by John Anthony Castro, J.D., LL.M.
Update 1/6/2021: Please note that the statutory deadline to either judicially challenge the tax or administratively claim a refund of the tax paid is October 15, 2021. After October 15, there are no options. If you have not filed a claim for refund, you will never get the tax back even if a favorable court ruling deems the tax unconstitutional as applied to circumstances matching your own.
This article explains our firm’s legal position on how family companies can claim a refund for the Section 965 Deemed Repatriation Tax. If you had to pay the Section 965 tax, please contact us today for a free consultation to learn how we can file an amended return to recover this tax for you.
Update 11/19/2020: The United States District Court for the Western District of Washington State issued a ruling. Moore v. U.S., Case No. C19-1539-JCC (W.D.Wash. 2020). In this case, U.S. District Court Judge John C. Coughenour found that the Section 965 tax was retroactive and chastised the government's argument that it was not retroactive as "meritless." However, the judge concluded that Congress had no choice but to make it retroactive since that was supposedly the only way to avoid undistributed earnings and profits from forever escaping "the imposition of U.S. taxation." Untrue; they could have applied this to only E&P after 2017. The judge then went out to conclude that Section 965 was merely a "remedial" correction to the law that "resolves uncertainty" on the treatment of accumulated E&P. That strains logic. The law had no errors requiring minor remedial corrections; this was the largest overhaul of the international tax rules since 1986. The judge at least admitted that taxpayers received "little notice."
It is important to note that this ruling is only effective in the Western District of Washington State. It does not have nationwide implication, and our firm looks forward to bringing this case before the U.S. Court of Federal Claims in Washington, DC.
First and foremost, this article summarizes our firm's position with references to other articles. For example, our primary legal position is that Section 965 is only unconstitutional as applied in certain cases where an innocent taxpayer did not "game" the system with aggressive tax deferral structures. Our firm's article, The Constitutionality of Retroactive Tax Legislation, addresses this issue.
Secondly, our firm's conclusion is that Section 965 violates the Ex Post Facto Clause of the U.S. Constitution.
Thirdly, if your family company was not listed on the regulatory list of per se corporations, it is our firm's position that the default classification of the entity would be fiscally transparent (i.e., disregarded if there's only one owner, partnership if there's more than one owner).
Contact Our Firm
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.
About the Author
John Anthony Castro, J.D., LL.M., is the Managing Partner of Castro & Co., the author of International Taxation in Plain English as well as International Estate Planning in Plain English, an esteemed graduate of Georgetown University Law Center in Washington DC, an OPM Fellow at Harvard Business School, and an internationally recognized tax attorney with offices in New York, Los Angeles, Miami, Chicago, Dallas, and Washington DC.
Bluebook Citation: John Anthony Castro, Claim a Refund for the Section 965 Tax, Int’l Tax Online Law Journal (Jan. 7, 2019) url.