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Proposed Legislation Regarding Section 965(h) Installment Payments – No longer an “Interest-Free Loan”

Just as taxpayers thought their Section 965 liabilities have been addressed by making the 965(h) election to defer payments on net Section 965 tax liabilities over eight years, a newly proposed law may impact these taxpayers and create additional costs and possible cash flow issues for paying deferred Section 965 liabilities.

Congressman Doggett and Senator Whitehouse, introduced the Stop Tax Haven Abuse Act on March 11, 2021, which proposes new laws and modifications to existing laws designed to close certain tax provisions created by the 2017 Tax Cuts and Jobs Act. The Act includes a proposed change to the treatment of deferred payments on Section 965 (commonly referred to as the transition tax or the mandatory repatriation tax) tax liabilities. If enacted into law as currently written, taxpayers who elected to pay their Section 965 tax liabilities in installments over eight years would have the option to pay the total remaining outstanding amounts currently or to continue to pay the outstanding liability over the remaining installments with an interest charge applied.

While this is a recently proposed legislation change, taxpayers should keep these possible changes in mind and continue to monitor this change. We will keep you up-to-date as to the passage (or modification) of the proposed legislation.

Author: Calvin Yung, JD, LLM | cyung@withum.com

For more information or questions, please contact a member of the International Tax Team.

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