January 20 2020

IRS announces potential relief for double taxation from transition tax on foreign earnings

Source: IBFD Tax Research Platform News

On 17 January 2020, the US Internal Revenue Service (IRS) issued a News Release (IR-2020-16) to announce that the IRS is open to considering relief for limited circumstances in which double taxation results from the transition tax on foreign earnings under section 965 of the US Internal Revenue Code (IRC), as amended by the Tax Cuts and Jobs Act (TCJA).

The IRS notes that, in unique circumstances where a corporation paid an unusual dividend for business reasons, not because of the enactment of the TCJA, double taxation may result if (1) the same earnings and profits of foreign corporations are taxed both as dividends and under IRC section 965; and (2) there is no significant reduction in the resulting tax by the application of foreign tax credits (FTCs).

The IRS invites taxpayers to contact the IRS Office of Associate Chief Counsel (International) if the taxpayers have fact patterns that may fit such limited circumstances.