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Goodyear Seeks Changes to High-Tax Exclusion From GILTI

AUG. 9, 2019

Goodyear Seeks Changes to High-Tax Exclusion From GILTI

DATED AUG. 9, 2019
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August 9, 2019

Honorable Charles P. Rettig
Commissioner
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20044

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

Dear Commissioner Rettig:

The Goodyear Tire & Rubber Company appreciates your efforts to develop a high tax exclusion election to Global Intangible Low-Taxed Income (GILTI). We request that you consider our below suggested comments which would help ensure that companies like Goodyear with an overall effective foreign tax rate exceeding 18.9 percent also benefit from the high tax exclusion.

From its 1898 beginning with just 13 employees, Goodyear has become a perennial American manufacturer. Today, Goodyear employs over 60,000 employees, operates 47 facilities in 21 countries, and generates over $15 billion in annual sales. Headquartered in Akron, Ohio, Goodyear is the last remaining major American manufacturer of tires.

Given the high rate of tax paid by Goodyear s CFCs in the aggregate, it is highly unlikely that Goodyear will ever owe GILTI tax. Notwithstanding that Goodyear will not owe GILTI tax, the mechanics of the GILTI inclusion produce increased state tax costs and double taxation from the limitation and loss of foreign tax credits. Historic losses from our U.S. operations further exacerbate the negative impacts that flow from the GILTI inclusion.

Requested modifications to the high tax exclusion from GILTI.

1. The high tax exclusion should be based upon the effective rate of the shareholder's deemed paid credit for taxes properly attributable to tested income, as defined in Section 960(d), in comparison of the shareholder's Net CFC Tested Income as defined in Section 951A(c).

2. The GILTI high tax exclusion should mirror the GILTI inclusion and be determined on an aggregate basis.

  • As evidenced by the legislative history, Congress deliberately chose to calculate GILTI on an aggregate basis.1

  • Denying the ability to calculate the high tax exclusion on an aggregate basis produces inequitable results.

    • For example, as currently written, a U.S. taxpayer with an aggregate effective foreign tax rate of 20 percent (with each affiliate's effective rate exceeding 19.8 percent) would not have a GILTI inclusion. However, a U.S. taxpayer with a higher aggregate effective foreign tax of 25 percent (with a single affiliate's effective rate below 19.8 percent) would incur a GILTI inclusion and the related negative consequences.

  • An aggregate test would also significantly alleviate compliance and administrative burdens for taxpayers and the Internal Revenue Service.

We appreciate your consideration of these comments and would welcome the opportunity to discuss them further.

Respectfully submitted,

J. Scott Scheiferstein
Vice President — Tax
The Goodyear Tire & Rubber Company
120A 200 Innovation Way
Akron, OH 44316-0001

cc:
David J. Kautter
Assistant Secretary (Tax Policy)
Department of the Treasury

Lafayette "Chip" G. Harter III
Deputy Assistant Secretary (International Tax Affairs)
Department of the Treasury

Douglas L. Poms
International Tax Counsel
Department of the Treasury

Lindsay Kitzinger
Attorney-Advisor, Office of International Tax Counsel
Department of the Treasury

Brett York
Attorney-Advisor, Office of Tax Legislative Counsel
Department of the Treasury

Marjorie A. Rollinson
Associate Chief Counsel (International)
Internal Revenue Service

Barbara Felker
Branch Chief, Office of Associate Chief Counsel (International)
Internal Revenue Service

Jeffery L. Parry
Attorney-Advisor, Office of Associate Chief Counsel (International)
Internal Revenue Service

Larry R. Pounders
Attorney-Advisor, Office of Associate Chief Counsel (International)
Internal Revenue Service

FOOTNOTES

1 Page 366 of the Senate Finance Committee's Explanation of the Bill states in part: "GILTI is calculated at the U.S. shareholder level after aggregating both certain income and adjusted basis in tangible depreciable property on a pro rata basis across each CFC with respect to which it is a U.S. shareholder. GILTI is treated as subpart F income, and the aggregate nature of the GILTI calculation is a departure from present law, under which subpart F income is calculated at the CFC level. The Committee believes that calculating GILTI on an aggregate basis, instead of on a CFC-by-CFC basis, reflects the interconnected nature of a U.S. corporation's global operations and is a more accurate way of determining a U.S. corporation's global intangible income.

END FOOTNOTES

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