Oklahoma has issued guidance on the treatment of:
– foreign earnings subject to the federal IRC Sec. 965 repatriation transition tax; and
– global intangible low-taxed income (GILTI) included in federal income under IRC Sec. 951A.
Federal Treatment of IRC Secs. 965 and 951(A) Income
The IRC Sec. 965 repatriation transition tax was enacted by the Tax Cuts and Jobs Act (P.L. 115-97) (TCJA). Under this provision, 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. TCJA also added IRC Sec. 951A. Under the new code section, a U.S. shareholder of any controlled foreign corporation must include its GILTI in gross income for tax years beginning after 2018.
Oklahoma Treatment of IRC Secs. 965 and 951(A) Income
IRC Sec. 965 income and GILTI income are considered dividends for purposes of calculating Oklahoma corporate income tax. This income should be reported as dividend income on the Oklahoma tax return. Taxpayers that did not include this income on federal Form 1120 should:
– include it as an addition to net taxable income on their Oklahoma return;
– allocate the income as dividend income; and
– include a copy of the federal IRC Sec. 965 Transition Tax Statement, if filed.
Taxpayers that did include the income on their federal tax return should include a statement identifying the amount of such income included in “Other income”.
Oklahoma legislation was enacted to adopt the federal timeline for making installment payments of federal tax under IRC Sec. 965(h) for tax years ending after January 1, 2017. Taxpayers electing to make installment payments should:
– include a schedule reflecting Oklahoma income tax attributable to the § 965 income;
– include the amount of installment payments to be remitted each year;
– add the installment payment to the Oklahoma income tax on the tax line of the return; and
– enter the designated number in the box on the return.
Tax Year 2017 Returns
The Oklahoma Tax Commission has created a table for taxpayers filing tax year 2017 returns. Returns using this method should be paper filed.
What information do you have related to IRC 965 and IRC 951A income?, Oklahoma Tax Commissioner, October 8, 2018, ¶201-253