IRS issues additional guidance on transition Tax on Foreign Earnings

Written on Apr 23, 2018

The Treasury Department and the IRS have provided additional guidance (Notice 2018-26) for computing the “transition tax” on the untaxed foreign earnings of foreign subsidiaries of U.S. companies under the Tax Cuts and Jobs Act enacted Dec. 22. The Treasury Department and the IRS provided prior guidance on the transition tax in Notice 2018-07, Notice 2018-13, and Revenue Procedure 2018-17.

This notice describes regulations that the Treasury Department and the IRS intend to issue, including rules intended to prevent the avoidance of section 965, rules and procedures relating to certain special elections under section 965, and guidance on the reporting and payment of the transition tax. The notice also provides relief to taxpayers from certain estimated tax requirements and penalties arising from the enactment of the transition tax and the change to existing stock attribution rules in the Tax Cuts and Jobs Act.

Additionally, Treasury and the IRS have requested comments on the rules described in the notice and comments on what additional guidance should be issued to help taxpayers compute the transition tax.

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