Attribution rules have always been relevant for tax planning purposes, but ever since the passage of the 2017 Tax Cuts and Jobs Act (the "2017 Tax Act"), a particular set of attribution rules has received a renewed amount of attention. The increased attention, at least from the U.S. international tax community, is mostly due to the implications that these rules now have for common investment structures utilized by non-U.S. clients investing in South Florida and elsewhere in the U.S. This article briefly summarizes the attribution rules applicable to partnerships and corporations under Section 318 and provides some practical tips for dealing with the rules. 
The upward attribution rules (i.e., attribution from an entity up to its owners) are found in Section 318(a)(2). In the case of a partnership, stock owned by the partnership is deemed to be owned proportionately by its partners. In the case of a corporation, stock owned by the corporation is deemed to be owned proportionately by the shareholders of the corporation, but only if such shareholder owns at least 50% of the value of the corporation (a "50% Shareholder").
The downward attribution rules (i.e., attribution from an owner down to an entity) are found in Section 318(a)(3). In the case of a partner, the partnership is deemed to own any stock owned by its partners. In the case of a 50% Shareholder, the corporation is deemed to own any stock owned by that shareholder.
A few practical points are worth noting here:
So what exactly is it about these rules and the passage of the 2017 Tax Act that has caused so much consternation? In short, these rules jeopardize the availability of the portfolio interest exemption in holding structures commonly used for non-U.S. clients. To keep things very brief, the portfolio interest exemption is a very powerful tool in cross-border tax planning. Simply put, interest payments that qualify for the exemption are U.S. income tax-free to foreign lenders. The exemption is not available, however, in the case of a controlled foreign corporation (or "CFC") that receives interest payments from a related person. Prior to the passage of the 2017 Tax Act, in determining whether a foreign corporation is a CFC, stock owned by a foreign person was not attributed to a U.S. person when applying the downward attribution rules.  The 2017 Tax Act repealed this rule, which has led to more foreign corporations being classified as CFCs. Accordingly, the availability of the portfolio interest exemption has been called into question in many common planning structures.
There is no easy way to deal with the attribution rules given their broad application to numerous fact patterns. Practitioners and advisors would be well-advised to thoroughly work their way through each of the rules in situations where they might apply, even if, upon first glance, it seems like there should not be any issues. With careful planning, however, or given the right set of facts, traditional holding structures can still provide their intended benefits for non-U.S. clients investing in the U.S.
 All section references are to the Internal Revenue Code of 1986, as amended.
 A discussion of the constructive ownership rules under Section 267 is beyond the scope of this article.
 Section 958(b)(4).