Utah has amended its IRC §965 repatriation tax provisions. It has changed:
- the definition of “unadjusted income”; and
- the schedule for a corporation to pay the state tax on deferred foreign income.
IRC §965, Tax on Repatriated Earnings
IRC §965, enacted by the Tax Cuts and Jobs Act of 2017 (TCJA), imposes a federal transition tax on untaxed earnings and profits (E&P) of certain foreign corporations. Corporations must pay a tax on that E&P as if the E&P had been repatriated to the United States. A separate federal deduction reduces the tax rate on the repatriated income.
Unadjusted Income Under Utah Tax Law
For Utah tax purposes, “unadjusted income,” includes deferred foreign income described in IRC §965(a). This has retrospective operation for:
- the last taxable year of a taxpayer beginning on or before December 31, 2017; and
- taxable years beginning on or after January 1, 2018.
Legislation enacted in 2018 previously made the definition operative for a corporation’s last taxable year beginning on or before December 31, 2017.
Installment Payments for Utah Tax on Deferred Foreign Income
A corporation can make installment payments of the state tax owed on deferred foreign income described in IRC §965.
The first installment must be made by the due date, including any extension, for its return filed for the first tax year in which it reports deferred foreign income.
Subsequent installments must be made by the due date, including any extension, for its return in each of the following seven years.
The 2018 legislation instructed a corporation to pay the first installment by the due date, including any extension, for its 2017 return. The current amendments have retrospective operation for taxable years beginning on or after January 1, 2017.
H.B. 49, Laws 2019, effective February 26, 2019, and operative as noted