The U.S. Treasury Department and the Internal\u00a0Revenue Service (IRS) released a third notice April 16 (Notice 2018-26)\u00a0regarding the so-called “Toll Tax.”<\/p>\n
The notice\u00a0is part of the transition to a new territorial tax regime and signals the intent to issue regulations related to mandatory repatriation.<\/p>\n
The main takeaway is that Notice 2018-26 communicates how the U.S. Treasury Department and the IRS\u00a0plan to\u00a0issue future regulations that will generally not take into account certain transactions. The transactions covered under the notice are those the IRS deems were entered into with a principal goal of reducing a U.S. shareholder\u2019s toll tax when the U.S. shareholder\u2019s toll tax liability is determined.<\/p>\n
The notice also communicates how\u00a0certain foreign taxes accrued in the toll tax year reduce post-1986 earnings and profits. It also:<\/p>\n
–clarifies rules for determining the foreign cash position of specified foreign corporations that are liquidated, acquired, or disposed of;<\/p>\n
–turns off the downward attribution of stock from a partner to a partnership when the partner owns less than five percent in the relevant partnership;<\/p>\n
–and clarifies that an election is available with respect to both current year operating losses and net operating losses from a prior year.<\/p>\n
The notice also modifies the previous Notice 2018-13 by excluding accounts receivable and accounts payable with a term of more than one year for determining net accounts receivable for the purposes of calculating the aggregate foreign cash position; and provides penalty relief related to Section 965, as well as waiving similar penalties with respect to estimated toll taxes in connection with changes to existing stock attribution rules.<\/p>\n","protected":false},"excerpt":{"rendered":"