Repatriation/Transition Tax: IRS Announces Limited “Double Taxation” Relief


The Internal Revenue Service (IRS) announced today that there are limited circumstances in which it may be appropriate to provide relief from “double taxation” resulting from application of the repatriation tax under Internal Revenue Code Section 965, as amended by the Tax Cuts and Jobs Act (TCJA).

The IRS has determined that in unique circumstances, such as where a corporation paid an unusual dividend for business reasons, unrelated to the enactment of TCJA, it may be appropriate to provide relief from “double taxation”. When the same earnings and profits of foreign corporations are taxed both as dividends and under Section 965, double taxation could result.

And when they say “limited relief” – they mean it!  Here’s what the IRS has said may qualify for relief:

“The IRS is open to considering relief from such double taxation where there is no significant reduction in the resulting tax by application of foreign tax credits, such that the taxpayer would be required to pay more tax than it would have if the dividend had not been paid.”

Taxpayers who have fact patterns that may fit these limited circumstances may raise them with the IRS by contacting the Office of Associate Chief Counsel (International) at 202-317-3800.

More information on the Repatriation Tax can be found in my blog posts here and at the IRS FAQs.

Posted January 17, 2020

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