New Rules on Repatriating Overseas Corporate Income


U.S. Treasury Proposes Rules on Repatriating Overseas Income for Corporations

The U.S. Treasury recently unveiled regulations proposing the repatriation of more than $2.5 trillion in United States corporate foreign income.  Experts predict that this would be a vital step in returning money to U.S. soil.

Tax Cuts & Jobs Act of 2017 and Repatriation

The 2017 Republican tax bill that President Donald Trump signed into law in December allows major corporations, which have been stockpiling income abroad for decades, to repatriate the money at special low-interest rates of 15.5 percent on cash and cash equivalents and 8 percent on non-liquid assets.

Trump and Republicans view the capital's return as an important stimulus to economic and job growth, while Democrats predict much of the money will be used instead to repurchase shares and declare lucrative dividends for shareholders.

But only now have regulators at Treasury and the Internal Revenue Service begun to set down rules on how companies should apply the new law to their overseas holdings.

Experts are predicting that the new proposed rules are just the first in an expected series of Treasury guidance needed to clarify the new tax law's international provisions.

IRS Code Sec. 965

As described by IRS, the proposed regs address "open questions regarding the application" of Code Sec. 965. They provide rules related to Code Sec. 965 described in the three notices issued since Dec. 22, 2017, with certain modifications, as well as additional guidance related to Code Sec. 965.

Specifically, the proposed guidance provides general rules and definitions, as well as rules related to the determination and treatment of Code Sec. 965(c) deductions, rules that would disregard certain transactions in connection with Code Sec. 965, rules related to foreign tax credits, rules regarding elections and payments, rules regarding the application of the section 965 regulations to affiliated groups, including consolidated groups, rules on dates of applicability, rules relating to Code Sec. 962 elections, and rules regarding the application of Code Sec. 986(c) in connection with Code Sec. 965.

For more details on the proposed regs, see "Prop regs set out elections related to Sec. 965 transition tax" and "Prop regs on Code Sec. 965 transition tax: Code Sec. 965(c) deduction, disregarded transactions, and FTCs".