Common questions about the US Section 965 Transition Tax Statement in ProConnect Tax

You can find the following input fields by going to the Input Return tab, selecting Taxes from the left of the screen, and choosing Section 965 Tax:

• Total amount required to be included in income by reason of section 965(a) - Enter the total amount required to be included in income by reason of section 965(a). The amount entered in this field prints on line 1 of the IRC 965 Transition Tax Statement.
• Aggregate foreign cash position, if applicable - Enter the aggregate foreign cash position, if applicable. Enter the total amount required to be included in income by reason of section 965(a). The amount entered in this field prints on line 2 of the IRC 965 Transition Tax Statement.
• Total deduction under section 965(a) - Enter the total deduction under section 965(c). The amount entered in this field prints on line 3 of the IRC 965 Transition Tax Statement.
• Total deemed paid foreign taxes associated with the total amount required to be included in income by reason of section 965(a) - Enter the total deemed paid foreign taxes associated with the total amount required to be included in income by reason of section 965(a). The amount entered in this field prints on line 4a of the IRC 965 Transition Tax Statement.
• Total deemed paid foreign taxes disallowed pursuant to IRC 965(g)(1) - Enter the total deemed paid foreign taxes disallowed pursuant to IRC 965(g)(1). The amount entered in this field prints on line 4b of the IRC 965 Transition Tax Statement.
• Taxpayer's net tax liability for the taxable year with all 965 related amounts - Enter the taxpayer’s net tax liability for the taxable year with section 965-related amounts. This entry is used in calculating the total net tax liability under section 965 (line 5 of the IRC Transition Tax Statement).
• Taxpayer's net tax liability for the taxable year without 965 related amounts - Enter the taxpayer’s net tax liability for the taxable year without section 965-related amounts. This entry is used in calculating the total net tax liability under section 965 (line 5 of the IRC Transition Tax Statement).
• Elect to pay net tax liability under section 965 in installments under section 965(h)(i) - Select the box to elect to pay net tax liability under section 965 in installments under section 965(h)(1). This entry checks the appropriate box on the IRC 965 Transition Tax Statement.
• S corporation shareholder election to defer payment of net tax liability under section 965(i)(1) - Select the box to make the S corporation shareholder election to defer payment of net tax liability under section 965(i)(1).
• Section 965(n) Election - Elect not to apply net operating loss deduction under section 965(n) - Select the box to produce the election not to apply net operating loss deduction under section 965(n).
• Section 965(n) Election - Amount required to be taken into account under section 951(a)(1) by reason of section 965 - Enter the amount required to be taken into account under section 951(a)(1) by reason of section 965 for the section 965(n) election statement.
• Section 965(n) Election - Taxes deemed to be paid by domestic corporation under section 960(a) and (b) for the taxable year with respect to the amount described above which are treated as dividends under section 78 - Enter the taxes deemed to be paid by domestic corporation under section 960(a) and (b) which are treated as dividends under section 78 to be included on the section 965(n) election statement.
• Notice 2018-13, Section 3.02 - Elect under section 3.02 of Notice 2018-13 to use alternative method to compute post-1986 earnings and profits - Check this box to elect under section 3.02 of Notice 2018-13 to use an alternative method to compute post-1986 earnings and profits of one or more foreign corporations. 
• Notice 2018-13, Section 3.02 - Foreign Corporation Name and ID Number - If making the election under section 3.02 of Notice 2018-13, for each applicable foreign corporation enter its name and ID number. This information is included in the Notice 2018-13 election statement.

For tax year 2021 see Generating the Schedules K-2 and K-3 in ProConnect

For tax year 2020 and prior: You can find the following input fields by going to the Input Return tab, selecting Other Forms from the left of the screen, and choosing Inclusion of Deferred Foreign Income (965):

• Total amount required to be included in income by reason of section 965(a) - Enter the total amount required to be included in income by reason of section 965(a). The amount entered in this field prints on line 1 of the IRC 965 Transition Tax Statement. The entry in this field also prints on Schedule K, line 10 and is allocated to each shareholder on Schedule K-1, line 10.
• Aggregate foreign cash position, if applicable - Enter the aggregate foreign cash position, if applicable. Enter the total amount required to be included in income by reason of section 965(a). The amount entered in this field prints on line 2 of the IRC 965 Transition Tax Statement.
• Total deduction under section 965(c) - Enter the total deduction under section 965(c). The amount entered in this field prints on line 3 of the IRC 965 Transition Tax Statement. The entry in this field also prints on Schedule K, line 12d and is allocated to each shareholder on Schedule K-1, line 12.
• Total deemed paid foreign taxes associated with the total amount required to be included in income by reason of section 965(a) - Enter the total deemed paid foreign taxes associated with the total amount required to be included in income by reason of section 965(a). The amount entered in this field prints on line 4a of the IRC 965 Transition Tax Statement. The entry in this field also prints on Schedule K, line 17d and is allocated to each shareholder on Schedule K-1, line 17.
• Total deemed paid foreign taxes disallowed pursuant to IRC 965(g)(1) - Enter the total deemed paid foreign taxes disallowed pursuant to IRC 965(g)(1). The amount entered in this field prints on line 4b of the IRC 965 Transition Tax Statement.
• Notice 2018-13, Section 3.02 - Elect under section 3.02 of Notice 2018-13 to use alternative method to compute post-1986 earnings and profits - Check this box to elect under section 3.02 of Notice 2018-13 to use an alternative method to compute post-1986 earnings and profits of one or more foreign corporations.
• Notice 2018-13, Section 3.02 - Foreign Corporation Name and ID Number - If making the election under section 3.02 of Notice 2018-13, for each applicable foreign corporation enter its name and ID number. This information is included in the Notice 2018-13 election statement.

For tax year 2021 see Generating the Schedules K-2 and K-3 in ProConnect

For tax year 2020 and prior: You can find the following input fields by going to the Input Return tab, selecting Other Forms from the left of the screen, and choosing Section 965 Tax:

• Total amount required to be included in income by reason of section 965(a) - Enter the total amount required to be included in income by reason of section 965(a). The amount entered in this field prints on line 1 of the IRC 965 Transition Tax Statement. The entry in this field also prints on Schedule K, line 13d and is allocated to each partner on Schedule K-1, line 13.
• Aggregate foreign cash position, if applicable - Enter the aggregate foreign cash position, if applicable. Enter the total amount required to be included in income by reason of section 965(a). The amount entered in this field prints on line 2 of the IRC 965 Transition Tax Statement.
• Total deduction under section 965(c) - Enter the total deduction under section 965(c). The amount entered in this field prints on line 3 of the IRC 965 Transition Tax Statement. The entry in this field also prints on Schedule K, line 13d and is allocated to each partner on Schedule K-1, line 13.
• Total deemed paid foreign taxes associated with the total amount required to be included in income by reason of section 965(a) - Enter the total deemed paid foreign taxes associated with the total amount required to be included in income by reason of section 965(a). The amount entered in this field prints on line 4a of the IRC 965 Transition Tax Statement. The entry in this field also prints on Schedule K, line 20c and is allocated to each partner on Schedule K-1, line 20.
• Total deemed paid foreign taxes disallowed pursuant to IRC 965(g)(1) - Enter the total deemed paid foreign taxes disallowed pursuant to IRC 965(g)(1). The amount entered in this field prints on line 4b of the IRC 965 Transition Tax Statement.
• Notice 2018-13, Section 3.02 - Elect under section 3.02 of Notice 2018-13 to use alternative method to compute post-1986 earnings and profits - Check the box to elect under section 3.02 of Notice 2018-13 to use an alternative method to compute post-1986 earnings and profits of one or more foreign corporations.
• Notice 2018-13, Section 3.02 - Foreign Corporation Name and ID Number - If making the election under section 3.02 of Notice 2018-13, for each applicable foreign corporation enter its name and ID number. This information is included in the Notice 2018-13 election statement.

You can find the following input fields by going to the Input Return tab, selecting Taxes from the left of the screen, and choosing Section 965 Tax:

• Total amount required to be included in income by reason of section 965(a) - Enter the total amount required to be included in income by reason of section 965(a). The amount entered in this field prints on line 1 of the IRC 965 Transition Tax Statement.
• Aggregate foreign cash position, if applicable - Enter the aggregate foreign cash position, if applicable. Enter the total amount required to be included in income by reason of section 965(a). The amount entered in this field prints on line 2 of the IRC 965 Transition Tax Statement.
• Total deduction under section 965(c) - Enter the total deduction under section 965(c). The amount entered in this field prints on line 3 of the IRC 965 Transition Tax Statement.
• Total deemed paid foreign taxes associated with the total amount required to be included in income by reason of section 965(a) - Enter the total deemed paid foreign taxes associated with the total amount required to be included in income by reason of section 965(a). The amount entered in this field prints on line 4a of the IRC 965 Transition Tax Statement.
• Total deemed paid foreign taxes disallowed pursuant to IRC 965(g)(1) - Enter the total deemed paid foreign taxes disallowed pursuant to IRC 965(g)(1). The amount entered in this field prints on line 4b of the IRC 965 Transition Tax Statement.
• Taxpayer's net tax liability for the taxable year with all 965 related amounts - Enter the taxpayer’s net tax liability for the taxable year with section 965-related amounts. This entry is used in calculating the total net tax liability under section 965 (line 5 of the IRC Transition Tax Statement).
• Taxpayer's net tax liability for the taxable year without 965 related amounts - Enter the taxpayer’s net tax liability for the taxable year without section 965-related amounts. This entry is used in calculating the total net tax liability under section 965 (line 5 of the IRC Transition Tax Statement).
• Elect to pay net tax liability under section 965 in installments under section 965(h)(i) - Select the box to elect to pay net tax liability under section 965 in installments under section 965(h)(1). This entry checks the appropriate box on the IRC 965 Transition Tax Statement.
• S corporation shareholder election to defer payment of net tax liability under section 965(i)(1) - Select the box to make the S corporation shareholder election to defer payment of net tax liability under section 965(i)(1).
• Section 965(n) Election - Elect not to apply net operating loss deduction under section 965(n) - Select the box to produce the election not to apply net operating loss deduction under section 965(n).
• Section 965(n) Election - Amount required to be taken into account under section 951(a)(1) by reason of section 965 - Enter the amount required to be taken into account under section 951(a)(1) by reason of section 965 for the section 965(n) election statement.
• Section 965(n) Election - Taxes deemed to be paid by domestic corporation under section 960(a) and (b) for the taxable year with respect to the amount described above which are treated as dividends under section 78 - Enter the taxes deemed to be paid by domestic corporation under section 960(a) and (b) which are treated as dividends under section 78 to be included on the section 965(n) election statement.
• Notice 2018-13, Section 3.02 - Elect under section 3.02 of Notice 2018-13 to use alternative method to compute post-1986 earnings and profits - Select the box to elect under section 3.02 of Notice 2018-13 to use an alternative method to compute post-1986 earnings and profits of one or more foreign corporations.
• Notice 2018-13, Section 3.02 - Foreign Corporation Name and ID Number - If making the election under section 3.02 of Notice 2018-13, for each applicable foreign corporation enter its name and ID number. This information is included in the Notice 2018-13 election statement.

You can find the following input fields by going to the Input Return tab, selecting Taxes from the left of the screen, and choosing Section 965 Tax:

• Total amount required to be included in income by reason of section 965(a) - Enter the total amount required to be included in income by reason of section 965(a). The amount entered in this field prints on line 1 of the IRC 965 Transition Tax Statement.
• Aggregate foreign cash position, if applicable - Enter the aggregate foreign cash position, if applicable. Enter the total amount required to be included in income by reason of section 965(a). The amount entered in this field prints on line 2 of the IRC 965 Transition Tax Statement.
• Total deduction under section 965(c) - Enter the total deduction under section 965(c). The amount entered in this field prints on line 3 of the IRC 965 Transition Tax Statement.
• Total deemed paid foreign taxes associated with the total amount required to be included in income by reason of section 965(a) - Enter the total deemed paid foreign taxes associated with the total amount required to be included in income by reason of section 965(a). The amount entered in this field prints on line 4a of the IRC 965 Transition Tax Statement.
• Total deemed paid foreign taxes disallowed pursuant to IRC 965(g)(1) - Enter the total deemed paid foreign taxes disallowed pursuant to IRC 965(g)(1). The amount entered in this field prints on line 4b of the IRC 965 Transition Tax Statement.
• Taxpayer's net tax liability for the taxable year with all 965 related amounts - Enter the taxpayer’s net tax liability for the taxable year with section 965-related amounts. This entry is used in calculating the total net tax liability under section 965 (line 5 of the IRC Transition Tax Statement).
• Taxpayer's net tax liability for the taxable year without all 965 related amounts - Enter the taxpayer’s net tax liability for the taxable year without section 965-related amounts. This entry is used in calculating the total net tax liability under section 965 (line 5 of the IRC Transition Tax Statement).
• Elect to pay net tax liability under section 965 in installments under section 965(h)(i) - Select the box to elect to pay net tax liability under section 965 in installments under section 965(h)(1). This entry checks the appropriate box on the IRC 965 Transition Tax Statement.
• Payment to be Made with Return (Exclude 965 payment) - Payment of non-section 965 tax to be made with tax return (-1 if none) -When section 965 tax is included in the return, enter the amount of the payment being made with the return. Although this amount won't be reflected anywhere on the return itself, it's necessary to ensure that the amount paid with the return doesn't include section 965 tax. If this return is being electronically filed and direct debit is being used to pay the amount due, this is the amount that will be included in the e-file as the payment.
  IMPORTANT: This amount should exclude the section 965 tax because it is required to be paid separately.
• Section 965(n) Election - Elect not to apply net operating loss deduction under section 965(n) - Select the box to produce the election not to apply net operating loss deduction under section 965(n).
• Section 965(n) Election - Amount required to be taken into account under section 951(a)(1) by reason of section 965 - Enter the amount required to be taken into account under section 951(a)(1) by reason of section 965 for the section 965(n) election statement.
• Section 965(n) Election - Taxes deemed to be paid by domestic corporation under section 960(a) and (b) for the taxable year with respect to the amount described above which are treated as dividends under section 78 - Enter the taxes deemed to be paid by domestic corporation under section 960(a) and (b) which are treated as dividends under section 78 to be included on the section 965(n) election statement.
• Notice 2018-13, Section 3.02 - Elect under section 3.02 of Notice 2018-13 to use alternative method to compute post-1986 earnings and profits - Select the box to elect under section 3.02 of Notice 2018-13 to use an alternative method to compute post-1986 earnings and profits of one or more foreign corporations.
• Notice 2018-13, Section 3.02 - Foreign Corporation Name and ID Number - If making the election under section 3.02 of Notice 2018-13, for each applicable foreign corporation enter its name and ID number. This information is included in the Notice 2018-13 election statement.

You can find the following input fields by going to the Input Return tab, selecting Credits & Taxes from the left of the screen, and choosing Section 965 Tax:

• Total amount required to be included in income by reason of section 965(a) - Enter the total amount required to be included in income by reason of section 965(a). The amount entered in this field prints on line 1 of the IRC 965 Transition Tax Statement.
• Aggregate foreign cash position, if applicable - Enter the aggregate foreign cash position, if applicable. Enter the total amount required to be included in income by reason of section 965(a). The amount entered in this field prints on line 2 of the IRC 965 Transition Tax Statement.
• Total deduction under section 965(c) - Enter the total deduction under section 965(c). The amount entered in this field prints on line 3 of the IRC 965 Transition Tax Statement.
• Total deemed paid foreign taxes associated with the total amount required to be included in income by reason of section 965(a) - Enter the total deemed paid foreign taxes associated with the total amount required to be included in income by reason of section 965(a). The amount entered in this field prints on line 4a of the IRC 965 Transition Tax Statement.
• Total deemed paid foreign taxes disallowed pursuant to IRC 965(g)(1) - Enter the total deemed paid foreign taxes disallowed pursuant to IRC 965(g)(1). The amount entered in this field prints on line 4b of the IRC 965 Transition Tax Statement.
• Taxpayer's net tax liability for the taxable year with all 965 related amounts - Enter the taxpayer’s net tax liability for the taxable year with section 965-related amounts. This entry is used in calculating the total net tax liability under section 965 (line 5 of the IRC Transition Tax Statement).
• Taxpayer's net tax liability for the taxable year without all 965 related amounts - Enter the taxpayer’s net tax liability for the taxable year without section 965-related amounts. This entry is used in calculating the total net tax liability under section 965 (line 5 of the IRC Transition Tax Statement).
• Elect to pay net tax liability under section 965 in installments under section 965(h)(i) - Select the box to elect to pay net tax liability under section 965 in installments under section 965(h)(1). This entry checks the appropriate box on the IRC 965 Transition Tax Statement.
• Payment to be Made with Return (Exclude 965 payment) - Payment of non-section 965 tax to be made with taxreturn (-1 if none) - When section 965 tax is included in the return, enter the amount of the payment being made with the return. Although this amount won't be reflected anywhere on the return itself, it's necessary to ensure that the amount paid with the return doesn't include section 965 tax. If this return is being electronically filed and direct debit is being used to pay the amount due, this is the amount that will be included in the e-file as the payment.
  • This amount should exclude the section 965 tax because it's required to be paid separately.
• Section 965(n) Election - Elect not to apply net operating loss deduction under section 965(n) - Select the box to produce the election not to apply net operating loss deduction under section 965(n).
• Section 965(n) Election - Amount required to be taken into account under section 951(a)(1) by reason of section 965 - Enter the amount required to be taken into account under section 951(a)(1) by reason of section 965 for the section 965(n) election statement.
• Section 965(n) Election - Taxes deemed to be paid by domestic corporation under section 960(a) and (b) for the taxable year with respect to the amount described above which are treated as dividends under section 78 - Enter the taxes deemed to be paid by domestic corporation under section 960(a) and (b) which are treated as dividends under section 78 to be included on the section 965(n) election statement.
• Notice 2018-13, Section 3.02 - Elect under section 3.02 of Notice 2018-13 to use alternative method to compute post-1986 earnings and profits - Select the box to elect under section 3.02 of Notice 2018-13 to use an alternative method to compute post-1986 earnings and profits of one or more foreign corporations.
• Notice 2018-13, Section 3.02 - Foreign Corporation Name and ID Number - If making the election under section 3.02 of Notice 2018-13, for each applicable foreign corporation enter its name and ID number. This information is included in the Notice 2018-13 election statement.

The section 965 tax amount is included on the total tax line of the main form.

No. Only the total tax calculated for the main form will be transmitted when e-filing the main form. The section 965 tax must be paid separately.

Any refund amount will be reduced by the amount of Section 965 tax calculated, including the portion of the tax that has been deferred to future years under Section 965(h)(1). 

An election with respect to section 965 of the Code must be made by the due date (including extensions) for filing the return for the relevant year. However, even if an election is made under section 965(h) of the Code to pay a net tax liability under section 965 of the Code in installments, the first installment must be paid by the due date (without extensions) for filing the return for the relevant year.

To report the tax and generate the statement in ProConnect

1. Go to Input Return ⮕ Taxes ⮕ Other Taxes ⮕ Schedule J, Recapture, Other Taxes
2. Scroll down to Other Taxes
3. Enter any applicable information in Section 962 Tax, and Section 962 tax reduction from Form 1118 foreign tax credit
4. Fill out Section 962 election attachment (MANDATORY for E-file) to generate the statement.

Yes. A domestic partnership, S corporation, or other passthrough entity should attach a statement to its Schedule K-1s, if applicable, that includes the following information for each deferred foreign income corporation for which such passthrough entity has a section 965(a) inclusion amount:

• The partner’s, shareholder’s, or beneficiary’s share of the partnership’s, S corporation’s, or other passthrough entity’s section 965(a) inclusion amount, if applicable.
• The partner’s, shareholder’s, or beneficiary’s share of the partnership’s, S corporation’s, or other passthrough entity’s deduction under section 965(c), if applicable.
• Information necessary for a domestic corporate partner, or an individual making an election under section 962, to compute its deemed paid foreign tax credits with respect to its share of the partnership’s, S corporation’s, or passthrough entity’s section 965(a) inclusion amount, if applicable.

For more information concerning the application of section 965 to domestic partnerships, S corporations, or other domestic passthrough entities, see Section 3.05(b) of Notice 2018-26.