“Notwithstanding the transfer pricing rules,” said the reform proposal, “there is evidence of income shifting offshore, including through transfers of intangible rights to subsidiaries that bear little or no foreign income tax. Under the proposal, if a US parent transfers an intangible to a controlled-foreign corporation (CFC) in circumstances that demonstrate excessive income shifting from the US, then an amount equal to the excessive return would be treated as subpart F income.”
Subpart F income applies to CFCs and is income that is relatively movable from one taxing jurisdiction to another and is that subject to low rates of foreign tax. Income under subpart F is subject to taxation even if it is not repatriated into the US.