"The Little Red Transition Tax Book" – Everything you need to know about the 965bmandatory repatriation tax but didn't know to ask. A horrific abuse of #Americansabroad in a @citizenshiptax and #FATCA world! https://t.co/j7v1Asreek
— U.S. Transition Tax – Subpart F and #GILTI (@USTransitionTax) June 26, 2023
To file a protective refund claim or to not seek a refund, that is question …
Individuals who were subject to the 2017 965 Transition Tax would have responded (whether using the 962 election or not) to the tax obligation in one of two ways:
1. They would have paid the tax in full.
2. They would have chosen to pay the tax over the eight year instalment period.
The Supreme Court will hear the appeal in Moore. It is possible that the Court will issue a decision that means the MRT was unconstitutional with respect to (some or all) individual taxpayers. Are those individuals who paid the tax in full entitled to a refund?
An interesting post from U.S. tax lawyer Virginia La Torre Jeker provides a possible answer:
Great post from @VLJeker explains those who paid the @USTransitionTax in full (as opposed to 8 year instalments) will not likely receive refunds even if the Supreme Court strikes it down in Moore. Apparently, no good deed goes unpunished! https://t.co/tF1Ffp34OL
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) September 7, 2023
Virginia’s post (focusing on whether to file a protective refund claim) includes an excellent analysis. I highly recommend taking the time to read it. In relevant part she writes:
Here’s the law in a nutshell:
Section 965(k) provides the IRS 6 years to assess any transition tax that is owed. However, this 6-year statute only favors the IRS. Taxpayers seeking a refund are bound to Section 6511 which deals with refund claims. Pursuant to Section 6511(a) a taxpayer must file a refund claim by the later of 3 years of filing the tax return, or 2 years of paying the tax.
Under the general refund claim rule, taxpayers that paid the full transition tax on their 2017 income tax return filed in 2018 (or 2018 tax return, filed in 2019, if they report on a fiscal year that is not a calendar year) will not be able to claim a refund. The time for claiming the refund expired in 2021 (or 2022 for fiscal year filers). Normally refund claims must be filed within 3 years of filing the tax return or 2 years from the date the tax was paid so these taxpayers are out of luck.
Clearly “No Good Deed Goes Unpunished”!
Interested in Moore (pun intended) about the § 965 transition tax?