Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski and I’m back again with Frank Landreneau, one of our International Tax Directors. Frank, welcome back to the Playbook.

Frank: Thanks, Jen. It’s great to be back.

Jen: Last time we talked about the GILTI tax. Remind our viewers, if they didn’t watch last time, what does it stand for?

Frank: What GILTI stands for – it’s an acronym for Global Intangible Low Tax Income, and the whole idea is that some level of foreign earnings should be taxed on a current basis in the U.S.

Jen: How does GILTI actually work?

Frank: First of all, you take a look at the foreign corporations’ earnings in its totality. And then, there are a bunch of carve outs, which you take a look at, and then that is the income that would be subject to the GILTI tax.

In theory, it’s supposed to work where a routine return, a normal operating return from normal operations, would be not taxed under GILTI. Any return so called “excess returns,” this would be returns earned through the fact that you’ve got special processes, intellectual property – that type of thing would be subject to the GILTI tax. That’s where the name comes from. There’s a lot of gyrations and calculations needed to get to that amount.

Jen: Are there particular industries that are impacted by this more so than others?

Frank: That’s a great question. Because of the way the Congress decided to spell out this legislation, it’s a mechanical test in how the computation works. Industries with very little or few fixed assets, such as service industries or distributing companies, would be hit more hard than manufacturing companies.

Jen: Would this be something that a company would consider maybe restructuring to a different structure?

Frank: There are some planning ideas. One thought would be for companies that are owned by individuals outright, or what’s common in the U.S. is ownership through pass through entities. Those entities are thinking perhaps putting a domestic corporate blocker entity between the individual owner and the form corporation. There’s some special considerations that are beneficial if you do that structure.

Jen: And does this take in effect already, because of the new tax reform?

Frank: Absolutely. It took effect technically from January 1, because the legislature was signed into law back in December.

Jen: Perfect. Well, we’ll get you back to talking a little bit more about some international tax reform.

Frank: Thank you. There’s plenty to talk about it.

Jen: All right, great. To learn more about other international topics, visit pkftexas.com/internationaldesk. This has been another Thought Leader Production brought to you by PKF Texas The Entrepreneur’s Playbook. Tune in next week for another chapter.

Jen: This is the PKF Texas Entrepreneur’s Playbook.  I’m Jen Lemanski, and I’m back again with Frank Landreneau, one of our international tax directors. Frank, welcome back to the Playbook.

Frank: Thank you. It’s great to be back.

Jen: So last time we had you here, you were talking a little bit about tax reform, how it impacts international companies. There’s a territorial tax system now. What is that?

Frank: That’s right. With tax reform we’ve replaced the worldwide tax system with what really is called a quasi-territorial tax system. And what that means is that while corporate shareholders can get dividends from specified core corporations tax free, there still are some hurdles that they have to go through such as dealing with this so-called GILTI tax that’s now in the law.

Jen: GILTI. So, I assume that’s not like “guilty,” but it’s probably an acronym?

Frank: It is, guilty as changed. It’s an acronym for Global Intangible Low Taxed Income, and the idea is that corporations will be taxed on foreign earnings when they operate in low tax jurisdictions.

Jen: So, what happens if they operate in high tax jurisdictions? Will they be taxed in that?

Frank: That’s actually a great question, because the name is deceiving that you’d only be taxed in lox tax jurisdictions. The interesting thing is that for corporate tax payers, they may still pay some tax if they’re in high tax jurisdictions, because of the fact that there’s certain business expense rules and you can only offset this GILTI income tax against 80% of foreign tax credits. So, you never really know where you end up. Now, for individuals, you don’t get this type of treatment for corporations, so that the actual tax bite is higher.

Jen: Okay, well I definitely have some more questions. We’ll get you back to talk a little bit more about the GILTI tax next time. Does that sound good?

Frank: Sounds great. Thank you.

Jen: Perfect, thank you. To learn more about other international topics, visit PKFTexas.com/internationaldesk. This has been another Thought Leader production brought to you by PKF Texas The Entrepreneur’s Playbook.

Jen:  This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemsamski, and I’m back with Frank Landreneau, one of our international tax directors. Frank, welcome back to the Playbook.

Frank: Well, thanks for having me. I appreciate it.

Jen: So, I’ve heard a little bit about a so-called toll or repatriation tax; can you explain to me what this is?

Frank: That’s right. Basically, under the new tax laws, it’s the change of regime of foreign earnings accumulated without being taxed until the earnings are brought back to going to more of an exemption system. So, the idea is we’re going to cleanse all foreign earnings by taxing it, and so anything that comes over as a repatriated dividend from this point forward most likely won’t be subject to tax.

Jen: What size company does that really affect? Is it middle market? Is it the big guys?

Frank: That’s a good question, because a lot of people think that tax reform was really only for the big guys. It really affects everybody who may have had a foreign corporation operating as an active trader business activity overseas.

Jen: So, for a middle market company, is it too late to do something about it or what’s the timeframe they need to be focusing on?

Frank: None at all. Actually, there are some considerations that need to be looked at. While tax liability on repatriated earnings need to have been made by April 15th in most cases for business entities, the final calculation most likely has not been determined. So now is the time to look at, “Have we been computing foreign earnings properly? Do we have our tax pools in order?” And while you may have paid a repatriation tax upon extension of your return that may not be the final tax you pay, so therefore there’s more that needs to be done before that final filing is made.

Jen: So, it sounds like they need to call you if they haven’t looked into it yet.

Frank: Absolutely. There’s definite things to look at. Like accounting methods that may have been done or taken or missed or different things like that, so there are things to look at.

Jen: Great. Well, we’ll get you back to talk some more international business with us soon.

Frank: Thank you very much. Appreciate it.

Jen: To learn more about other international topics visit PKFTexas.com/internationaldesk. This has been another Thought Leader production brought to you by PKF Texas Entrepreneur’s Playbook.

Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, and I’m here today with Frank Landreneau, one of our International Tax Directors. Frank, welcome back to the Playbook.

Frank: Well, thanks, Jen. It’s great to be back again.

Jen: Last time we talked a little bit about tax reform—how it impacts international businesses—and so, what were they doing before and then what does the tax reform mean to them now?

Frank: The landscape has truly changed, because before, middle market companies with overseas operations were really trying to shift earnings to overseas operations to minimize tax. That’s commonly known as a deferral strategy. You don’t pay tax on that income until you repatriate it back to the U.S. That was the crux of all international tax planning, particularly for middle market companies.

Jen: Now, with the new reform, what is that going to look like?

Frank: Now, the tax planning has kind of turned on its head with a lot of different provisions of excluding foreign dividend income from taxation and making those changes permanent. Companies are now looking at what can we do to actually shift some production to the U.S. with lower tax rates and minimize exposure overseas, if that’s in their game plan.

Jen: Is there a timeframe where they need to get all their ducks in a row, or is it just kind of an ongoing type thing?

Frank: Now is the time to re-look at everything that they’re doing, whether it’s supply chain, entity structuring; there’s incentives. The new tax reform heavily favors the domestic corporation type of entity. It’s one area that entities that are doing business as partnerships and S corporations are really taking a look at, should we change entity types, or should we do a different type of entity for a particular type of activity, etc.

Jen: Well, that sounds great and I know we’ve got a lot more to talk about this. We’ll get you back next time.

Frank: Great, thank you.

Jen: Thanks, Frank.

Frank: I appreciate it.

Jen: To learn more about other international topics, visit pkftexas.com/internationaldesk. This has been another Thought Leader Production brought to you by PKF Texas the Entrepreneur’s Playbook. Tune in next week for another chapter.

Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, and I’m here today with Frank Landreneau, one of our International Tax Directors at PKF Texas. Frank, welcome back to the Playbook.

Frank: Thank you, Jen. It’s great to be back.

Jen: So, tax reform has been in the news a lot. What are you seeing for middle market companies in the international space? How is it changing the way they do business?

Frank: Because of the incentives created through the tax reform, many middle market companies are starting to rethink all types of aspects of their operations, including their supply chain, areas of production, really refocusing on different areas of where they are operating and placing strategic activities.

Jen: And is that for inbound and outbound as well?

Frank: It is. Primarily, a lot of this tax reform was centered around US companies and how they do business in the US, but it does have incentives for inbound companies as well.

Jen: And what types of industries is this going to impact most? Is it manufacturing or is it all across the board?

Frank: It’s really going to impact everything across the board, because a lot of the crux of the tax reform has to do with the reduction of tax rates, and so, therefore, it will transcend industries and the entity types as well.

Jen: I know there’s going to be a lot more to talk about this and dive into with the international tax. Can I get you back?

Frank: Absolutely. I’d love to do that.

Jen: Perfect. Well, thanks. To learn more about other international topics, visit pkftexas.com/internationaldesk. This has been another Thought Leader Production brought to you by PKF Texas The Entrepreneur’s Playbook. Tune in next week for another chapter.

https://vimeo.com/121468283

Karen: This is PKF Texas Entrepreneur’s Playbook and I’m Karen Love, I’m the host and Co-founder. So today I’m here with Frank Landreneau, one of our international tax directors, so I’d like to welcome you to the Playbook Frank.

Frank: Thank you Karen, it’s great to be here.

Karen: Thank you. Well you know we’re in Houston, international city and U.S. manufacturers and exporting, there may be some things that they need to know about that they’re not doing that you could share with us.

Frank: Right. Well one of the best kept secrets is a tax incentive that’s been around for a while but it’s gotten increased popularity over the last few years and it’s called the IC-DISC.

Karen: Wow. Okay, now that sounds very, very, very complex. So tell me about that.

Frank: It’s an acronym for Interest Charged – Domestic International Sales Corporation and it’s a tax incentive that allows tax payers to convert income at a lower tax rate.

Karen: Wow, now that sounds really complex, as I thought it was going to be.

Frank: It can be, it can be.

Karen: I would love for you to come back and do a series with us and explain how we can help companies do that at PKF Texas.

Frank: I’d love to. I’d love to talk about it in more detail.

Karen: Fantastic, look forward to having you back Frank.

Frank: Thanks Karen.

Karen: Thank you. We’ll talk more next week about the IC-DISC and for other international topics you can visit PKFTexas.com/InternationalDesk. This has been another Thought Leader production brought to you by the PKF Texas Entrepreneur’s Playbook.

Russ: This is the PKF Texas Entrepreneur’s Playbook. I’m Russ Capper, this week’s guest host, and I’m here once again with Chris Jones, Vice President at Pierpont Communications. He also heads up their Energy and Crisis practices. Pierpont is also a contributor to the Profit and Peril Report. Welcome back to the Playbook, Chris.

Chris: Thanks Russ.

Russ: You bet. So last time you were here we talked about a company expanding internationally, and what they really needed to pay attention with inside their company. Today I want to ask you what do they do to get prepared for the actions outside their company.

Chris: That’s a good question. Last time we were talking about knowing the differences in the media as you plan your crisis response. So, that can come down to things like the history in the region that drives that. So, you need to know: what are some events in the past that might influence the way the media thinks about your industry or your company.

Russ: Okay, all right. So, tell us more though.

Chris: Example here in the US would be the Gulf of Mexico; the Macondo incident. That was a major, significant, watershed moment that significantly and probably permanently changed the relationship between the media in that region covering energy, and the energy firms themselves.

Russ: Okay. What’s another example, Chris, of things that might happen outside your company but inside the destination country that you should prepare for?

Chris: One thing that comes to mind, we have maritime clients that have crisis plans that relate to their shipping operations. Those that are primarily US based don’t have a piracy section in their plan. In many parts of the world, your crisis communications plan needs to account for the probability or the chance of piracy. So, that’s one of those regional things that’s outside of your control but you have to be ready for it.

Russ: How in the world do you learn about those things?

Chris: You know that’s part of the due diligence right up front. So, when we’re brought in, when anyone’s brought in to put together a crisis plan and what they need to start with is understanding the environment that the plan is going to need to operate within. So, that includes the history of incidents within the industry, as well as cultural differences, all of these things. But that’s the upfront research before you even get into the vulnerabilities and the rest of the plan.

Russ: Okay. Really appreciate you sharing that with us.

Chris: Thanks a lot.

Russ: You bet. For other international topics visit pkftexas.com/internationaldesk. This has been another Thought Leader Production, brought to you by PKF Texas Entrereneur’s Playbook.

Russ: This is the PKF Texas Entrepreneur’s Playbook. I’m Russ Capper, this week’s guest host, and I’m here with Don Looper, Attorney with Looper Goodwine P.C., and contributor to the “Profit and Peril” report. Welcome to the Playbook, Don.

Don: Thank you very much.

Russ: You bet. So, you’re contribution to the report is titled, “Foreign Transactions Require an Investment of Professional and Emotional Capital.” That emotional capital part, that’s pretty interesting. Tell us about that.

Don: My practice is an M&A practice. We represent clients acquiring companies, and when US companies go overseas, one of the biggest mistakes they make is to believe they can plop down the price, get the company, and it succeed. Lawyers very seldom understand that they need to invest themselves professionally into the local environment, the community, the employees, and the success of that acquisition depends upon how successful the legal team is in helping the company get to know the environment, the surroundings, and the people; the vendors, to make the acquisition successful.

Russ: Sounds like the legal team might spend weeks, maybe months, there?

Don: On a good acquisition, you would spend many weeks there, yeah. And it may be over nine months, but they would spend quite a bit of time there.

Russ: Really interesting. Thank you for sharing that with us.

Don: You’re welcome.

Russ: For other international topics visit pkftexas.com/internationaldesk. This has been another Thought Leader Production brought to you by PKF Texas Entrepreneur’s Playbook.

Karen: Hello, this is the PKF Texas, Entrepreneurs Playbook. I’m Karen Love, Director of Practice Growth, and I’m here today with Frank Landreneau, one of Houston’s go-to international tax advisors. Frank, welcome back to the Playbook.

Frank: Well, thank you, Karen. It’s great to be here.

Karen: Well, I tell you what, we have some more to talk about about international today because there’s got to be a lot of businesses in Houston who need international advice.

Frank: Right.

Karen: So, how can they tell if their advisor has the necessary experience? Can you share with us what they would look for?

Frank: Absolutely. What a business would like to have is someone who does this on a day-to-day basis where it becomes as natural as breathing; not somebody who has done this a couple of times and may have an inkling of an idea of what to do, but really it’s a core area of their practice.

Karen: Fantastic, and so would you share some of the key areas that they would need to look at that would need some frequency?

Frank: Well, one thing would be there’s a whole set of complex reporting requirements that needs to be addressed as well as just general business information about what are the tax implications of, let’s say, starting an overseas operation or funding the overseas operation.

Karen: Thank you for sharing that with us today.

Frank: You’re very welcome.

Karen: Now, for more information about our international capabilities, please visit PKFtexas.com/internationaldesk. This has been a thought leader production brought to you by the PKF Texas Entrepreneurs Playbook. So, we’d like you to tune in next week for another chapter.