AICPA wants clarity on Section 965

AICPA building in Durham, N.C.

With taxpayers unsure how to handle their 2017 tax obligations, the American Institute of CPAs is asking the Treasury and the Internal Revenue Service for immediate guidance on Code Section 965 transition tax reporting.

As part of the Tax Cuts and Jobs Act, the Sec. 965 transition tax requires U.S. shareholders, including individuals, trusts and estates, to report and pay tax on the earnings of certain foreign companies as if they had been repatriated to the United States.

In a letter signed by Tax Executive Committee chair Annette Nellen, the institute wrote, “These taxpayers need clarity on Section 965 reporting issues.”

Among the AICPA’s suggestions and requests for guidance were:

  • Penalty relief for individuals, trusts or estates “that have acted reasonably and made a good faith effort” to report Sec. 965 tax liabilities on 2017 tax returns.
  • Clarification that trusts and estates should report Sec. 965 tax in the same way individuals do.
  • Clarification that the individuals, trusts or estates that owe Sec. 965 taxes actually have the authority to make the Section 965(i) election or assume the liability.
  • “Guidance on the treatment of deferred foreign income upon transition to participation exemption system of taxation (Section 965) for S corporation trust shareholders, what trust transactions are Section 965 triggering events, and how a transferee of S corporation stock held in trust might assume the liability for the Section 965 transition tax.”
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