IRS Issues Final Regulations on Deemed Repatriation Tax

Posted by Kim Chen on January 21st, 2019

: Under IRC Sec. 965, which was added by the Tax Cuts and Jobs Act (TCJA), U.S. shareholders of a specified foreign corporation are subject to a deemed repatriation tax. This is accomplished by increasing the foreign corporation’s Subpart F income by the greater of (1) the accumulated post-1986 earnings and profits of the corporation determined as of 11/2/17 or (2) the accumulated post-1986 earnings and profits determined as of 12/31/17. Recently, the IRS released final regulations implementing the deemed repatriation tax. The final rules retain the basic approach and structure of proposed regulations issued in August 2018, with certain revisions. Specifically, the final regulations provide rules on (1) the participation exemption to included income; (2) disregarded transactions; (3) foreign tax credits, elections, and payments; and (4) consolidated group rules. Regs. 1.962-2, 1.965-1 through -9, and 1.986(c)-1.
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