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IRS provides draft version of Form 965 instructions

IRS provides draft version of Form 965 instructions

The IRS has posted an “early draft release” of instructions for reporting information with respect to Form 965 about the “transition tax” imposed under section 965.


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Section 965 was added to the Code by the new U.S. tax law (Pub. L. No. 115-97, enacted December 22, 2017) as a transition rule to effect the participation exemption regime. The transition rule includes a participation exemption, the net effect of which is to tax a U.S. shareholder’s “mandatory inclusion” amount at a rate of 15.5% to the extent it is attributable to the shareholder’s aggregate foreign cash position or otherwise at a rate of 8%. 

The draft version of the instructions [PDF 231 KB] for Form 965, Inclusion of Deferred Foreign Income Upon Transition to Participation Exemption System, has been posted with a “watermark” date of December 11, 2018, and includes cautionary language that these instructions are not to be used for filing purposes and are subject to change and to OMB approval before being officially released.

The IRS previously provided draft versions of Form 965 and the related schedules. Read TaxNewsFlash

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