Implementation of the Tax Cuts and Jobs Act Deemed Repatriation Tax Presented Significant Challenges

The Deputy Commissioner for Services and Enforcement should ensure that, if it is unable to refund excess payments to taxpayers because the entire income tax liability was not overpaid, the IRS takes steps to inform taxpayers that their excess payments will be applied to the deferred Section 965 portion of their income tax liability and inform them of the status of the liability, including when the next installment payment is due.

The Commissioner, Wage and Investment Division, should take steps to ensure that Section 965 payments are recorded with the correct designated payment code. For instance, develop a report that lists the amount recorded as the Section 965 net tax liability and the amount recorded as owed and compares the difference between the two amounts to the amount recorded as paid.

The Deputy Commissioner for Services and Enforcement should develop and document a comprehensive compliance plan that, at a minimum, includes:-A strategy to identify taxpayers that did not properly comply with Section 965.-An assessment of the benefit of issuing notices to those taxpayers that may be subject to Section 965 filing requirements according to Form 5471 information.-Procedures to monitor those taxpayers that elected to defer tax.-Validation of Section 965 data reported by the taxpayer.-Steps to ensure that taxpayers did not violate anti-abuse rules. For instance, if a U.S. shareholder becomes an "expatriated entity" at any point during the 10-year period following the enactment of the law, the reduced rates are recaptured and the shareholder is subject to a retroactive 35 percent rate.