Company Seeks Retroactivity Under GILTI High-Tax Exclusion Regs

The Honorable David J. Kautter
Assistant Secretary (Tax Policy)
Department of the Treasury
1500 Pennsylvania Ave., N.W.
Washington, D.C. 20220

The Honorable Charles Rettig
Commissioner
Internal Revenue Service
1111 Constitution Ave., N.W.
Washington, D.C. 20224

The Honorable William Paul
Principal Deputy Chief Counsel and Deputy Chief Counsel
Internal Revenue Service
1111 Constitution Ave., N.W.
Washington, D.C. 202224

RE: REG-101828-19 — Guidance Under Section 958 (Rules for Determining Stock Ownership) and Section 951A (Global Intangible Low-Taxed Income)

Dear Messrs:

WW International, Inc., formerly Weight Watchers International, Inc. (“WW International”) appreciates the opportunity to provide comments on the proposed regulations regarding guidance related to rules for determining stock ownership and Global Intangible Low-Taxed Income or “GILTI" under section 951A (IRS REG-101828-19)

WW International is a global wellness company and a leading commercial provider of weight management services. The WW business has been operating in the US since 1961 and internationally since 1968. The company has always been headquartered in the United States. In 2018, WW International's revenue was more than $1.5b. WW International's subsidiaries operate in the following countries and nearly all the subsidiaries are subject to tax rates in excess of 18.9%: Australia, Belgium, Canada, France, Germany, Netherlands, New Zealand, Sweden, Switzerland, and UK. Therefore, nearly all of WW International foreign revenue would qualify as “high tax” under the current version of the proposed High Tax Exclusion (“HTE”) rule.

Without the GILTI HTE, WW International is suffering significant GILTI tax on its foreign revenue on top of its already high foreign tax costs, due solely to expense apportionment. The preamble to the proposed regulations references the Congressional intent to exclude high-taxed income from gross tested income. In fact, it may be possible to view the high-tax exclusion as an interpretation of current law and, based on the legislative history, this appeared to be the view of Congress.

The Proposed Regulations provide that the GILTI HTE election is effective for taxable years of foreign corporations “beginning on or after the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register, and to taxable years of United Stales shareholders in which or with which such taxable years of foreign corporation ends.” From IRS comments given at a panel, we understand that the effective date was delayed in the proposed regulations as the GILTI HTE electionwas still very much in draft format but that the government was open to the possibility that in final form the effective date could be retroactive to coincide with the GILTI provision effective date, i.e., “taxable years of foreign corporations beginning after December 31, 2017.” A retroactive effective date would make the preamble consistent with the regulations and meet the noted Congressional intent to exclude high taxed income from tested income.

Why provide relief from bad, unintended consequences, but not for all years? Under Section 7805(b)(2), regulations filed or issued within 18-months of the date a statute is enacted can be made retroactive to the original date of enactment. However, where regulatory relief is elective and favorable to the taxpayer, Treasury is not bound by the 18-months period, see Section 7805(b)(7).

Some have raised the compliance burden of making the GILTI HTE retroactive, as taxpayers like WW International would be required to file amended returns in order to make the election for some years. While not ideal, we assure you as a taxpayer in that situation, it is well worth the administrative burden and, if it were not, we simply would not make the election in those years. Further, many taxpayers affected by GILTI HTE will be required to file amended returns already as a consequence of other TJCA provisions; for instance, for interaction between toll charge foreign tax credits and foreign tax redeterminations. As such, the burden of amending returns should not be a consideration for this retroactive election.

In summary, delaying the effective date of the GILTI HTE would be inconsistent with the legislative history (acknowledged in the preamble to the proposed regulations) and, therefore, the final regulations can and should make the election retroactive to coincide with the GILTI provision's effective date to avoid unduly harming taxpayers such as WW International that operate in high tax jurisdictions.

Sincerely,

Rebecca Anavim
VP, Global Tax Reporting and Planning
Tax Counsel
WW International, Inc.
New York, NY