Why a fund-focused tax lawyer is relevant to fleets
Jason P. Traue is a Boston-based partner at Morgan, Lewis & Bockius whose practice centers on federal tax issues for registered and private investment funds, including work with master limited partnership (MLP) funds, exchange-traded funds (ETFs), and complex cross-border structures. His background also includes obtaining IRS rulings and advising on FATCA—experience that often shows up in National Law Review bylines on fund taxation topics. For trucking companies that park cash in mutual funds or ETFs, or that participate in cross-border joint ventures, the rules Traue navigates—PFICs (passive foreign investment companies) and CFCs (controlled foreign corporations)—can quietly affect tax bills and reporting.
The issue in a nutshell
U.S. investors frequently gain foreign or commodity exposure through regulated investment companies (RICs)—think mutual funds or ETFs. In 2016, Treasury and the IRS proposed rules that would have made it harder for RICs to count certain “deemed income” from CFCs and PFICs toward the 90% qualifying income test, unless those foreign entities also made matching cash distributions. That raised alarms across the fund industry because it could have forced portfolio changes or limited commodity strategies often accessed through offshore subsidiaries.
In March 2019, the government reversed course in final regulations (T.D. 9851). The final rules treat required CFC and PFIC inclusions as qualifying income for a RIC’s 90% test when derived with respect to the fund’s business of investing in stock, securities, or currencies—even without contemporaneous distributions. In short: the fund strategies many treasurers use to diversify cash can keep operating without tripping the RIC income test.
Why owner-operators and fleet managers should care
While these rules target funds, they ripple to business investors in two ways. First, if your surplus cash sits in a mutual fund or ETF that uses offshore subsidiaries (common in commodity or certain international exposures), the 2019 decision reduces the risk of fund-level disruptions that could have affected performance or distributions. Second, if your company invests directly in non-U.S. funds or holds minority stakes in cross-border ventures, PFIC and CFC regimes can trigger complex reporting (for example, Form 8621 for PFICs) and potentially punitive tax if elections aren’t made on time. Final PFIC regulations issued in 2021 refined who is treated as a PFIC shareholder and when, underscoring the need to identify foreign-domiciled funds in corporate portfolios early.
Action steps for trucking finance teams
- Inventory your cash vehicles. Confirm whether your mutual funds and ETFs are U.S.-registered RICs or foreign-domiciled products (for example, UCITS). Ask managers whether any commodity exposure is obtained through offshore subsidiaries and whether PFIC/QEF statements are available if relevant.
- Flag PFIC touchpoints. Direct holdings of non-U.S. funds can trigger Form 8621 filings and special tax regimes. Coordinate with your tax preparer before year-end to evaluate mark-to-market or QEF elections.
- Scrub JV and partnership structures. If you own interests in entities that themselves own foreign corporations, determine whether CFC/Subpart F or GILTI rules could flow up to you; recent guidance has shifted how domestic partnerships attribute these inclusions to partners, changing who bears current tax and who instead faces PFIC exposure risk.
- Watch the “no-rule” areas. Since 2016, the IRS has said it will not ordinarily issue rulings on whether an instrument is a “security” for RIC purposes—limiting advance comfort on novel commodity-linked positions. Rely on experienced counsel when strategies push the edges.
- Document, document, document. Keep manager due diligence files, prospectuses, PFIC statements, and election records with your fixed-asset and depreciation schedules so your auditor or CPA can tie out investment income and filings quickly.
Bottom line
Traue’s specialty—helping funds navigate PFIC/CFC and RIC qualification rules—may sound far from dispatch and diesel, but it directly affects the stability and tax efficiency of the vehicles where trucking companies often park working capital. The 2019 final regulations largely preserved the operating flexibility of U.S. funds that use foreign subsidiaries, while subsequent PFIC guidance sharpened shareholder attribution and filing expectations. If your fleet invests beyond basic U.S.-only funds, a quick portfolio check with tax counsel could prevent costly PFIC surprises and keep your cash working at full RPMs.
Sources Consulted: National Law Review; Morgan, Lewis & Bockius LLP; Internal Revenue Bulletin (IRS/Treasury); K&L Gates HUB; The Tax Adviser (AICPA).
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This article was prepared exclusively for truckstopinsider.com. For professional tax advice, consult a qualified professional.
