On March 14, 2018 the IRS published advice for personal income taxpayers who must report their IRC 965 repatriated deferred foreign income on their 2017 federal tax return (https://www.irs.gov/newsroom/questions-and-answers-about-reporting-related-to-section-965-on-2017-tax-returns).  Shareholders and partners who are individuals are entitled to have this income taxed for federal purposes at an effective tax rate of either 8% or 15%, depending on the type of income.  The IRS has determined that individuals will report this repatriation income, minus a deduction amount to achieve the effective tax rate, on their federal Form 1040, line 21 (with “SEC 965” written on the dotted line). 

 

For Oregon income tax purposes, deducting income that is taxable by Oregon in order to take advantage of a special federal tax rate is not allowed.  An addition on the Oregon return is required for the amount that was deducted under IRC 965(c) from the repatriation income to arrive at the amount included on Line 21 of the federal return.  Please use addition code 162 (titled “Capital loss with Oregon-only tax benefit” even though the description does not match the use) to add the deduction amount (IRC 965 (c)) to your 2017 Oregon personal income tax return. 

 

Also, the IRS is allowing the taxes on the repatriated and deferred income to be paid over eight-years; however, Oregon is not tied to this extension of time for making payments.  The Oregon taxes to be paid on this income are due by April 17, 2018.  

 

The online edition of Publication OR-17 will be updated shortly to include these instructions.  We wanted to get this information to you as quickly as possible since it is the middle of filing season!