The Supreme Court has agreed to hear a case challenging the constitutionality of the transition tax on deferred foreign earnings imposed by Section 965 of the Internal Revenue Code.
Background
Internal Revenue Code Section 965 imposed a one-time transition tax (essentially a toll charge) on the undistributed, 1986年以后未纳税的外国收入和利润.S.-owned foreign corporations. The tax, 纳入2017年减税和就业法案(TCJA), 要求美国政府必须将递延外国收入作为F部分收入.S. 递延外国收入公司(dfic)股东, 包括持有美国国内直通债券的国内直通债券持有人.S. shareholder. It is a tax on foreign income deemed distributed to shareholders that was previously treated as not currently taxable under the Internal Revenue Code existing prior to the TCJA.
The tax, calculated at a reduced rate dependent upon whether the deferred earnings were held in cash or other assets, could be paid immediately with a 2017 return (generally) or was allowed to be paid in installments over eight years ranging from 8% for the first five installments to 15%, 20%, and then 25%, respectively, 在过去的三期.
纳税人对未收所得纳税的质疑
Taxpayers from Washington state, Charles and Kathleen Moore (the Moores) are challenging the assessment of tax on their proportionate share of corporate income earned by a foreign corporation. The income was never distributed to them in cash (or other property); rather, the corporation reinvested all earnings in its business of assisting rural farmers in India.
The Moores lost a refund claim case in the Western District of Washington in which they argued that Section 965 violated the Sixteenth and Fifth Amendments to the U.S. Constitution. They appealed to the Ninth Circuit court which affirmed the district court’s ruling. The Moores petitioned the Supreme Court to review the Ninth Circuit’s decision; on June 26, 2023, the Supreme Court agreed to hear whether the tax is constitutional under the Sixteenth Amendment.
摩尔夫妇认为，根据最高法院之前的裁决, 收入必须实现才能征税. In part, that decision provided that income is realized when there are instances of [1] undeniable accessions to wealth, [2] income is clearly realized, [3]收入是纳税人完全支配的部分.
The case will be argued before the Supreme Court later this year and a ruling is likely sometime in the middle of 2024.
最高法院判决的可能后果
There are a number of possible (and uncertain) outcomes resulting from the Supreme Court’s decision. Obviously, 最高法院可能会同意第九巡回法院的裁决, in which case the tax regime
会被发现是符合宪法的吗?法律没有改变吗. Another option includes the Supreme Court striking down all or possibly some part of the deemed repatriation tax regime. In this instance, there may be opportunities to recover taxes paid in earlier years.
What Should Taxpayers Do Now?
纳税人向国税局申报退税的时间通常有限. Occasionally, this time limit may expire before the taxpayer’s right to the refund claim is finalized and determinable (e.g., during pending litigation). 在这些情况下保留其要求退款的权利, 纳税人可以提出保护性退税申请.
The deadline for filing for administrative relief is generally the later of three years from the time a return was filed, 或者从缴税开始算起两年. However, for taxpayers who made the election under §965(h) to pay the liability over eight years, filed their returns late, 或者由于审计或其他安排而有开放的年份, they might want to consider the merits of filing a protective claim to preserve the ability to file for refunds on amended returns for tax years that might close between now and the ruling. Given that many taxpayers with this issue may file returns on extension in September and October, the statute of limitations on some tax years might be closing between now and October 15 for some tax years.
However, 就像生活和税收中的大多数事情一样, there are other positive and/or negative implications of choices that might need to be considered before making a decision to file a protective claim. For help in making this decision, 请联系您的施耐德唐斯税务顾问, 谁能更详细地和你讨论你的选择.
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