The IRS on August 17 updated its Streamlined Filing Compliance Procedures and Section 965 webpage to clarify that a taxpayer that uses the agency’s streamlined filing compliance procedures must include in its submission the tax year in which the Section 965 transition tax is levied (generally, 2017 and/or 2018), if the taxpayer is not compliant with Section 965. Accordingly, the lookback period for any streamlined filing submission involving specified foreign corporations (SFCs) with a Section 965(a) inclusion in 2017 must include 2017 and all subsequent years affected. In addition, taxpayers must account for and report Subpart F income and Section 956 amounts in their submission.
Action item: Taxpayers affected by the updated guidance should take into account that the impact of the guidance may be additional tax liability and penalty exposure for items beyond the Section 965 transition tax for the additional years required to be included in their submission. In addition, they should monitor the IRS website for additional guidance as the updated guidance does not address how they may be affected if they submitted a streamlined filing before the updated guidance was posted and whether any omission of information required to be included pursuant to the updated guidance would subject them to audit and assessment exposure for 2017.