Does a GILTI deduction under Sec. 250 flow through to form 5471?

The section 250 deduction does not flow to Form 5471. The GILTI inclusion under section 951A is reported on the Form 5471 Schedules J and P because it directly affects the E&P and PTEP of the CFC. However, the section 250 deduction is a domestic deduction that affects only the U.S. shareholder's taxable income. Think of it this way: the section 250 deduction is a benefit given to the U.S. parent corporation to reduce the effective tax rate on GILTI inclusions, but it doesn't change what happened at the CFC level. The CFC's E&P and PTEP are based on what actually happened at the foreign corporation level, while the section 250 deduction is purely a U.S. tax calculation.

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I was skeptical about taxr.ai at first, but after that thread where Profile 7 recommended it, I decided to give it a try for our company's international tax reporting issues. I'm genuinely impressed by how it handled our GILTI and Section 250 questions. The platform confirmed that our approach of reporting

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Just my 2 cents as someone who deals with this regularly - the Section 250 deduction absolutely does NOT flow to Form 5471. It's a deduction that's purely for the U.S. shareholder's benefit to reduce effective tax rates on foreign income. Think about it conceptually: Form 5471 tracks what's happening at the CFC level. The CFC doesn't get any benefit from Section 250 - that's a U.S. tax concept. Only the GILTI inclusion impacts the CFC's PTEP accounts because that's the income being subject to tax. If you're using tax software, be careful because some packages try to automate this flow and get it wrong. We manually review all our 5471s for this exact reason.

Anyone using any specific workpapers to handle the disconnect between the GILTI inclusion and the Sec 250 deduction? I'm trying to create a reconciliation schedule for our audit team that clearly shows why the full GILTI amount flows to the 5471 without the corresponding Sec 250 deduction.

This is a great discussion that really clarifies the conceptual framework. I've been dealing with a similar situation and was getting confused by the mechanics, but reading through these responses really helps. One follow-up question: when the CFC eventually makes an actual distribution of these earnings that created PTEP through the GILTI inclusion, is that distribution tax-free to the extent of the full GILTI inclusion amount, or only to the extent of the net amount after the Section 250 deduction? I'm thinking it should be tax-free up to the full GILTI inclusion amount since that's what created the PTEP in the first place, but I want to make sure I'm not missing something about how the Section 250 deduction might affect future distributions.