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Tennessee Explains Reporting of Repatriated Earnings – Tax & Accounting Blog

Tennessee advises taxpayers on how to report earnings repatriated under IRC Sec. 965 as required by the Tax Cuts and Jobs Act (TCJA). The Internal Revenue Service (IRS) has issued some guidance on the IRC Sec. 965 transition tax.

How Corporations Should Report Foreign Earnings

Corporations should not include repatriated earnings in their earnings on Tennessee excise tax Schedule J-4. They  will not report the earnings on Form 1120, but will file a IRC Sec. 965 transition tax statement with their federal returns.

Further, the repatriated earnings should not be:

  • deducted as dividends; or
  • included in the apportionment formula.

Similar rules apply for S corporations.

How Partnerships Should Report Foreign Earnings

Partnerships will report repatriated earnings and the related exclusion amount on federal Form 1065. Therefore, these amounts should be included in the earnings reported on Tennessee Schedule J-1.

A deduction for dividends received from an 80%-or-more owned corporation can be made on Schedule J. The amount deducted will equal:

  • the amount of the repatriated earnings, less
  • the exclusion amount.

Also, the apportionment formula should include repatriated earnings, less

  • the related exclusion amount; and
  • dividends received deduction.

How REITs Should Report Foreign Earnings

Real estate investment trusts (REITs) will report repatriated earnings, net of any exclusion amount, on federal Form 1120-REIT. However, REITs can deduct the amount on federal Schedule A as dividends paid. Accordingly, the net earnings calculation on Tennessee Schedule J-4 for REITs will include repatriated earnings, less dividends paid.

In addition, the amount received from an 80%-or-more owned corporation, net of any exclusion amount, can be deducted to the extent they are included on Schedule J-4.

Finally, the apportionment formula should also include repatriated earnings, less:

  • the related exclusion amount; and
  • any dividend received deduction.

Important Notice No. 18-05, Tennessee Department of Revenue, April 2018, ¶401-718

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Author: CCHTaxGroup

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