Tag Archives: 962 election

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

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An example of the perspective of the “tax compliance” community -Look at what the statute says and not what was intended


In general, the tax compliance community has not been helpful to Americans abroad in responding to the “transition tax”. Few practitioners have made any effort to consider whether the “transition tax” applies to Americans abroad and/or whether it can be mitigated by treaty provisions. Furthermore, (assuming that the “transition tax” does apply) few have explored the full range of options available to affected taxpayers. (These options may include: paying the tax outright, paying the tax over 8 installments, maximimizing the effects of tax credits available at the shareholder level or maximizing the effects of tax credits available at the corporate level – the 962 election. Of course the attractiveness of these options is influenced by whether people intend to retain U.S. citizenship.)
By failing to consider the various “Faces Of The Transition Tax”, some in the tax compliance community, are effectively “bullying” taxpayers into responses that are not in the interest of the taxpayer.
Surely Circular 231 obligations don’t prevent an objective consideration of the whole range of options!
It is within this context, that I find the recent discussion of Nina Olson of IRS Tax Advocate refreshing.
But, wait. At least in terms of how the IRS administers the law, “Congressional intent” should matter


Her analysis includes:

In other words, the memo concluded that the full amount of the Section 965 liability becomes due immediately – not ratably over the eight-year period the law gives taxpayers the option to make payments. As a result, any “overpayment” of non-Section 965 liabilities over the 8-year period cannot be refunded or applied as estimated tax for a future period until the full Section 965 liability is paid in full.
As a practical matter, this interpretation sharply limits the value of Section 965(h), and in some cases, it may even render it meaningless. Large corporations frequently overpay their estimated taxes for a variety of reasons, including to minimize the risk they may become liable for underpayment interest. Some may even have “overpaid” by most or all of their Section 965 liability. According to the IRS’s interpretation, those corporations will not receive any of the benefits Congress provided by enacting Section 965(h).
It may be that the IRS’s interpretation is legally correct, and congressional tax-writers failed to consider the interaction of IRC 965(h) with existing provisions governing refunds and credits. Some in the private sector generally agree that the IRS cannot pay refunds after a return is filed and the tax has been assessed, but they have suggested that – before the liability is assessed – the IRS may at least pay the estimated tax refunds requested on Form 4466. I have requested the Office of Chief Counsel to take another look at the issue and consider alternative approaches. Where Congressional intent is clear, it is the job of administrative agencies to give effect to that intent to the extent feasible. In some cases, that may require adopting a plausible interpretation, even if it not the “best” interpretation.

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The first sixteen posts in my “transition tax” series were:
Part 1: Responding to The Section 965 “transition tax”: “Resistance is futile” but “Compliance is impossible”
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”
Part 3: Responding to the Sec. 965 “transition tax”: They hate you for (and want) your pensions!
Part 4: Responding to the Sec. 965 “transition tax”: Comparing the treatment of “Homeland Americans” to the treatment of “nonresidents”
Part 5: Responding to the Sec. 965 “transition tax”: Shades of #OVDP! April 15/18 is your last, best chance to comply!
Part 6: Responding to the Sec. 965 “transition tax”: A “reprieve” until June 15, 2018
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 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 9: Responding to the Sec. 965 “transition tax”: From the “Pax Americana” to the “Tax Americana”
Part 10: Responding to the Sec. 965 “transition tax”: Individuals subject to U.S. state tax jurisdiction, the response of New York State – It’s about “reasonable cause”!
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 – Bulletin – June 4, 2018: It appears that the first payment for the @USTransitionTax will be delayed for some
Part 13 – Calculating the Transition Tax: Just Like Dental Work – Painful in More Ways Than One
Part 14 – Calculating the Transition Tax: The 962 Election – getting credit for the tax the corporation has paid
Part 15 – The Canadian Media Notices the @USTransitionTax: The @LizT1 series of post
Part 16 – Interview with David Sutherland and @IRSMedic about the @USTransitionTax