The document outlines the timeline and process for passing the Tax Cuts and Jobs Act of 2017 in the U.S. Congress. It then provides a high-level overview of some of the major provisions introduced in the new tax law, including lower corporate tax rates, limitations on interest expense deductibility, immediate expensing, changes to net operating loss rules, new FDII rules, lowered rates for pass-through entities, related party anti-hybrid rules, and the new Base Erosion and Anti-Abuse Tax (BEAT). The provisions are complex due to existing rules layered on top of the new rules, and regulations will be needed to provide further guidance. Tax planning flexibility will be important given elements that

1. Osler Hoskin & Harcourt LLP
U.S. Tax Reform for Canadians
The Tax Cuts and Jobs Act of 2017
January 9, 2018
Paul Seraganian
Jennifer Lee

2. 2
U.S. House
U.S. House
Ways &
Means
Committee
U.S.
Senate
U.S. Senate
Finance
Committee
Conference
Nov. 2
H.R. 1 released
for mark-up
1
Nov. 10
Amended H.R. 1
approved (24-16) for
full House vote
2
Nov. 10
Senate bill released
for mark-up
2
Dec. 1
Senate bill to be sent for
full Senate vote
3
Dec. 15
House bill sent to
Conference for
reconciliation
4 Dec. 15
Senate bill sent to
Conference for
reconciliation
5
6
Dec. 19-20
Reconciled bill sent to
House and Senate
for full vote
Timeline of Tax Cuts and Jobs Act
The White
House
Dec. 22
Signed into law by
President Trump
7

3. General Outlook for Tax Planning
3
• New rules on top of the old: The TCJA is not a complete tear-down of the
US tax system but rather a very thorough overhaul.
– This means that the “old” framework remains largely intact but with
transformative modifications in many key areas.
– The co-existence of “old” and “new” rules makes for complex layering and
undercuts “simplification”.
• Work in progress: Because of the hurried pace for enacting the TCJA, it
has a large number of flaws and needs substantial “scaffolding” from
regulations.
– Expect a technical corrections bill
– Expect a torrent of regulatory enactments.
• Phase in  Phase out: Many key provisions either phase-out or phase-in
over the next 10 years.
3
2
1
Given these dynamics, preserving
flexibility in tax planning will be key.

4. Key U.S. Domestic and International Provisions
4
US Domestic
• Lower corporate rate of 21%
• Interest deduction restrictions
• Immediate expensing of capital assets
• Net operating loss operational rule changes
• Patent Box regime
• Pass-through rates lowered
International
• Anti-hybrid provisions for related parties
• Base Erosion and Anti-Abuse Tax
• CFC regime
• “Semi”-Territorial system of taxation
• GILTI targeting overseas intangible returns
• Partnership interests held by non-US persons

5. U.S. “Headline” Tax Rates Going Forward
5
Corporations:
35% 21%
FDII ETR: 13.125%
GILTI ETR: 10.5%
(16.406% after 2025)
(13.125% after 2025)
AMT: REPEALED
Individuals*:
39.6% 37% 29.6%Sunsets 12/31/2025
AMT: RETAINED (with temporary increase in exemption level)
“Qualified Income” ETR:
Sunsets 12/31/2025
* does not reflect the 3.8% Medicare tax which is still applicable to individuals on net investment income.

6. Limitation of Interest Expense Deductibility – Section 163(j)
Deductible business interest is the sum of business interest
income, plus 30% of adjusted taxable income.
Adjusted taxable income means taxable income computed without regard to:
1) Any item not properly allocable to a trade or business;
2) Any business interest or business interest income;
3) The amount of any NOL deduction;
4) The amount of any Section 199A (pass-through) deduction;
5) For taxable years beginning before 1/1/2022, any depreciation,
amortization or depletion deduction.

7. Limitation of Interest Expense Deductibility
7
Other Key Aspects
• Unlike old Section 163(j), applies to all
interest, regardless of whether the debt is
with related parties.
• No debt-equity ratio safe harbor.
• Interest deductibility is determined at the
partnership level. This may negatively
impact leveraged blocker structures.
• Generally, certain small businesses whose
3-year average annual gross receipts do not
exceed $25 million, certain regulated public
entities and certain electing businesses are
excluded from Section 163(j).
• As before, indefinite carryforward of
disallowed interest expenses, but the
new Section 163(j) will subject the
disallowed interest carryforward to
limitations under Section 382 (i.e.,
restrict their utilization upon an
ownership change).
• Effective for taxable years beginning after
December 31, 2017, with no
grandfathering.

8. Limitation of Interest Expense Deductibility
8
Leveraged Blocker Example
Onshore Feeder
Investment Fund
Offshore
Feeder
US Real Estate Assets
Canadian Investors +
-
Loan

9. Immediate Expensing
9
• 100% Expensing: Taxpayers are allowed to currently expense 100% of cost
of “qualified” property” placed into service after September 27, 2017 and
before January 1, 2023 (with an additional year for certain property).
• “Qualified Property” is generally depreciable tangible property and does
not include real estate, intangibles (such as goodwill) or shares of a
corporation.
• Qualified property includes “used” property – accordingly, assets acquisitions (or
deemed asset acquisitions via 338 election) can benefit from immediate expensing.
• Phase out: Immediate expensing begins phasing out in 2023.
• Phase out occurs in 20% increments per year until it hits 0% in 2027.
• This may create strong incentives to cluster business expenditures in the next 5
years.

10. NOL changes – Limiting the Utility of NOLs
10
• Net operating losses (NOLs) can
be carried back 2 years.
• NOLs can be carried forward 20
years.
Old Rules TCJA New Rules
• NOLs can’t be carried back.
• NOLs can be carried forward
indefinitely.
• NOL carryforwards to any particular
tax year are limited to 80% of the
taxable income during that year.
Transition: The new rules generally become applicable to NOLs generated
in taxable years beginning after 12/31/2017.
Financial Statements Effect: historic (i.e., pre-2018) NOLs (and other tax
assets) may be subject to financial statement write-down due to drop in
corporate marginal rates.

11. The Importance of “Matching”
11
• The interaction of the new immediate expensing and NOL
provisions in the TCJA creates new tax planning dynamics.
• Specifically, to the extent that current year deductions exceed
current year income, the taxpayer will generally create an
NOL.
• All other things being equal, $1 of current year deduction (matched with current
year income) is more valuable to a taxpayer than $1 of NOL
• The “value” of the NOL is impaired by the 80% limitation and time-value of money
considerations.
• In order to maximize value of items of deductions, U.S.
corporate taxpayers should strive to achieve more effective
“matching” of current year expense with current year income.
• Taxpayers will look for means of controlling the flow of expense items
• E.g. sale-leaseback arrangements

12. “FDII” Rules – “Patent Box Lite”
12
• In an effort to encourage taxpayers to keep intangible and other high-
value assets in the United States, Congress enacted the “Foreign-Derived
Intangible Income” rules found in new Section 250 of the Code.
• The FDII rules are applicable to US corporations only.
STEP 1: Determine “Deduction Eligible Income” (DEI)
• DEI is essentially (1) the gross income of the corporation (with exclusions including most notably,
(i) subpart F income, (ii) GILTI, (iii) dividends from certain CFCs, and (iv) foreign branch income),
minus (2) deductions properly allocated to such gross income
STEP 2: Determine “Deemed Intangible Income” (DII)
• DII = DEI – [10% x “qualified business asset investment” (QBAI)]
• QBAI is essentially US tax basis in tangible depreciable business assets
STEP 3: Determine foreign-derived portion of DEI
• In general, and subject to exceptions for related parties, DEI is foreign-derived if it is (i) property sold or
licensed for use, consumption or disposition outside the US, (ii) for services provided to persons outside the
US

13. “FDII” Rules – “Patent Box Lite”
13
FDII = DII x [Foreign DEI / Total DEI]
• A US corporation is entitled to a 37.5% deduction for FDII, resulting in an effective
rate of tax on FDII of 13.125%.
• In 2026, the deduction ratchets down to 21.875% (resulting in an effective tax rate
of 16.406%).
• Is it preferable to place intangible assets in Canada or the US?
Canco
USco
25%
13.125%

14. Pass-Through Rates Lowered – Section 199A
14
• Headline Rule: Beginning in 2018, individuals, trusts and estates are
allowed a deduction for 20% of domestic “qualified business income”
received through pass-through arrangements.
– This results in a highest effective U.S. tax rate (assuming full
deductibility) of 29.6%.
• Qualified Business Income must:
a. not be attributable to a “specified trade or business” (e.g., traditional service
businesses such as health, law, financial services, consulting businesses and
any trade or business where the principal asset is the reputation and skill of
one or more of its employees or owners);
b. be effectively connected with a US trade or business;
c. not be passive-type income;
d. not be compensation made to the taxpayer by the business.
*The ability to claim the 20% deduction is subject to a cap
**Some of the limitations described above are not applicable to individuals with
income below a prescribed level

15. Flow-Through vs. Incorporation – A Simplified Illustration
15
Individual
Qualifying
business
Flow-Through
“qualifying
income”
ETR: 29.6%
“Old” ETR: 39.6%
Individual
Qualifying
business
U.S.
Corporation
qualifying
dividend
ETR: 39.8%
“Old” ETR: 50.47%
21% corporate rate
23.8*% rate
*includes 3.8% Medicare tax

16. Related Party Anti-Hybrid Provision – Section 267A
16
New Section 267A denies a deduction for any disqualified related party
amount paid or accrued pursuant to a hybrid transaction or by, or to, a hybrid
entity.
1. Disqualified related party amount is generally any interest or royalty payments
paid or accrued to a related party (50% control or common control) to the extent that:
• such amount is not included in the income of such related party under the tax
law of its country, or
• (ii) the related party is allowed a deduction with respect to such amount under
the tax law of its country.
2. Hybrid Element can be the entities involved or the transaction itself:
• Hybrid Transaction: any transaction, series of transactions, agreement or
instrument one or more payments of which are treated as interest or royalties
for US tax purposes but is not so treated under the local tax law of the
recipient.
• Hybrid entity: any entity which is treated as fiscally transparent for US tax
purposes, but not so treated under the local tax law of the recipient, or vice
versa.
Effective for taxable years beginning after December 31, 2017

17. Related Party Anti-Hybrid Provision
17
New Rules on the Horizon: Section 267A grants broad regulatory
authority to the Treasury to issue regulations, including rules for:
• Denying deductions for conduit
arrangements involving hybrid
transaction or hybrid entity
• Denying deductions for certain
structured transactions
• Treating a tax preference as an
exclusion from income if such tax
preference has the effect of reducing
the generally applicable statutory
rate by at least 25%
• Application to foreign branches
• Denying deduction if such the interest
or royalty payment is subject to a
participation exemption system or
other system which provides for the
exclusion or deduction of a substantial
portion of such amount

18. Related Party Anti-Hybrid Provision
18
Sale and Repurchase (“Repo”) Financing Arrangement
Canadian
Parent
US Parent
Lender
US
AcquisitionCo
US LLCUS FinanceCo
Loan
Loan
Preferred
Forward Agreement
Support
Agreement
US Target
Corporation for U.S. and Canadian tax purposes
Fiscally transparent for U.S. tax; corporation for Canadian tax

19. Related Party Anti-Hybrid Provision
19
Tower Structure
Canadian
Parent
Canadian
Sub
US
Partnership
Lender
Loan
Canadian
ULC
US LLC US Opco
Loan
Corporation for U.S. and Canadian tax purposes
Fiscally transparent for U.S. tax; corporation for Canadian tax
Checked as corporation for U.S. tax; fiscally transparent for Canadian tax

20. Related Party Anti-Hybrid Provision
20
IFL Luxco Structure
Canadian
Parent
Other Entities Lux Finco
US Opco
Lender
Loan
Non-interest
Bearing
Loan of $X
Interest Bearing
Loan of $X
Corporation for U.S., Canadian, and Luxembourg tax purposes

21. The BEAT – Section 59A
21
• Designed to curb the use of base-stripping payments, or “base
erosion payments”, by U.S. taxpayers.
• Only applies to certain large taxpayers. Specifically, it only
applies to corporate taxpayers that have:
o an average annual gross receipts* of at least $500 million
for the preceding 3 tax years, and
o “base erosion percentage” of 3**% or higher
• Effective for base erosion payments paid or accrued in taxable
years after December 31, 2017
*Corporations within the same 50% controlled group are generally aggregated for
purposes of determining annual gross receipts. With respect to foreign corporations within
the group, only effectively connected gross receipts are taken into account.
**2% for banks and registered securities dealers.

22. Base Erosion and Anti-Abuse Tax – The BEAT
22
• Operates similar to an alternative minimum tax by increasing a
U.S. taxpayer’s tax liability by an amount equal to the taxpayer’s
“base erosion minimum tax amount” (the “BEAT”)
• The BEAT equals:
o 10*% of the taxpayer’s modified taxable income, minus
o taxpayer’s regular tax liability (reduced by credits**, but not
below zero).
*5% for the single taxable year beginning in 2018, and increasing to 12.5% for years
beginning after 2025. Rates for banks and registered securities dealers and their affiliates
are 1% higher.
**for taxable years beginning prior to 2026, the taxpayer’s regular tax liability is not
reduced by certain credits.

23. Base Erosion and Anti-Abuse Tax – Key Definitions
23
• At a high level, taxpayer’s modified taxable income is the
taxpayer’s taxable income recomputed to exclude:
o Tax benefits from base erosion payments; and
o The base erosion percentage of NOL carryforwards
• Base erosion percentage for a given tax year equals:
Base erosion tax benefits__
Total deductions*
*Includes deductions for the base erosion tax benefits and excludes NOL carryforwards,
participation exemption deductions and GILTI and FDII deductions
**interest deduction disallowed under Section 163(j) is allocated first to interest
payments paid to unrelated parties

24. Base Erosion and Anti-Abuse Tax – Base Erosion Payments
24
• Base erosion payments are payments paid or accrued to 25%-related
foreign persons that are:
o deductible payments (e.g., interest, royalties, fees for services);
o Payments for acquisition of depreciable and amortizable assets;
o Certain reinsurance payments; or
o Payments resulting in a reduction of gross receipts if paid or accrued to
a post-11/9/17 60% inverted company
• Base erosion payments generally do not include:
o U.S. source payments subject to gross-basis withholding tax at the full
30% (with a proration rule to the extent that the withholding tax rate is
reduced pursuant to a treaty);
o Service payments charged at cost with no markup and which are
eligible for the use of services cost method under U.S. transfer-pricing
rules; and
o Payments with respect to certain marked-to-market derivatives

25. Base Erosion and Anti-Abuse Tax – Illustration
25
Assumptions:
• Non-financial institution/non-broker corporate taxpayer
• Base erosion percentage > 3%
• No NOLs
• 2019 taxable year
Regular tax calculation BEAT calculation
Regular taxable income 1,000$ Regular taxable income 1,000$
Regular tax rate 21% Payment to related foreign person for services (150)$
Regular tax before credits 210$ Modified taxable income 1,150$
Tax credits (non-R&D) (100)$ BEAT rate 10%
Regular tax liability 110$ BEAT minimum tax threshold 115$
BEAT amount 5$

26. Base Erosion and Anti-Abuse Tax – Illustration
26
Canadian
Parent
UK Subsidiary US Subsidiary
Interest
US Branch
Interest
Service
Payments
This counts as a BE payment for BEAT
purposes, even if interest payable by the US
Sub is less than its interest receivable.
These payments appear to “count” for
BEAT purposes, even though there is
no BE.

27. CFC Rules – Three Adverse Changes
27
1. CFC Downward Attribution Rule:
o TCJA repealed Section 958(b)(4), which provided that in testing whether
a foreign corporation is a “controlled foreign corporation” (“CFC”), the
downward attribution rules will not be applied to treat a U.S. person as
owning stock in fact owned by a non-U.S. person.
o The repeal is effective for the last taxable year of the foreign
corporation beginning before 2018.
2. US Shareholder Rule: Effective for taxable year of the foreign corporation
beginning after 2017, “U.S. shareholder” definition expanded to include
U.S. shareholders that own 10% of a foreign corporation by vote or value.
3. 30 Day Rule: The requirement that a corporation be a CFC for an
uninterrupted period of 30 days before subpart F inclusion applies is
repealed.
Why does this matter?

28. CFC Attribution and Definitional Changes - Example
28
Canadian
Parent
US Sub
Canadian
Subs
Canadian
Subs
Public
Share-
holders
US Fund
10%
• US Sub subject to phantom income inclusions.
• Are US partners of US Fund subject to 956 inclusions?
• Are US Partners of US Fund subject to GILTI inclusions (with no FTC)?
Guarantee
Bank
Loan
99% held by Canadian Parent; 1% held by US Sub

29. “Semi”-Territorial System – Section 245A
29
• Headline Rule: 10% US corporate shareholders of a qualifying
foreign corporation receive a 100% dividends received
deduction on eligible dividends.
• The Fine Print:
o Not available with respect to “hybrid”
dividends, i.e., dividends for which the
foreign corporation receives a
deduction in a foreign jurisdiction
o Generally does not provide any
exemption for proceeds from the
direct or indirect sale of a foreign
subsidiary (except amounts re-
characterized as dividends under
Section 1248)
o Restricted to the foreign-source
portion of the dividends
o Requires a holding period of at least
365 days over the 731 days period
straddling the ex-dividend date
o 10% holdings determined by vote or
value

30. One-Time Repatriation/Transition Tax – Section 965
30
Headline rule: 10% U.S. shareholders of “specified foreign corporations” are
required to include in income the accumulated deferred earnings of such
foreign corporations.
• Applicable to corporate and non-corporate
shareholders
• Specified foreign corporations are (i) CFCs
and (ii) foreign corporations with at least
one 10% corporate U.S. shareholder
• For corporate U.S. shareholders, the
effective rate of the tax is 15.5% on earnings
held in cash and cash equivalents and 8%
rate on earnings held otherwise. Higher
effective rates generally apply to individual
U.S. shareholders.
• Accumulated deferred earnings is measured
as of 11/2/17 or 12/31/17, whichever is
greater
The Fine Print:
• The income inclusion occurs during such
U.S. shareholder’s taxable year that
includes the last taxable year of such
foreign corporation beginning before 2018
(i.e., 2017 for calendar taxpayers and
foreign corporations)
• May elect to pay tax in instalments over 8
years (subject to certain triggers)
• Various aggregation rules apply

31. GILTI – “global low-taxed intangible income” – Section 951A
31
The GILTI rules create an entirely new class of “phantom income”
that operate in parallel with subpart F rules.
• Current Inclusions: The GILTI rules require a 10% US
Shareholder of a CFC to pay a current, foreign minimum tax on
extraordinary returns earned by the CFC.
GILTI = Net Tested Income – Net Deemed Tangible Income Return
Net Tested Income = aggregate net income of each of its CFCs, except for (i) ECI, (ii)
subpart F income, (iii) income that would be subpart F income but for the high-tax
kickout, (iv) dividends from related parties, and (v) certain foreign oil and gas income.
Net Deemed Tangible Income Return = [10% x aggregate QBAI of applicable CFCs] minus
net interest expense taken into account in determining “net tested income”. QBAI
determined in a manner parallel to FDII rules.

32. GILTI – “global low-taxed intangible income”
32
• GILTI Deduction for Corporations. 10% US Shareholders that are
corporations (not individuals) are eligible to a 50% deduction for
GILTI income.
– This amounts to an effective rate of US tax on GILTI of 10.5%
– This deduction ratchets down to 37.5% after 2025 (effective rate of US tax on
GILTI of 13.125%)
• GILTI and Foreign Taxes. 10% US Shareholders that are
corporations (not individuals) may claim a FTC for foreign taxes
deemed paid on the GILTI. The FTCs that the shareholder may claim
is equal to:
Total Foreign Tax on Tested Income x 0.8 x [GILTI/Total Tested Income]
– As a general matter, so long as the total GILTI has borne a foreign ETR of at least 13.125%, there
should not be residual US tax payable on GILTI inclusions.
• Overarching GILTI Limitation. GILTI deduction is limited if a 10% US
Shareholder’s total GILTI + FDII exceeds its taxable income.

33. Foreign Person’s Sale of Partnership Interests – Section 864(c)(8)
33
• Headline Rule: Gain from the sale by a foreign person of a partnership
interest is subject to US taxation to the extent attributable to partnership
assets used in a US trade or business. Effective for dispositions on or after
November 27, 2017.
• Withholding scheme:
• Buyers of partnership interests must withhold 10% when necessary
• Partnerships must withhold on new partner if buyer did not withhold
US or Foreign
Partnership
Partners Foreign Partner
A
Sale Incoming Partner
B 10% ECI withholding – 1446
15% FIRPTA withholding – 1445
• Substantive liability under both ECI
and FIRPTA – 864 & 897
• Potential ECI withholding
obligation– 1446
Three new and cumbersome obligations:
3
2
1

34. 34
Questions?
Contact Information:
Paul Seraganian - New York Managing Partner
pseraganian@osler.com
tel: 212.991.2526
Jennifer Lee - Partner, Taxation
jennifer.lee@osler.com
tel: 212.991.2597