It has now been 30 years since the U.S. Congress enacted Section 404A to "rescue" U.S. taxpayers with global operations maintaining large foreign pension plans through branches, disregarded entities, partnerships or controlled foreign corporations. Section 404A was intended to allow a deduction or a reduction in earnings and profits (E&P) as applicable, in a manner that would mirror what would apply had the foreign pension plan instead been a U.S.-qualified pension plan under Section 401(a). However, without an affirmative election by the U.S. taxpayer under Section 404A, in most instances the deduction or reduction in E&P is seriously compromised.
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