Repatriation Tax Compliance (IRC 965): IRS Newest Campaign
IRC 965 Repatriation Tax: Recently, the IRS announced another new international enforcement and compliance campaign involving offshore money. The IRS will begin focusing its attention to the repatriation tax and IRC section 965 (U.S. Code § 965 aka Treatment of deferred foreign income upon transition to participation exemption system of taxation.)
The campaign will include increased audit examination risk for tax years 2017 and/or 2018 (depending on the tax year of the business) tax deferred Income (not previously taxed in the U.S.) and IRC 965.
Repatriation Tax Compliance
The repatriation act was introduced as part of the TCJA (Tax Cuts and Jobs Act). In accordance with the repatriation act, certain foreign corporations were required to pay a one-time repatriation of foreign income, which was:
- Not previously taxed; and
- Not excluded as Subpart F
- Other exceptions, exclusions, and limitations apply
26 U.S. Code § 965
Section 965 refers to the “Treatment of deferred foreign income upon transition to participation exemption system of taxation.”
As provided by 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
Repatriation Tax Compliance
As provided in the IRS announcement:
“Internal Revenue Code (IRC) 965, Treatment of Deferred Foreign Income Upon Transition to Participation Exemption System of Taxation, was part of the Tax Cuts and Jobs Act (TCJA) enacted on December 22, 2017.
In general, IRC 965 requires United States shareholders, as defined under IRC 951(b), to pay a transition tax on the untaxed foreign earnings of certain specified foreign corporations as if those earnings had been repatriated to the United States.
IRC 965 applies with respect to the last taxable year of the relevant specified foreign corporation that begins before January 1, 2018, and the amount included in income under IRC 965 is includible in the United States shareholder’s year in which or with which such a specified foreign corporation’s year ends.
The vast majority of IRC 965 liability will arise on taxpayer returns for 2017 and 2018 tax years. The goal of this campaign is to promote compliance with IRC 965. The treatment stream will include conducting examinations as well as providing technical assistance to teams on 965, with a focus on identifying and addressing taxpayer populations with potential material compliance risk.
The campaign will start with 2017 returns and generally require looking at both the 2017 and 2018 tax returns. It is anticipated that returns selected as part of the 965 campaign will also be risked and, if appropriate, examined for other material issues, especially issues related to TCJA planning.”
Cross-Border Compliance is Complex
There are thousands of businesses out-of-compliance. This is primarily due to the fact that some businesses were not aware they qualify (such as foreign service corporations) and/or because they may not be in a financial position to pay the tax.
This is crucial, because oftentimes we are contacted by businesses that were unaware that they would be subject to this tax. In addition, it seems like from our review of prior cases by other CPAs and tax practitioners that many of them were just “winging it” and hoping for the best.
The analysis for IRC 965 one-time repatriation act can be very complicated, and you should consult with a specialist if you require assistance.
Offshore Amnesty Lawyers- Golding & Golding (Board-Certified)
We specialize exclusively in international tax, and specifically IRS offshore disclosure.
We have successfully represented clients in more than 1,000 streamlined and voluntary offshore disclosure submissions nationwide and in over 70-different countries. We have represented thousands of individuals and businesses with international tax problems.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.
- Learn more about the Board-Certified Tax Lawyer Specialist credential
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We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants and Financial Professionals worldwide.
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.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
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.
Sean holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver. He has also earned the prestigious IRS Enrolled Agent credential. Mr. Golding's articles have been referenced in such publications as the Washington Post, Forbes, Nolo, and various Law Journals nationwide.