a climate action... it's a very good one," she said. "I wish we had more of it." Technicians get 50,000 rupiah ($3) per kilogram of recovered refrigerant AFP Demand is increasing as climate change fuels record temperatures and expanding middle classes seek cooling and refrigeration AFP The effects of hydrofluorocarbons (HFCs) and the efforts to safely store them after use AFP
