GILTI and Controlled Foreign Corporation Rules for Miami Immigrant Owners

GILTI stands for Global Intangible Low-Taxed Income. The rule was written to catch profits sitting inside a foreign company that a US taxpayer controls, and it pulls a share of those profits onto the owner's US return each year without waiting for a dividend. The IRS puts it plainly: "U.S. shareholders of controlled foreign corporations use Form 8992 and Schedule A to figure their global intangible low-taxed income inclusions under section 951A and its related regulations."^[5]

For a Miami resident who moved to Florida from Latin America but still owns a family company back home, this often comes as a surprise. As we cover in foreign-owned US business tax reporting guide, becoming a US resident alien can turn a routine foreign investment into a stack of new US filings, on top of any tax the foreign country already assesses.

The first question is whether you are a US person for tax purposes at all. The IRS states plainly that "Resident aliens are generally taxed on their worldwide income, the same as U.S. citizens."^[10] If you pass the substantial presence test or hold a green card, you are a US resident alien, and your foreign business ownership becomes visible to the IRS.

The second question is whether your slice of the foreign company is large enough to matter. The Form 5471 instructions define a US shareholder as a US person who "Owns (directly, indirectly, or constructively, within the meaning of section 958(a) and (b)) 10% or more of the total combined voting power or value of shares of all classes of stock of a CFC".^[2] Voting power and value are separate tests: either one at 10% or more makes you a US shareholder. Attribution rules can also treat stock owned by a spouse, child, parent, or grandparent as owned by you, which is one of the traps a Miami new arrival most often walks into.

A CFC is a specific US concept, not a status your foreign country grants. The Form 5471 instructions describe a CFC as "a foreign corporation that has U.S. shareholders that own (directly, indirectly, or constructively, within the meaning of section 958(a) and (b)) on any day of the tax year of the foreign corporation, more than 50% of: The total combined voting power of all classes of its voting stock, or The total value of the stock of the corporation."^[1]

Read literally: aggregate every US-shareholder slice on any day of the year. If the sum exceeds 50%, the company is a CFC even if no single owner controls it. A Miami filer with a modest stake in a family sociedad anonima in Latin America, alongside two US-resident cousins, can sit inside a CFC even though the founder abroad still runs the company. The determination is made independently each year, so an ownership change midway through a year can flip the answer.

GILTI targets a CFC's tested income, which is generally its ordinary business earnings after allowable deductions, with a handful of statutory exclusions (Subpart F income, certain foreign oil and gas extraction income, effectively connected income already taxed in the US, and dividends from related persons). A separate carve-out reduces the inclusion by a deemed return on the CFC's qualified business asset investment, so a company that owns real physical operations abroad is taxed less aggressively than a service business that holds mostly intangibles. Even so, most active consulting, trading, and professional-services CFCs owned by Miami residents produce a real GILTI inclusion year after year.

The inclusion is calculated on Form 8992 and its Schedule A, one line per CFC.^[5] A companion Form 5471 (or several, if you own more than one) reports each CFC's balance sheet, income statement, earnings, and your ownership picture. Bring both to your Enrolled Agent together: the tested-income figures reported on Form 5471 feed directly into the Form 8992 calculation.

FATCA is the reporting side of foreign ownership. If your foreign shares are held outside a US brokerage account, they are typically reportable on Form 8938, the Statement of Specified Foreign Financial Assets. The IRS states "Foreign stock or securities, if you hold them outside of a financial account, must be reported on Form 8938, provided the value of your specified foreign financial assets is greater than the reporting threshold that applies to you."^[9]

The thresholds depend on your filing status and whether you live inside the US. The table below covers the two most common Miami-resident filing situations. Values are measured across ALL your specified foreign financial assets, not just the shares: foreign bank accounts, foreign brokerage assets, foreign pensions, and interests in foreign entities all count toward the same aggregate.

Two penalty regimes stack on a CFC owner who does not file. For Form 5471, the IRS states "A $10,000 penalty is imposed for each annual accounting period of each foreign corporation for failure to furnish the information required by section 6038(a) within the time prescribed."^[3] The instructions add that "If the information is not filed within 90 days after the IRS has mailed a notice of the failure to the U.S. person, an additional $10,000 penalty (per foreign corporation) is charged for each 30-day period, or fraction thereof, during which the failure continues after the 90-day period has expired."^[3] That additional penalty caps at $50,000 for each failure.

For Form 8938 under FATCA, the IRS warns "If you must file Form 8938 and do not do so, you may be subject to penalties: a $10,000 failure to file penalty, an additional penalty of up to $50,000 for continued failure to file after IRS notification, and a 40 percent penalty on an understatement of tax attributable to non-disclosed assets."^[8]

When catching up on multiple years of missed CFC filings, our IRS representation service can help evaluate the streamlined and delinquent-return procedures the IRS offers, so penalties do not compound while you file.

Timing matters. Once you become a US resident alien, worldwide income is on the table and the CFC and FATCA rules apply from that year forward. Ideally, you review the foreign entity BEFORE the year in which you clear the substantial presence test or receive a green card. A pre-immigration review can look at check-the-box elections, distribution timing, and ownership restructuring while options are still available and inexpensive; after that year begins, most planning becomes cleanup rather than prevention.

Once you are a US resident, ongoing compliance is best handled by a firm that runs both sides of the border. Our foreign-owned LLC tax filing service handles US filings for foreign-owned entities and the individual returns of their owners, and our foreign-owned U.S. entity tax services page walks through the industry-wide questions we most often help resolve for Miami families with company interests abroad.