Louisiana Provides Guidance on IRC §965 Repatriation Income

Louisiana has issued guidance on how to report IRC §965 repatriation income for state tax purposes, and how to claim the federal income tax deduction on the income taxed at the federal level. Under the federal changes made by the Tax Cuts and Jobs Act, §965 repatriation income is added to Subpart F income. Because Louisiana generally recognizes and treats Subpart F income as dividends, §965 income is treated as dividend income for state income tax purposes.

Corporate Income Tax Filers

Because dividend income is not allocable income in Louisiana, the income is apportionable. The §965 income is eligible for a deduction equal to 72% of dividends that would otherwise be included in gross income for tax year 2017. Additionally, a federal deduction is allowed on §965 income apportioned and taxed by Louisiana. However, a federal deduction is not allowed on income upon which no state income tax is incurred, so the federal income tax paid on the 72% of dividends that are exempt from Louisiana income tax are not eligible for the federal deduction.

Specific Form Instructions. The notice provides specific instructions on how to report §965 amounts on Form R-620-965 and Form CIFT-620

Individual Income Tax Filers

For nonresident individuals, Louisiana specifically classifies dividends as allocable income.

Specific Form Instructions. The notice provides specific instructions on how to report §965 income on Form IT-540 (residents) and Form IT-540B (nonresidents).

Fiduciary Filers

For federal tax purposes, §965 income of a trust or estate is treated differently depending on whether or not the income was distributed to the beneficiaries. All §965 income of resident trusts and estates that is distributed to the trust or estate beneficiaries is included in Louisiana income.

Specific Form Instructions. The notice provides specific instructions on how to report §965 income on Form IT-540, Form IT-541, and Form R-620-965.

Revenue Information Bulletin No. 18-030, Louisiana Department of Revenue, October 8, 2018, ¶202-857

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