The IRS recently modified the final Section 965 transition tax regulations posted to IRS.gov during the government shutdown, revising the transfer agreement due date.
Though the IRS was able to issue some guidance during the shutdown, it could not publish regulations to the Federal Register, complicating effective dates and other deadlines. With the government fully reopened, it updated the final transition tax regulations accordingly and formally published
Under Section 965, taxpayers may elect to pay the transition tax in eight installments, but those payments may be accelerated if certain events occur. This includes a liquidation, sale, exchange or other disposition of substantially all of the taxpayer’s assets. Taxpayers may avoid an acceleration or triggering event if the transferee enters into a transfer agreement assuming the liability for any unpaid amounts. Similar rules also apply to liabilities deferred under the Section 965(i) rules applicable to S corporations.
For triggering events that occurred on or before Dec. 31, 2018, the IRS changed the date for timely filing from Jan. 31, 2019, to 30 days from the date the regulations appear as final in the Federal Register. The regulations were published on Feb. 5, making the new due date March 7, 2019.
Taxpayers with deferred Section 965 liabilities, or those paying the amounts in installments, should take note of these rules. Taxpayers that fail to timely comply (i.e., file a transfer agreement 30 days from the date of the event) may face significant tax consequences.
Partner, Washington National Tax Office
+1 202 861 4104
Managing Director, Washington National Tax Office
+1 202 521 1543
Senior Manager, Washington National Tax Office
+1 202 521 1509
Mike Del Medico
Manager, Washington National Tax Office
+1 202 521 1522
Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.