Own ≥10% of a foreign corporation? You may be a US Shareholder of a Controlled Foreign Corporation — and the GILTI inclusion taxes your share of the foreign company's tested income at US rates, every year, whether or not the company distributes. The §962 election rescues the position by accessing C-corp-level treatment (21% rate + 50% deduction + 80% FTC). Run your numbers.
The Global Intangible Low-Taxed Income (GILTI) regime, enacted by the 2017 TCJA, taxes US shareholders on their pro-rata share of a CFC's tested income above a 10% deemed return on qualified business asset investment. For US individual shareholders without the §962 election, GILTI is taxed at top ordinary rates (37%+) with no foreign tax credit — the worst outcome in the Code for a 10%-shareholder of a profitable foreign business.
The §962 election is the rescue. By electing to be taxed at C-corporate rates on the GILTI inclusion, the individual shareholder accesses the 21% corporate rate, the 50% §250 deduction (producing a 10.5% effective rate), AND an 80% foreign tax credit. The trade-off: later distribution of the post-tax PTEP is taxed as a dividend, but at qualified-dividend rates. For high-tax foreign jurisdictions (>13.125% effective rate), §962 is almost always advantageous.
Any foreign corporation where US shareholders (10%+ owners by vote or value) own >50% in the aggregate. Once a CFC, every 10%+ US shareholder includes pro-rata Subpart F + GILTI each year.
Annual, irrevocable per year. Made on Form 8993. Individual elects to be taxed as if a C-corp on Subpart F/GILTI inclusions. Later PTEP distributions taxed as dividends (qualified-dividend rate where treaty-qualified).
The CFC / Subpart F / GILTI chapter — including the §962 election framework, the GILTI high-tax exception, the §245A DRD for C-corp shareholders, and a worked-example workbook. Get the chapter and the launch notice.