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Issue 40101

Sec 965 - Pub. 5292

Project Statement: Evaluate Publication 5292, How to Calculate Section 965 Amounts and Elections Available to Taxpayers. Determine the if Publication clearly communicates appropriate guidance to the public.

Goal Statement: The goal of this project is to review the publication and make recommendations to the IRS that will enhance customer service and improve the taxpayer’ experience.

TAP RECOMMENDATION

ID 1582 For use in preparing 2017 and 2018 Returns

While the repatriation tax under Code Section 965 was due with the 2017 tax return, many taxpayers elected to pay the tax over eight years with the second payment due with the 2018 tax return. The current publication contains no information on what the taxpayer must do for 2018 concerning Section 965 reporting and no mention of the new forms adopted by the IRS in January 2019 to deal with this tax. As a result, there is a need to update the publication to address the 2018 taxable year.

IRS Action:Not adopted

ID 1582 Non-Adopt

Publication 5292 was developed as a stopgap measure to expeditiously issue filing information for tax year 2017 only while the IRS was in the process of developing Form 965 (and related schedules) and Form 965-A and 965-B for tax years beginning in 2018. Due to the timing and logistics of the Tax Cuts and Jobs Act, it was impossible to issue Form 965 and related schedules in time for tax year 2017. This is because there are constraints associated with developing a form (for example, the necessity of OMB approval and the need to allow processing the time necessary to develop the programming needed to process a form). Therefore, Publication 5292 was developed for tax year 2017 only. There was never an intent to revise Publication 5292 for tax year 2018. Taxpayers are required to use Form 965 (and related schedules) and Forms 965-A and 965-B for tax years beginning in 2018. The IRS will consider adding a recent developments article to the product page for Publication 5292 to advise taxpayers of the limited duration of the Publication 5292 and the need to use Form 965 (and related schedules) and Forms 965-A and 965-B for tax years beginning in 2018.

TAP RECOMMENDATION

ID 1583 an election to use an alternative method to calculate post-1986 earnings and profits (post-1986 E&P) See Notice 2018-13 (Add a hyperlink to Notice 2018-13. https://www.irs.gov/pub/irs-drop/n-18-13.pdf).

For guidance concerning section 965, see Notice 2018-07, 2018-4 I.R.B. 317; Notice 2018-13, 2018-6 I.R.B. 341; Rev. Proc. 2018-17, 2018-9 I.R.B. 384; and Notice 2018-26, 2018-16 I.R.B. 480. Adding information about an additional Notice for the alternative method for computing this tax is beneficial; it saves time by providing direct access to relevant information.

IRS Action:Not adopted

ID 1583 Non-Adopt

As noted above, the IRS has no intention of further revising Publication 5292. In the 2018 instructions for Form 965, the IRS discusses the alternative method of computing post-1986 E&P (see “Calculating Post-1986 Earnings and Profits in Schedules A, B, and C). Those instructions include a reference to Regulations section 1.965-7(f), which supersedes the Notices.
Publication 5292, page 2, Introduction, second paragraph at end of paragraph

TAP RECOMMENDATION

ID 1584 and Notice 2018-26, 2018-16 I.R.B. 460; and Notice 2018-78, I.R.B. 604, as well as Treas. Reg. §§1.965-0 through 1.965-9. Incorporates an additional Notice and the final Treasury Regulations concerning Section 965, which were recently issued. Publication 5292, page 2, Definitions, insert after the definition for “Deferred foreign income corporation”

IRS Action:Not adopted

ID 1584 Non-Adopt As noted above, the IRS has no intention of further revising Publication 5292. The 2018 instructions for Form 965 include references to the regulations under 965, which have generally superseded the Notices.
Publication 5292, page 2, Definitions, insert after the definition for “Deferred foreign income corporation”

TAP RECOMMENDATION

ID 1585 E&P is the current and accumulated earnings and profits of any corporation. E&P is frequently referred to in other definitions, but there is no definition included. This definition will help the taxpayer understand the text within the publication. Page 2, Column 3, last Paragraph

IRS Action:Not adopted

ID 1585 Non-Adopt As noted above, the IRS has no intention of further revising Publication 5292. The IRS will consider adding a definition of E&P in the 2019 instructions for Form 965. Page 2, Column 3, last Paragraph

TAP RECOMMENDATION

ID 1586 Section 965 amounts must be reported in a particular manner on 2017 tax returns. A person that includes an amount in income under section 965 for its 2017 tax year is required to include an IRC 965 Transition Tax Statement. (Add hyperlink https://www.irs.gov/pub/irs-news/Appendix%20-QA3_IRC-965-Transition-Tax-Statement_Fillable.pdf)
Adding hyperlinks is beneficial; it saves time by providing direct access to relevant information.

IRS Action:Not adopted

ID 1586 Non-Adopt

As noted above, the IRS has no intention of further revising Publication 5292. This is not applicable to the 2018 instructions because the 2018 Form 965 and schedules replace the statement.

TAP RECOMMENDATION

ID 1587 See Questions and Answers (Add hyperlink https://www.irs.gov/newsroom/questions-and-answers-about-reporting-related-to-section-965-on-2017-tax-returns) about Reporting Related to Section 965 on 2017 Tax Returns. Adding hyperlinks is beneficial; it saves time by providing direct access to relevant information. Publication 5292, page 2, insert new section after “Who May be Required to Report Section 965 Amounts”

IRS Action:Not adopted

ID 1587 Non-Adopt As noted above, the IRS has no intention of further revising Publication 5292. This is not applicable to the 2018 instructions for Form 965. Publication 5292, page 2, insert new section after “Who May be Required to Report Section 965 Amounts”

TAP RECOMMENDATION

ID 1588 Reporting Amounts with 2018 Tax Returns

Taxpayers subject to the one-time repatriation tax under Code Section 965 that made an election with their 2017 return to pay such tax over eight years must pay their second installment of tax with their 2018 tax return. Individual taxpayers would report the amount of income included for the 2018 year on line 21 of Schedule 1 to Form 1040. Corporate taxpayers would report the amount of income included for the 2018 taxable year on line 15 of Schedule C to Form 1120.

Taxpayers that reported income under Code Section 965 on their 2017 or 2018 tax returns must also complete and attach new Form 965, and either Form 965-A or Form 965-B, which were published in Jan. 2019, to their 2018 income tax return. Form 965 needs to also be filed by any person that would be required to include income under Section 965 but for an aggregate foreign earnings and profits deficit.

Part I of Form 965 is used to report the Section 965(a) inclusion amount. Part II is used to calculate the Section 965(c) deduction
and determine the appropriate rate equivalent percentage. Part III is used to report the Section 965 elections that have been made. Additional schedules are to be attached to Form 965 to contain relevant information and computations.

In addition to Form 965, Form 965-A is filed by individual taxpayers while Form 965-B is filed by corporate taxpayers. Certain organizations exempt from tax are exempt from filing Form 965. See Instructions to these forms for more details.

. Gives the taxpayer information that would be helpful for filing their 2018 tax return, including where to report their second installment of the tax, if the taxpayer elected to pay the tax over eight years, as well as recently released forms which must be filed with the 2018 tax return.

IRS Action:Not adopted

ID 1588 Non-Adopt

As noted above, the IRS has no intention of further revising Publication 5292. In the 2018 instructions for Form 965, the IRS discusses all the information requested in the proposal. Pub 5292, Page 3, column 1 (bottom of column 1)

TAP RECOMMENDATION

ID 1589 Workbook To Assist in Calculating Section 965 Amounts

Use the workbook and instructions below to assist in calculating section 965 amounts,

• Section 965(a) inclusions,
• section 965(c) deductions,
• Deemed paid foreign taxes with respect to the section 965(a) inclusions, and the portion of such deemed paid foreign taxes disallowed under section 965(g).

Reword and insert bullet points to highlight items used in calculation.

IRS Action:Not adopted

ID 1589 Non-Adopt

As noted above, the IRS has no intention of further revising Publication 5292. In the 2018 instructions for Form 965, the IRS discusses all the information requested in the proposal. Publication 5292, page 3, insert a new section after “2016 Tax Year Section 965(a) Inclusion Amount”

TAP RECOMMENDATION

ID 1590 Impact of Adoption of Final Regulations

On Jan. 15, 2019, final Section 965 regulations were published. While the final Section 965 regulations are generally consistent with proposed regulations published on Aug. 9, 2018, there were some changes made to the regulations that may aid taxpayers affected by these rules. Taxpayers should review the final regulations to determine if added flexibility or elections may be available based on their particular circumstances. Treas. Reg. §§1.965-0 through 1.965-9.

New section to help taxpayers filing their 2018 tax returns.

Page 11, third column, second bullet point

IRS Action:Not adopted

ID 1590 Non-Adopt

As noted above, the IRS has no intention of further revising Publication 5292. In the 2018 instructions for Form 965, the IRS refers to the regulations as appropriate.
Page 11, third column, second bullet point

TAP RECOMMENDATION

ID 1591 *The taxpayer’s net income tax for the tax year without regard to section 965 amounts, (do not include any section 965 amounts, such as amounts described in 965(a) or 965(c)), and without regard to any dividends received from DFICs (“without calculation”).

This paragraph needs to be simplified as it is very difficult to read in its current version. Simplifying it would help provide clarity. Page 12, Column 2, second paragraph, second bullet

IRS Action:Not adopted

ID 1591 Non-Adopt

As noted above, the IRS has no intention of further revising Publication 5292. The IRS will consider this proposal in the 2019 instructions for Forms 965-A and 965-B.
Page 12, Column 2, second paragraph, second bullet

TAP RECOMMENDATION

ID 1592 *The shareholder’s net income tax for the tax year without regard to section 965, (do not include any section 965 amounts, such as amounts described in 965(a) or 965(c)), and without regard to any dividends received from DFICs

This paragraph needs to be simplified as it is very difficult to read in its current version. Simplifying it would help provide clarity. Page 12, Column 1, middle of the column, under With Calculation

IRS Action:Not adopted

ID 1592 Non-Adopt

As noted above, the IRS has no intention of further revising Publication 5292. The IRS will consider the proposal when revising the 2019 instructions for Forms 965-A and 965-B.
Page 12, Column 1, middle of the column, under With Calculation

TAP RECOMMENDATION

ID 1593 If an election is made to pay tax due in installments, the taxpayer must make installment payments according to the following schedule: Provides clarity as to which election is being made. Page 12, Column 3, Election Under Section 3.02 of Notice 2018-13 To Use Alternative Method To Compute Post-1986 Earnings and Profits

IRS Action:Not adopted

ID 1593 Non-Adopt

As noted above, the IRS has no intention of further revising Publication 5292. In the 2018 instructions for Forms 965-A and 965-B, the IRS discusses the appropriate payment schedules. Page 12, Column 3, Election Under Section 3.02 of Notice 2018-13 To Use Alternative Method To Compute Post-1986 Earnings and Profits

TAP RECOMMENDATION

ID 1594 An election can be made to determine an SFC’s post-1986 earnings and profits using an alternate method (See election sample Statement)- Insert hyperlink to Notice 2018-13. https://www.irs.gov/pub/irs-drop/n-18-13.pdf). If this election is made, the amount of the post-1986 earnings and profits of an SFC as of November 2, 2017 will equal the sum of: (1) the corporation’s post-1986 earnings and profits as of October 31, 2017, and (2) two days of daily earnings amount. Adding hyperlinks is beneficial; it saves time by providing direct access to relevant information. Page 12, Column 3, Election Under Section 3.02 of Notice 2018-13 To Use Alternative Method To Compute Post-1986 Earnings and Profits

IRS Action:Not adopted

ID 1594 Non-Adopt

As noted above, the IRS has no intention of further revising Publication 5292. In the 2018 instructions for Form 965, the IRS discusses the alternative method of computing post-1986 E&P (see “Calculating Post-1986 Earnings and Profits in Schedules A, B, and C). Those instructions include a reference to Regulations section 1.965-7(f), which supersedes the Notices.
Page 12, Column 3, Election Under Section 3.02 of Notice 2018-13 To Use Alternative Method To Compute Post-1986 Earnings and Profits

TAP RECOMMENDATION

ID 1595 Daily earnings amount looks to the average daily earnings of the SFC between the beginning of the relevant tax year and October 31, 2017. See Notice 2018-13 6(Insert hyperlink to page 16), section 3.02 for more information. Adding hyperlinks is beneficial; it saves time by providing direct access to relevant information. Page 16, Insert at the top of the page. (this item is Continued from item above)

IRS Action:Not adopted

ID 1595 Non-Adopt

As noted above, the IRS has no intention of further revising Publication 5292. In the 2018 instructions for Form 965, the IRS discusses the alternative method of computing post-1986 E&P (see “Calculating Post-1986 Earnings and Profits in Schedules A, B, and C). Those instructions include a reference to Regulations section 1.965-7(f), which supersedes the Notices.
Page 16, Insert at the top of the page. (this item is Continued from item above)

TAP RECOMMENDATION

ID 1596 Format for statement under Section 3.02 of Notice 2018-13 to use Alternative Method to Compute Post -1986 Earnings and Profits. (see below)
And add hyperlink: https://www.irs.gov/pub/irs-news/Appendix-QA7_2018-13%20Election_3-18-18_FINAL.pdf
Add sample format for taxpayers who elect to use the alternative method for calculating post – 1986 earnings and profits.

IRS Action:Not adopted

ID 1596 Non-Adopt

As noted above, the IRS has no intention of further revising Publication 5292. In the 2018 instructions for Form 965, the IRS discusses the alternative method of computing post-1986 E&P (see “Calculating Post-1986 Earnings and Profits in Schedules A, B, and C). Those instructions include a reference to Regulations section 1.965-7(f), which supersedes the Notices.

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2020 TAP Annual Report

The 2020 TAP Annual Report highlights our key recommendations to improve IRS customer service and summarizes our key accomplishments and activities, including the 237 recommendations submitted to the IRS in 2020.

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