Section 965 Payment Acceleration Events: Avoiding Triggers, Curable Events

Description

The 2017 tax act included a mandatory repatriation tax on a taxpayer's allocable share of unrepatriated earnings from certain foreign corporations. Any U.S. taxpayer directly, indirectly or constructively owning 10 percent or more of specified foreign corporations was subject to immediate taxation if the taxpayer did not make a proper election under Section 965. Electing taxpayers were permitted to spread the payment of this tax liability over eight years, interest and penalty-free. Shareholders owning foreign stock through an S corporation could elect to defer the payment indefinitely.

Subsequent transactions and events can accelerate these deferred payments. Missed payments, the sale of a business, and the death of a taxpayer are a few examples of events that can accelerate the balance due. Concurrent with acceleration events, the regulations offer several ways to circumvent immediate taxation. Curable events include liquidations, disposal of substantially all assets, and a corporation becoming a consolidated group member. Planning to avoid or prevent the acceleration of this considerable liability is key.

Listen as our panel of international tax experts explains how to avoid and mitigate unintended consequences of transactions and actions that accelerate Section 965 transition tax payments.