Post 36 – The Little Red @USTransitionTax Book – About the 965 Mandatory Repatriation Tax

June 2023 – The fight against the 965 Transition AKA Mandatory Repatriation Tax Continues

On June 26, 2023 the U.S. Supreme Court agreed to hear the Moore appeal to the constitutionality of the U.S. Transition Tax. For those who don’t know, the transition is found in S. 965 of the Internal Revenue Code and was part of the 2017 TCJA. It was intended (in part) to be a “trade off” pursuant to which:

1. U.S. corporations would have the corporate tax rate lowered from 35% to 21%.

2. The U.S. Claimed to adopt “territorial taxation” for its corporations. Generally this meant that profits earned outside the United States would not be taxed by the United States.

3. The U.S. adopted the 951A GILTI rules which exposed the lie of moving to territorial taxation (the profits earned outside the United States were taxed before being distributed. They were then not taxed a second time on distribution).

4. The U.S. adopted that 965 transition AKA mandatory repatriation tax which was a retroactive tax on the retained earnings of CFCs which had not been distributed and therefore not subjected to U.S. taxation.

In a nutshell:

The 965 transition tax was a one time retroactive tax (going back to profits accrued since 1986) on earnings that were not subject to taxation at the time that they were earned. This is incredible stuff!!

But, (as usual) little thought was given to the fact that some CFCs were owned by individuals. No thought was given to the fact that many Americans living outside the United States had small business corporations in their country of residence.

For U.S. citizens in Canada, their small business corporations (in many cases) were actually their private pension plans. To put it simply:

The 965 transition AKA mandatory repatriation tax confiscated the pension plans of many Americans abroad. Frankly this is/was one of the most egregious offences against Americans abroad ever perpetrated by Congress and the Treasury.

In 2018 I began writing a number of blog posts about various aspects of this issue. These are written mostly from the perspective of Americans abroad who are dual “tax residents” (of other countries and of the United States). I don’t think the Moore’s are tax residents of India.

I haven’t written about the transition tax for a long time. That said, the fact that the U.S. Supreme Court is going to hear the Moore Case has reminded me of this issue. This means that more posts will be written. Each post is really a chapter. The posts have been designated as chapters which collectively compose the “Little Red Transition Tax Book”.

Therefore, this post (which I will add to) is “The Little Red Transition Tax Book”.

The posts include:

Introduction – http://citizenshipsolutions.ca/2018/02/13/u-s-tax-reform-and-the-nonresident-corporation-owner-does-the-sec-965-transition-tax-apply/

U.S. Tax Reform and the "nonresident" corporation owner: Does the Sec. 965 transition tax apply?

Post 1 – http://citizenshipsolutions.ca/2018/03/02/part-1-responding-to-the-section-965-transition-tax-resistance-is-futile-but-compliance-is-impossible/

Part 1: Responding to The Section 965 "transition tax": "Resistance is futile" but "Compliance is impossible"

Post 2* – http://citizenshipsolutions.ca/2018/03/02/part-2-responding-to-the-section-965-transition-tax-the-possible-use-of-the-canada-u-s-tax-treaty-to-defeat-the-transition-tax/

Part 2: Responding to The Section 965 "transition tax": Is "resistance futile"? The possible use of the Canada U.S. tax treaty to defeat the "transition tax"

Post 3* – http://citizenshipsolutions.ca/2018/03/11/part-3-responding-to-the-sec-965-transition-tax-they-hate-you-for-your-pensions/

Part 3: Responding to the Sec. 965 "transition tax": They hate you for (and want) your pensions!

Post 4 – http://citizenshipsolutions.ca/2018/03/17/part-4-responding-to-the-sec-965-transition-tax-comparing-the-treatment-of-homeland-americans-to-the-treatment-of-nonresidents/

Part 4: Responding to the Sec. 965 “transition tax”: Comparing the treatment of individuals who are US residents to US citizens living outside the USA

Post 5 – http://citizenshipsolutions.ca/2018/03/20/part-5-responding-to-the-sec-965-transition-tax-shades-of-ovdp-april-15-18-is-your-last-best-chance-to-comply/

Part 5: Responding to the Sec. 965 “transition tax”: Shades of #OVDP! April 15/18 is your last, best chance to comply!

Post 6 – http://citizenshipsolutions.ca/2018/04/02/part-6-responding-to-the-sec-965-transition-tax-a-reprieve-until-june-15-2018/

Part 6: Responding to the Sec. 965 “transition tax”: A "reprieve" until June 15, 2018

Post 7 – http://citizenshipsolutions.ca/2018/04/05/part-7-responding-to-the-sec-965-transition-tax-why-the-transition-tax-creates-a-fictional-tax-event-that-allows-the-u-s-to-collect-tax-where-it-never-could-have-before/

Part 7: Responding to the Sec. 965 “transition tax”: Why the transition tax creates a fictional tax event that allows the U.S. to collect tax where it never could have before

Post 8* – http://citizenshipsolutions.ca/2018/04/13/part-8-responding-to-the-sec-965-transition-tax-this-small-business-thought-it-was-saving-to-invest-in-business-expansion-wrong-they-were-saving-to-be-robbed-by-america/

Part 8: Responding to the Sec. 965 “transition tax”: This small business thought it was saving to invest in business expansion – Wrong, they were saving to be robbed by America!

Post 9 – http://citizenshipsolutions.ca/2018/04/16/part-9-responding-to-the-sec-965-transition-tax-from-the-pax-americana-to-the-tax-americana/

Part 9: Responding to the Sec. 965 “transition tax”: From the "Pax Americana" to the "Tax Americana"

Post 10 – http://citizenshipsolutions.ca/2018/04/24/part-10-responding-to-the-sec-965-transition-tax-individuals-subject-to-u-s-state-tax-jurisdiction-the-response-of-new-york-state/

Part 10: Responding to the Sec. 965 “transition tax”: Individuals subject to U.S. state tax jurisdiction, the response of New York State

Post 11* – http://citizenshipsolutions.ca/2018/05/05/part-11-responding-to-the-sec-965-transition-tax-letter-to-the-senate-finance-discussing-the-effects-of-the-transition-tax-on-americans-abroad/

Part 11: Responding to the Sec. 965 “transition tax”: Letter to the Senate Finance discussing the effects of the transition tax on Americans abroad

Part 12 – http://citizenshipsolutions.ca/2018/06/04/part-12-bulletin-june-4-2018-it-appears-that-the-first-payment-for-the-ustransitiontax-will-be-delayed-for-some/

Part 12 – Bulletin – June 4, 2018: It appears that the first payment for the @USTransitionTax will be delayed for some

Post 13 – http://citizenshipsolutions.ca/2018/09/03/part-13-calculating-the-transition-tax-just-like-dental-work-painful-in-more-ways-than-one/

Part 13 – Calculating the Transition Tax: Just Like Dental Work – Painful in More Ways Than One

Post 14 – http://citizenshipsolutions.ca/2018/09/03/part-14-calculating-the-transition-tax-the-962-election-getting-credit-for-the-tax-the-corporation-has-paid/

Part 14 – Calculating the Transition Tax: The 962 Election – getting credit for the tax the corporation has paid

Post 15* – http://citizenshipsolutions.ca/2018/09/03/part-15-the-canadian-media-notices-the-ustransitiontax-the-lizt1-series-of-post/

Part 15 – The Canadian Media Notices the @USTransitionTax: The @LizT1 series of post

Post 16 – http://citizenshipsolutions.ca/2018/09/03/part-16-interview-with-david-sutherland-and-irsmedic-about-the-ustransitiontax/

Part 16 – Interview with David Sutherland and @IRSMedic about the @USTransitionTax

Post 17 – http://citizenshipsolutions.ca/2018/09/09/part-17-does-intent-matter-in-the-interpretation-of-the-ustransitiontax/

Part 17 – Does "intent" matter in the interpretation of the @USTransitionTax?

Post 18* – http://citizenshipsolutions.ca/2018/09/13/part-18-campaign-to-treasury-irs-exempt-american-small-businesses-in-the-u-s-worldwide-from-the-ustransitiontax-gilti-taxes/

Part 18 – CAMPAIGN TO TREASURY/IRS: EXEMPT AMERICAN SMALL BUSINESSES IN THE U.S. & WORLDWIDE FROM THE @USTransitionTax & GILTI TAXES

Post 19 – http://citizenshipsolutions.ca/2018/10/09/part-19-comments-from-those-with-taxresidency-in-other-countries-about-the-effects-of-ustransitiontax-gilti/

Part 19 – Comments from those with @TaxResidency in other countries about the effects of @USTransitionTax & #GILTI

Post 21 – http://citizenshipsolutions.ca/2018/10/23/part-21-acavoice-makes-presentation-at-october-22-18-irs-ustransitiontax-hearing-argues-that-both-that-regulatory-flexibility-act-should-apply-and-or-that-de-minimis-rule-be-created/

Part 21 – @ACAVoice makes presentation at October 22/18 IRS @USTransitionTax hearing – argues both that Regulatory Flexibility Act should apply and/or that de minimis rule be created

Post 22 – http://citizenshipsolutions.ca/2018/10/23/part-22-the-16th-amendment-authorises-an-income-tax-but-the-ustransitiontax-is-a-wealth-tax/

Part 22 – The 16th amendment authorises an Income Tax – but the @USTransitionTax is a wealth tax!

Post 23 – http://citizenshipsolutions.ca/2018/11/13/part-23-its-time-for-americansabroad-to-support-the-fight-against-the-ustransitiontax-and-gilti/

Part 23 – It's time for #Americansabroad to support the fight against the @USTransitionTax and #GILTI

Post 24 – http://citizenshipsolutions.ca/2018/11/17/part-24-when-it-comes-to-the-treatment-of-individuals-ustransitontax-code-sec-965i-proves-that-some-individuals-are-more-equal-than-other-individuals/

Part 24 – When it comes to the treatment of individuals: @USTransitonTax Code Sec. 965(i) proves that "Some individuals are more equal than other individuals"

Post 25* – http://citizenshipsolutions.ca/2018/11/18/part-25-reflections-on-the-s-corporation-exemption-to-the-sec-965-ustransitiontax/

Part 25 – Reflections on the "S Corporation" exemption to the Sec. 965 @USTransitionTax – Hat Tip to @SCorpAssn

Post 26 – http://citizenshipsolutions.ca/2018/11/23/part-26-2018-the-ustransitiontax-in-review-as-the-year-winds-down-lawyer-montesilver1-organizes-the-transition-tax-lawsuit-monte-has-supported-you-its-time-for-you-to-help-monte-support/

Part 26 – 2018 The @USTransitionTax in Review: As the year winds down lawyer @MonteSilver1 organizes the "Transition Tax" lawsuit – Monte has supported you! It's time for you to help Monte support you!

Post 27* – http://citizenshipsolutions.ca/2018/11/29/part-27-while-addressing-some-sec-965-transition-tax-concerns-there-is-no-concern-for-the-injustice-inflicted-on-americans-abroad/

Part 27 – While addressing some Sec. 965 @USTransitionTax concerns, there is NO EVIDENT CONCERN from @WaysandMeansGOP ‏for the injustice inflicted on Americans abroad

Post 28 – http://citizenshipsolutions.ca/2018/11/29/part-28-from-helenburggraf-concern-as-brady-tax-bill-fix-legislation-lacks-called-for-fixes-for-us-expats/

Part 28 – From @HelenBurggraf: Concern as Brady tax bill fix legislation lacks called-for fixes for US expats including @USTransitionTax

Post 29* – http://citizenshipsolutions.ca/2018/12/11/part-29-can-the-full-canadian-tax-paid-personally-on-distributions-from-sec-965-income-be-used-to-offset-the-ustransitiontax/

Part 29 – Can the full Canadian tax paid personally on distributions from Sec. 965 income be used to offset the @USTransitionTax

Post 30* – http://citizenshipsolutions.ca/2019/01/16/part-30-treasury-issues-final-ustransitiontax-regs-with-no-relief-for-americansabroad/

Part 30 – Treasury issues final @USTransitionTax Regs with no relief for #Americansabroad

Post 31* – http://citizenshipsolutions.ca/2019/05/28/part-31-double-taxation-disguised-as-tax-reform-jackie-bugnion-comments-in-taxnotes-on-ustransitiontax-and-gilti/

Part 31 – "Double Taxation Disguised as Tax Reform": Jackie Bugnion comments in @TaxNotes on @USTransitionTax and #GILTI

Post 32 – http://citizenshipsolutions.ca/2019/06/09/part-32-so-you-have-received-a-letter-saying-that-your-ustransitiontax-is-also-subject-to-the-3-8-niit/

Part 32 – So, you have received a letter saying that your @USTransitiontax is also subject to the 3.8% NIIT

Post 33 – http://citizenshipsolutions.ca/2019/09/30/part-33-us-residents-bring-suit-alleging-that-the-section-965-us-transition-tax-is-unconstitutional/

Part 33 – US residents bring suit alleging that the Section 965 US Transition Tax is Unconstitutional

Post 34 – http://citizenshipsolutions.ca/2019/12/27/part-34-2019-treasury-fails-to-prevent-montesilver1-lawsuit-against-ustransitiontax-from-proceeding-case-to-be-heard-on-the-merits/

Part 34 – 2019: Treasury Fails To Prevent @MonteSilver1 lawsuit against @USTransitionTax From Proceeding – Case To Be Heard On The Merits

Post 35 – http://citizenshipsolutions.ca/2023/06/26/part-35-2023-us-supreme-court-denies-cert-petition-in-montesilver1-lawsuit-against-ustransitiontax-lawsuit-ends/

Part 35 – 2023: US Supreme Court Denies Cert Petition In @MonteSilver1 lawsuit against @USTransitionTax – Lawsuit Ends

Post 36 – http://citizenshipsolutions.ca/2023/06/26/post-36-the-little-red-ustransitiontax-book-about-the-965-mandatory-repatriation-tax/

Post 36 – The Little Red @USTransitionTax Book – About the 965 Mandatory Repatriation Tax

Part 37 – 2023: US Supreme Court To Hear Moore Appeal In Lawsuit Against @USTransitionTax – Great News!

Part 38 – The § 965 Transition Tax Caused The Moore’s To Pay $14,712 Moore In Double Taxation

Part 39 – The § 965 Transition Tax: Congress Said: “Let There Be Income And There Was Income”

Part 40 – The Moore @USTransitionTax Appeal: Unrealized Income And Attacking The “Wealth Of OTHER Nations”

Part 41 – The Six Faces Of The 965 Transition Tax – The Ugliest Face Applies To Americans Abroad

Part 42 – In Moore The Supreme Court Should Consider The Retroactive Nature Of The Transition Tax

Part 43 – The 1996 Treasury Regs, 2017 TCJA And The Looting Of Canadian Controlled Private Corporations

Part 44 – The Moores, Unrealized Income And Exporting US Taxes, Forms And Penalties To Residents Of Other Countries

Part 45 – “Some” examples where the U.S. creates unrealized “foreign income” before a realization event in the source country

Part 46 – Why Other Countries Should File Amicus Briefs In The Moore MRT Appeal

Part 47 – Are Refunds For Payments Of The MRT Possible If The Moore Appeal Succeeds?

Part 48 – Discussing The @USTransitionTax and Moore With @FAIRTaxGuys of @FAIRTaxOfficial

Part 49 – 2012 Report Of Congressional Research Service Suggests @USTransitionTax May Be Unconstitutionally Retroactive

Part 50 – Moore: The Government And The Tax Academics Strike Back

Part 51 – Twas The Night Before Moore – SEAT Members Discuss What They Expect In Moore Hearing

Part 52 – December 5, 2023 – The Supreme Court Hearing In Moore v. United States

Part 53 – Debriefing The December 5, 2023 – Moore @USTransitionTax Hearing – WHAT The Court Must Do And HOW It Will Do It

Part 54 – Reactions To The Argument Before The Supreme Court: “Due Process” Does Matter

John Richardson – Follow me on Twitter @Expatriationlaw

Leave a Reply