IRS announces intent to grant some multinationals relief from double tax on deemed repatriation

The US IRS on January 17 announced that it will consider granting multinationals relief from double taxation resulting from the application of the repatriation tax under section 965, added by the Tax Cuts and Jobs Act (TCJA), in some cases where a multinational has paid an unusual dividend for business reasons. 

In IR-2020-16, the IRS states: 

The IRS has determined that in unique circumstances, such as where a corporation paid an unusual dividend for business reasons, not because of the enactment of TCJA, it may be appropriate to provide relief from double taxation. When the same earnings and profits of foreign corporations are taxed both as dividends and under section 965, double taxation could result.

The IRS is open to considering relief from such double taxation where there is no significant reduction in the resulting tax by application of foreign tax credits, such that the taxpayer would be required to pay more tax than it would have if the dividend had not been paid. 

Taxpayers requesting relief are asked to contact the IRS’s Office of Associate Chief Counsel (International) at 202-317-3800.