The IRS announced in IR-2020-16 on Jan. 17, 2020, that it would consider providing relief from double taxation that results from the repatriation tax under Section 965, as amended by the Tax Cuts and Jobs Act (TCJA). The IRS determined that in limited circumstances, such as where a corporation paid an unusual dividend for business reasons and not because of the TCJA, it may be appropriate to provide relief.
Double tax under this release could occur, for example, if a first-tier controlled foreign corporation (CFC) with a fiscal year-end of Nov. 30, 2017, paid a dividend to its U.S. shareholder(s) before Nov. 30, 2017, but after the first measurement date specified under Section 965 of Nov. 2, 2017. Here, the dividend would not reduce the CFC’s Section 965 earnings amount and would not be considered distributed from previously taxed income, thereby resulting in double taxation.
The IRS directs taxpayers to contact the Office of Associate Chief Counsel (International) if they have fact patterns that fit the unique circumstances outlined in the release.