The U.S. Treasury Department and IRS today released proposed regulations (REG-104226-18) relating to the “transition tax” under section 965—as added to the Code by the new tax law (Pub. L. No. 115-97) enacted in December 2017.
Section 965 imposes a transition tax—one that requires a mandatory deemed repatriation of previously untaxed earnings. Under this provision, a 15.5% rate applies to earnings attributable to liquid assets, and an 8% rate applies to earnings attributable to illiquid assets. According to a related IRS release (IR-2018-158), taxpayers may generally elect to pay the transition tax in installments over an eight-year period under section 965(h). The proposed regulations contain detailed information on the calculation and reporting of a United States shareholder’s section 965(a) inclusion amount, as well as information for making the elections available to taxpayers under section 965.
For exempt organizations, the guidance in the proposed regulations is generally limited to section 4940—the excise tax that section 501(c)(3) private foundations pay on their net investment income.
Read text of the proposed regulations [PDF 770 KB] (249 pages)
The purpose of this report is to provide text of today’s regulations.
For more information, contact a tax professional with KPMG’s Washington National Tax practice:
Preston Quesenberry | +1 202 533 3985 | email@example.com
Randall Thomas | +1 202 533 3786 | firstname.lastname@example.org
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.