Arkansas Issues IRC Sec. 965 Guidance

Arkansas has issued guidance on the state’s conformity to the federal IRC Sec. 965 repatriation transition tax enacted by the Tax Cuts and Jobs Act (P.L. 115-97). Under IRC Sec. 965, certain taxpayers must include untaxed foreign earnings and profits from post-1986 tax years. A deduction is allowed that reduces the tax rate on those earnings.

Arkansas Treatment of IRC Sec. 965 Repatriation Income

Arkansas is a “selective” conformity state and only adopts certain IRC provisions. As such, the state does not conform to IRC Sec. 965. Unless conformity legislation is passed, Arkansas will continue to tax income as dividends are actually paid. The new federal deduction will also not be allowed.

Revenue Legal Counsel Opinion, No. 20180826, Department of Finance and Administration, October 2, 2018, ¶400-962

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