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Section 965 Foreign Deemed Repatriation Transition Tax: Final Regulations

Identifying Cash Positions, Treatment of Consolidated Entities, Loss Treatments, Correcting Underpayments, Anti-Avoidance Rules

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Tuesday, November 26, 2019

Recorded event now available

This course will provide corporate tax advisers with a detailed and practical guide to the repatriation provisions of the Section 965 transition tax in the wake of the most recent IRS final regulatory guidance. The panel will discuss E&P and basis adjustments, foreign tax credit calculations, and special rules governing affiliated groups and consolidated returns.

Description

The "deemed repatriation" provisions of Section 965, requiring U.S. shareholders of "specified foreign corporations" to report and pay a one-time "transition tax" on previously untaxed foreign income, continue to confuse U.S.-based corporate taxpayers engaged in international activities. The provisions required taxpayers to calculate and report the tax on their 2018 filings, which created an immediate compliance challenge for advisers serving clients with offshore holdings.

In January 2019 the IRS finalized its previously issued proposed regulations on calculating the transition tax. While the final regulation accepted most of the proposed guidance, the Service provided clarification on a pair of critical issues for corporate taxpayers. The final guidance provides a narrow exemption from the definition of "cash position" in determining the amount of transition tax a specified foreign corporation must report. Additionally, the Service offered clarification on the loss aggregation calculations for consolidated groups.

Consequences of failure to correct transition tax errors are steep. In addition to late payment penalties, taxpayers who fail to remedy any initial installment underpayment would be required to pay the entire foreign transition on an accelerated basis. Tax advisers must review impacted taxpayers' filings to ensure the transition tax calculations, payment, and election reporting were done correctly to avoid costly tax consequences.

Listen as our experienced panel provides a practical and timely guide to calculating Section 965 transition tax in light of the finalized guidance.

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Outline

  1. Shareholders subject to new foreign provisions
  2. Definition of "specified foreign corporations"
  3. Identifying and calculating accumulated E&P subject to deemed repatriation transition tax
  4. Netting provisions
  5. Calculating tax
  6. Section 965(h) elections
  7. IRS guidance finalized in January 2019 and adjustments to prior proposed regulations
    1. Consolidated return provisions
    2. Exemptions to cash positions
    3. Anti-avoidance rule application
  8. Fiscal year taxpayers with initial payments due in 2019

Benefits

The panel will review these and other key issues:

  • Determining the applicability of Section 965 to specific U.S. shareholders
  • Identifying what is cash vs. non-cash for purposes of foreign-source income and applicable tax rates
  • The use of NOLs and determining taxable foreign-source income
  • New guidance governing consolidated returns and loss allocations
  • Application of anti-avoidance rules to E&P reducing transactions

Faculty

Benayoun, Andre
Andre Benayoun, J.D.
Partner - Tax & Business Services
Marcum

Mr. Benayoun is a Partner who specializes in consulting around international taxation for inbound and outbound...  |  Read More

McCormick, Patrick
Patrick J. McCormick, J.D., LL.M.
Partner
Culhane Meadows Haughian & Walsh

Mr. McCormick specializes in the areas of international taxation, tax compliance, and offshore reporting...  |  Read More