The first set of final Regulations were recently issued; some changes include:
- Stock basis flexibility
- Right to have some changes in methods of accounting as “regarded”
- Clarification of ordering rules
- Elect to not disregard payments between SFC’s between measurement dates
- Including only actual Sec 956 inclusions for the “without” calculation
As the Regulations were issued in January, this set of Reg’s, as well as others to be issued by June 22, 2019, will be treated as having retroactive effect to the enactment date of December 22, 2017.
IRS recently updated its previously published Q and A’s re: application of Sec. 965 deemed repatriation tax instructions re: estimated tax payments for 2018. The prior version still has a debatable Question 14 that applied a 2017 overpayment to the entire amount of deemed repatriation tax (not just the first installment) prior to application for the first estimated payment of federal income tax generally due April 15th.
As Question 14 was issued literally just prior to the first installment date, corporations may have missed this point and thereby would be subject to interest and penalty for late payment.
The latest update obviates such penalties if the second estimated payment is a cumulative catch-up amount for both the first and second estimates.
However, what was not fixed is the apparent ability by IRS to apply the overpayment solely to deemed repatriation tax in its entirety prior to applying it to estimated federal income tax liability due. This is still a question in the minds of many.
EY’s Global Tax Alert highlights this development.
Click to access 2018G_03498-181Gbl_US%20IRS%20updates%20Section%20965%20transition%20tax%20FAQs.pdf