Tax reform readiness: Implications of the Section 965 proposed regulations

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September 2018

Overview

The 2017 tax reform act (the Act) includes significant international tax provisions, including Section 965, which imposes a ‘toll charge’ on deemed repatriated earnings. On August 1, Treasury and the IRS
released a 249-page set of proposed regulations under Section 965, addressing a wide range of issues regarding the toll charge.

PwC on September 5 hosted a webcast featuring PwC specialists who discussed some of the key issues under the proposed Section 965 regulations. This Insight highlights those discussions. Watch the webcast replay and register for future webcasts in PwC’s Tax Reform Readiness series, which addresses other areas affected by tax reform.

The next webcast — Tax reform readiness: Deeper dive on bonus depreciation — will take place on Wednesday, September 19, from 2:00 PM - 3:00 PM (EDT).

For prior coverage and overviews of Section 965, see PwC Insights, IRS Notice addresses the ‘Toll Tax’ under amended Section 965, January 3, 2018; Tax reform readiness: US mandatory deemed repatriation considerations, January 10, 2018; Treasury and IRS release second notice on toll tax, January 19, 2018; Treasury and IRS release third notice on toll tax, April 2, 2018; Tax reform readiness: Recent IRS guidance clarifies key international tax issues, May 10, 2018; IRS issues lengthy proposed rules on toll tax’ under amended Section 965, August 8, 2018; and Tax reform readiness: The proposed ‘toll charge’ regulations, August 20, 2018.

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The takeaway

Taxpayers should consider carefully the proposed Section 965 regulations and assess the impact of the regulations on their Section 965 toll charge liability.  In doing so, taxpayers should consider the impact of the provisions of the proposed regulations that vary from the rules previously announced in Notices 2018-07, 2018-13, and 2018-26.  Further, taxpayers should note the uncertain interaction of the rules related to the disregard of certain payments, transactions, and elections in Prop. Reg. sec. 1.965-4, and the ordering rules set forth in Prop. Reg. sec. 1.965-2, and understand the impact, if any, on their toll charge liability.  Comments on the proposed regulations are required to be submitted by October 9, 2018, which is expected to be a hard deadline, as Treasury and the IRS endeavor to issue final Section 965 regulations by the end of the 2018 calendar year.

Contact us

Rebecca Lee

Principal, International Tax Services, PwC US

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