What is the IRC 965 International Compliance Campaign?
IRC 965 International Compliance Campaign: Each year, the IRS introduces several new international enforcement campaigns. The purpose of these campaigns is to put Taxpayers on notice of certain tax issues of which the Internal Revenue Service will prioritize when it comes to enforcement. Back on July 6, 2020, the IRS introduced a new IRC 965 International Compliance Campaign.
IRC 965 is the Treatment of deferred foreign income upon transition to participation exemption system of taxation.
IRC 965 (26 U.S.C. 965)
As provided by the Internal Revenue Code:
(a) Treatment of deferred foreign income as subpart F incomeIn the case of the last taxable year of a deferred foreign income corporation which begins before January 1, 2018, the subpart F income of such foreign corporation (as otherwise determined for such taxable year under section 952) shall be increased by the greater of—
(1) the accumulated post-1986 deferred foreign income of such corporation determined as of November 2, 2017, or
(2) the accumulated post-1986 deferred foreign income of such corporation determined as of December 31, 2017.
Reduction in amounts included in gross income of United States shareholders of specified foreign corporations with deficits in earnings and profits
(1)In general In the case of a taxpayer which is a United States shareholder with respect to at least one deferred foreign income corporation and at least one E&P deficit foreign corporation, the amount which would (but for this subsection) be taken into account under section 951(a)
(1) by reason of subsection
(a) as such United States shareholder’s pro rata share of the subpart F income of each deferred foreign income corporation shall be reduced by the amount of such United States shareholder’s aggregate foreign E&P deficit which is allocated under paragraph (2) to such deferred foreign income corporation.
(2) Allocation of aggregate foreign E&P deficitThe aggregate foreign E&P deficit of any United States shareholder shall be allocated among the deferred foreign income corporations of such United States shareholder in an amount which bears the same proportion to such aggregate as—
(A) such United States shareholder’s pro rata share of the accumulated post-1986 deferred foreign income of each such deferred foreign income corporation, bears to
(B) the aggregate of such United States shareholder’s pro rata share of the accumulated post-1986 deferred foreign income of all deferred foreign income corporations of such United States shareholder.
IRC 965 Requirements
IRC 965 was developed in accordance with the significantly reduced corporate tax rate. Back when the TCJA was introduced, 965 was designed to ensure that certain foreign corporations with U.S. shareholders paid a one-time tax for money that was held or retained overseas — and not previously taxed.
Many shareholders have not paid this tax — simply because they never heard of it. Therefore, the IRS introduced this new international tax compliance group.
As provided by the IRS:
July 6, 2020
IRC 965 Section for Individuals (Compliance Campaign)
The campaign described below was identified through LB&I data analysis and suggestions from IRS employees. LB&I’s goal is to improve return selection, identify issues representing a risk of non-compliance and make the greatest use of limited resources.
The new campaign is:
- IRC Section 965 for Individuals
- Practice Area: Withholding and International Individual Compliance
Lead Executive: Deborah Palacheck, Director, Withholding and International Individual Compliance
Campaign Point of Contact: Ursula Gee, Withholding and International Individual Compliance
“Pursuant to the changes to IRC §965 under the Tax Cuts and Jobs Act, U.S. shareholders, including individuals, that directly or indirectly own at least 10% of the stock of a specified foreign corporation (SFC) are required to include in gross income their share of the SFC’s accumulated post-1986 deferred foreign income for the last taxable year of the SFC beginning before January 1, 2018, and report this amount on their returns for the taxable year in which or with which their SFC’s taxable year ends (generally, 2017 and/or 2018). The Internal Revenue Service will address noncompliance through soft letters and examinations.”
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.
Each case is led by a Board-Certified Tax Law Specialist with 20 years of experience, and the entire matter (tax and legal) is handled by our team, in-house.
*Please beware of copycat tax and law firms misleading the public about their credentials and experience.
Less than 1% of Tax Attorneys Nationwide Are Certified Specialists
Sean M. Golding is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.
Recent Golding & Golding Case Highlights
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
- We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
- We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
- We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
How to Hire Experienced Offshore Counsel?
Generally, experienced attorneys in this field will have the following credentials/experience:
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
- Dually Licensed as an EA (Enrolled Agent) or CPA
Interested in Learning More about Golding & Golding?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
Golding & Golding specializes in FBAR and FATCA. Contact our firm today for assistance with getting compliant.