US Shareholder Of A Canco After 2017 Tax Reform

Public Law no. 115-97 (2017 tax act)—the Tax Cuts and Jobs Act, signed December 22, 2017—significantly changed the Code and negatively affects a US person in Canada holding shares in a closely held corporation. The changes were intended to target a large corporation, such as Apple, that has large non-US retained earnings, an oversight no doubt attributable to hasty legislative drafting.

A US CFC shareholder is deemed to be a US shareholder if 10 percent of the CFC's votes or value is held by a US individual or US corporation. A CFC is a non-US corporation in which more than 50 percent of the votes or value is owned by US shareholders. Before the 2017 tax act, a US shareholder was a US person who held at least 10 percent of the votes of the non-US corporation.