Varian Medical Systems and Forte International Tax Tackle GILTI/FDII and Foreign Tax Credits

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This is the second installment of our Tax Technology Corner. As a corporate tax professional, you know how important technology is and how it’s evolving at warp speed. With new regulatory and compliance initiatives in the federal, state, local, and international areas, landmark tax reform legislation, and globalization of tax monitoring and enforcement, keeping up with tax technology is not a luxury—it’s a necessity. Each installment of this column will pair a taxpayer with a service provider. Together, in Q&A format, they’ll tell a story about how they have worked together to solve a specific tax problem, implement a better solution, cut costs, or improve productivity. In this installment, Mark Gasbarra, national managing director for Forte International Tax LLC, and Brian Pollard, vice president of tax at Varian Medical Systems Inc., discuss an intriguing tax issue they successfully handled together. Michael Levin-Epstein, senior editor of Tax Executive, moderated the discussion.

Michael Levin-Epstein: Brian, please tell us about your company.

Brian Pollard: Varian is the world’s leading manufacturer of medical devices and software for treating cancer and other medical conditions with radiotherapy, stereotactic radiosurgery, stereotactic body radiotherapy, brachytherapy, and proton therapy. Our vision is a world without fear of cancer. Our mission is to combine the ingenuity of people with the power of data and technology to achieve new victories against cancer. To meet this challenge, we offer comprehensive solutions for fighting cancer.

Levin-Epstein: Mark, please tell us about your company.

Mark Gasbarra: Forte International Tax LLC is an international tax specialty firm. We leverage our proprietary software platform, VantagePoint™, to meet the complex planning and compliance needs of multinational enterprises. Our team has continually served the international tax software and services market since 1981 and has programmed software for every major international tax change since then, including the Tax Reform Act of 1986. Before founding Forte in 2004, our principals led international tax practices and developed international tax software for Price Waterhouse (PwC) and EY. VantagePoint represents a high point in our development efforts, including GILTI, FDII, and other TCJA international tax provisions.

“With passage of the tax reform legislation, there were many new provisions, including GILTI, FDII (foreign-derived intangible income), BEAT, and 163(j), that needed to be dealt with.”
—Brian Pollard

The Tax Issue

Levin-Epstein: Brian, describe the issue that you were looking for help for from Mark’s group.

Pollard: I think it’s a problem that a lot of companies have. With passage of the tax reform legislation, there were many new provisions, including GILTI, FDII (foreign-derived intangible income), BEAT, and 163(j), that needed to be dealt with. We faced the challenge of computing our GILTI and FDII under the new law. Those were the main issues we were trying to solve.

Levin-Epstein: Mark, what services was your company able to provide to help Brian?

Gasbarra: We’ve had the pleasure of working with Brian for the last fourteen years, so we certainly understood his need to implement the Tax Cuts and Jobs Act’s international tax provisions and the very significant change it represents. In particular, the level of integration between the controlled foreign corporation calculations, including Subpart F and the new GILTI regime, and the impact on their U.S. shareholders was greatly intensified. Major aspects of the U.S. international tax system had not changed for several decades, and companies had been able to rely on Excel-based models they had developed over those years. With the TCJA, that is no longer the case, and the new law really requires more sophisticated models. The models themselves are certainly important, but data management is also critical. Brian definitely emphasized the need to be able to synchronize his data collection packages with VantagePoint on a real-time basis because of the very short turnaround requirements for forecasting and provision purposes. We were able to do that and prove out the calculations and data integration processes even before going live with our implementation.

“The models themselves are certainly important, but data management is also critical.”
—Mark Gasbarra

Working Together

Levin-Epstein: Brian, how would you describe the experience of working with Mark’s group?

Pollard: As Mark mentioned, we had a long-standing working relationship. His company has helped us for a number of years with our domestic production activities deduction, and before that with ETI, so we knew that they had these capabilities from that work. When the new law came out, we were looking around at how to address these new, complex calculations. As Mark mentioned, there’s interplay between regular Subpart F, GILTI, and the foreign tax credit, etc., so we talked with Mark about it. We talked with other vendors as well. His model was pretty far advanced and ready to go. We had some demos and were impressed by what we saw. We thought it would meet our needs. Mark and his team came onsite and did initial training with all of the members of our team who were going to be involved in the process, and then they have supported us since then as we’re learning to use the software ourselves. In the meantime, they’ve been giving us great support, and we’ve used their software for forecasting, we’ve used it for our quarterly estimated annual effective tax rate, and we’ve started to use it for some planning and modeling.

Levin-Epstein: Mark, from your point of view, what were the best parts of working with Brian and his group?

Gasbarra: I think excellent team dynamics is the best way to describe it. There is a great deal of trust between us, which is very important any time you’re implementing software, especially when new and very complex tax rules are involved. The level of trust fuels and expedites the process and the willingness and ability for everyone to respond quickly to needs as questions come up on either side. It’s just a great group of people to work with.

Levin-Epstein: Anything else you wanted to add?

Pollard: I would add that it’s been a pleasure to work with Mark and his team. They’re very knowledgeable, very responsive, and the software is pretty amazing. It has a lot of capability, so we’ve been very impressed.

Gasbarra: Thank you, Brian; I appreciate that.

Levin-Epstein: Thank you.

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