August 3, 2018

Proposed Section 965 Regulations Related to Transition Tax

By Mark Chaves, International Tax Co-Leader & Douglas Nakajima, International Tax Co-Leader

Related Services Tax & Business, International Tax, Certified Acceptance Agent, International Individual Mobility Services, Transfer Pricing, Tax Advisory Services

Proposed Section 965 Regulations Related to Transition Tax Tax & Business

On Wednesday, August 1, 2018, the Internal Revenue Service issued proposed regulations under the repatriation tax provisions of Section 965 enacted as part of the Tax Cuts and Jobs Act of 2017 (“TCJA”), providing guidance to U.S persons with direct or indirect ownership in certain foreign corporations.

In response to the great uncertainty that ensued following the passage of TCJA, the Treasury Department and the IRS issued notices to provide preliminary guidance ahead of the impending tax filing deadlines and to announce what regulations would contain when issued under Section 965. The proposed regulations contain rules and interpretations related to Section 965 that were described in the notices, with certain modifications, as well as additional guidance related to Section 965 and IRS responses to strategies employed by taxpayers to reduce repatriation taxes.

Pursuant to IRS procedures, the proposed regulations will be subject to a period of public commentary and hearings. Additionally, the IRS is seeking comments concerning compliance with the Section 965 requirements as well as with respect to treatment of specific items.

For additional information regarding the proposed Section 965 repatriation tax regulations, and how it may affect you or your business, please contact your Marcum International Tax Services professional.