The IRS has announced that it will begin enforcing Section 965’s repatriation tax in October 2020. Section 965 and its regulations require United States shareholders to pay a one-time transition tax on untaxed foreign earnings of certain foreign corporations as if these earnings had been repatriated to the United States. Cash holdings are taxed at 15.5% and non-cash or non-liquid assets are taxed at 8%. Taxpayers can make payments over eight years. Prior to the repatriation tax, which was enacted in 2017 as part of the Tax Cuts and Job Act (“TCJA”), companies could defer tax on any earnings made and held abroad, and would be taxed on such income at a rate of 35% only upon repatriation.
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