Claim a Refund for the Section 965 Tax
This article is intended to synthesize 5 other articles and explain our firm’s legal position on how family companies can claim a refund for the Section 965 Deemed Repatriation Tax.
First and foremost, it would be best if your entity was not listed on the regulatory list of per se corporations: see here. Even if it is, contact us for a free consultation so we can discuss.
Secondly, it is critical that you read and understand our firm’s position on Section 965: see here. The most valid criticism of the legal position was that Congress specifically addressed the use of entity classification elections in Section 965(o)(2) by empowering the Secretary of the Treasury with power to promulgate regulations preventing the use of entity classification elections to lawfully avoid Section 965 taxation. This, however, will be explained below.
Thirdly, it is important to understand our firm’s position regarding the legality of retroactive Treasury regulations: see here. This is critical since, because no regulations were promulgated in 2017 or 2018, the regulations arguably do not have retroactive effect since it was not the intent of Congress to target family businesses.
Fourthly, our firm’s position on the foreign equivalent of LLCs being flow-through by default is the final nail in the coffin of the Section 965 tax: see here. This is the legal position that resolves the Section 965(o)(2) dilemma. Our firm is not making an election to have a foreign entity classified as flow-through (effectively disregarded) for U.S. federal income tax purposes. Our firm is saying that the default classification under the Entity Classification Regulations is invalid as a matter of law. In other words, the regulations are not valid. The default treatment for a non-per se foreign corporation is flow-through status; effectively disregarded, which means Section 965 does not apply.
Therefore, if you were subject to the Section 965 tax, you need to call us for a free consultation. For amended returns, we engage clients on a contingent basis, which means, unless and until we compel the IRS to refund you the Section 965 tax, there are no fees. That means there’s no risk on your end. Even if it goes to litigation with the IRS, there are absolutely no out-of-pocket expenses for clients.
Contact us to schedule a free consultation: click here.