Intuit HelpIntuitState Conformity to Federal Section 965 Transition Tax
by Intuit• Updated 2 years ago
The following is a state by state guide to conformity to the Federal 965 Transition Tax Rules:
| DISTRICT OF COLUMBIA |
Does the State Conform to Federal Guidelines? No
Reporting Information: Section 965 amounts must be reported on Schedule A, Form 20C. Corporate taxpayers have access to a Dividends Received Deduction (DRD) to offset Section 965 income if the taxpayer owns more than 20% of the Deferred Foreign Income Corporation (DFIC)'s stock. Flow-Through taxpayers will mirror the federal reporting guidance.
Additional Information: Alabama is a rolling conformity state and has not decoupled from the federal deemed repatriation rules under IRC 965, as amended by the federal Tax Cuts and Jobs Act of 2017 (TCJA). However, IRC 965 income (net of related deductions) may be offset for purposes of the Alabama corporate income tax by the dividends received deduction if the corporation owns more than 20% of the stock, by vote or value, of the controlled foreign corporation from which the deemed dividend is received. Thus, Alabama does not conform to the federal deemed repatriation rules under IRC 965, as amended by the federal TCJA.
Reporting Information: Section 965 amounts must be reported on Schedule A, Form 20C. Corporate taxpayers have access to a Dividends Received Deduction (DRD) to offset Section 965 income if the taxpayer owns more than 20% of the Deferred Foreign Income Corporation (DFIC)'s stock. Flow-Through taxpayers will mirror the federal reporting guidance.
Additional Information: Alabama is a rolling conformity state and has not decoupled from the federal deemed repatriation rules under IRC 965, as amended by the federal Tax Cuts and Jobs Act of 2017 (TCJA). However, IRC 965 income (net of related deductions) may be offset for purposes of the Alabama corporate income tax by the dividends received deduction if the corporation owns more than 20% of the stock, by vote or value, of the controlled foreign corporation from which the deemed dividend is received. Thus, Alabama does not conform to the federal deemed repatriation rules under IRC 965, as amended by the federal TCJA.
Does the State Conform to Federal Guidelines? No
Reporting Information: Section 965 amounts must be included in Alaska taxable income, but Alaska taxpayers are afforded an 80% Dividends Received Deduction (DRD) for foreign dividends received.
Additional Information: Although Alaska is a rolling conformity state and has not specifically decoupled from the federal deemed repatriation rules under IRC § 965, as amended by the federal Tax Cuts and Jobs Act of 2017 (TCJA), the state does set forth special rules for member corporations of an affiliated group filing using the water's edge combined reporting method, including the exclusion of 80% of dividend income received from foreign corporations. Alaska thus does not conform to the federal deemed repatriation rules under IRC § 965, as amended by the TCJA.
Reporting Information: Section 965 amounts must be included in Alaska taxable income, but Alaska taxpayers are afforded an 80% Dividends Received Deduction (DRD) for foreign dividends received.
Additional Information: Although Alaska is a rolling conformity state and has not specifically decoupled from the federal deemed repatriation rules under IRC § 965, as amended by the federal Tax Cuts and Jobs Act of 2017 (TCJA), the state does set forth special rules for member corporations of an affiliated group filing using the water's edge combined reporting method, including the exclusion of 80% of dividend income received from foreign corporations. Alaska thus does not conform to the federal deemed repatriation rules under IRC § 965, as amended by the TCJA.
Does the State Conform to Federal Guidelines? No
Reporting Information: Section 965 amounts should be added to Federal Taxable income, and then subtracted due to the treatment of Subpart F income as excludable foreign income.
Additional Information: For tax years beginning from and after December 31, 2016 through December 31, 2017, Arizona conforms to the IRC, as amended, in effect on January 1, 2017, including provisions of the federal Tax Cuts and Jobs Act of 2017 (TCJA) that are retroactively effective during the 2017 tax year.
However, Arizona treats Subpart F income as a deemed dividend from a foreign corporation, which should be subtracted from taxable income. Arizona thus does not conform to the federal deemed repatriation rules under IRC 965, as amended by the TCJA.
Reporting Information: Section 965 amounts should be added to Federal Taxable income, and then subtracted due to the treatment of Subpart F income as excludable foreign income.
Additional Information: For tax years beginning from and after December 31, 2016 through December 31, 2017, Arizona conforms to the IRC, as amended, in effect on January 1, 2017, including provisions of the federal Tax Cuts and Jobs Act of 2017 (TCJA) that are retroactively effective during the 2017 tax year.
However, Arizona treats Subpart F income as a deemed dividend from a foreign corporation, which should be subtracted from taxable income. Arizona thus does not conform to the federal deemed repatriation rules under IRC 965, as amended by the TCJA.
Does the State Conform to Federal Guidelines? No
Reporting Information: IRC Sec 965 not adopted. Sec 965 amounts need to be subtracted out.
Additional Information: Arkansas is a selective conformity state and does not specifically adopt the federal deemed repatriation rules under IRC 965, as amended by the federal TCJA.
Notably, Arkansas also does not follow the federal treatment of Subpart F income and dividends received by a corporation doing business within the state from a subsidiary (if at least 80% of the subsidiary's capital stock is owned by a corporation doing business within the state) are exempt.
Reporting Information: IRC Sec 965 not adopted. Sec 965 amounts need to be subtracted out.
Additional Information: Arkansas is a selective conformity state and does not specifically adopt the federal deemed repatriation rules under IRC 965, as amended by the federal TCJA.
Notably, Arkansas also does not follow the federal treatment of Subpart F income and dividends received by a corporation doing business within the state from a subsidiary (if at least 80% of the subsidiary's capital stock is owned by a corporation doing business within the state) are exempt.
Does the State Conform to Federal Guidelines? No
Reporting Information: Sec 965 amounts need to be removed on CA return. Taxpayers can make adjustments on CA540 (individuals) Schedule K (S-Corp/Partnership) and should omit all Sec 965 amounts on CA return for C-Corp and Fiduciary filers.
Program Details:
Reporting Information: Sec 965 amounts need to be removed on CA return. Taxpayers can make adjustments on CA540 (individuals) Schedule K (S-Corp/Partnership) and should omit all Sec 965 amounts on CA return for C-Corp and Fiduciary filers.
Program Details:
Lacerte: California will automatically calculate an adjustment on Schedule CA, line 21 / Schedule CANR, line 21f.
Additional Information: California conforms to the IRC as of January 1, 2015, when an IRC provision is incorporated by reference. When water's-edge provisions refer to an IRC provision, however, California conforms to the IRC provision in effect for federal purposes for the same taxable period. California does not incorporate by reference IRC § 965 and the water's-edge provisions do not specifically refer to IRC § 965. Thus, California does not conform to the post-TCJA IRC § 965 deemed repatriation rules.
Does the State Conform to Federal Guidelines? Yes
Reporting Information: 965 amounts included on the Transition Tax Statements must be added to federal taxable income on Line 1 of the taxpayer's CO corporate return less any associated deductions.
Additional Information: Colorado, a rolling conformity state, has not decoupled from the federal deemed repatriation rules under IRC 965, as amended by the TCJA and conforms to the federal treatment of Subpart F income. Thus, Colorado conforms to the federal deemed repatriation rules under IRC 965, as amended by the TCJA.
Reporting Information: 965 amounts included on the Transition Tax Statements must be added to federal taxable income on Line 1 of the taxpayer's CO corporate return less any associated deductions.
Additional Information: Colorado, a rolling conformity state, has not decoupled from the federal deemed repatriation rules under IRC 965, as amended by the TCJA and conforms to the federal treatment of Subpart F income. Thus, Colorado conforms to the federal deemed repatriation rules under IRC 965, as amended by the TCJA.
Does the State Conform to Federal Guidelines? No
Reporting Information: Federal 965 amounts need to be added to Line 9 on CT-1120. Additionally, CT corporate taxpayers are allowed a dividend received reduction to fully offset the 965 amounts; however, the taxpayer must add back expenses related to dividend income which is set at a statutory rate of 5% of 965 amounts. The 965 amounts also need to be reported on form CT-1120 ATT, Schedule I, Column A, Lines 1 and 3 to claim the Dividends Received Deduction (DRD). Flow-through entity taxpayers/individuals will have their 965 amounts automatically included in Federal taxable income when completing their Connecticut return. Connecticut did not adopt the election to defer payment within an 8-year installment period.
Additional Information: Connecticut's dividend received deduction fully offsets the amount of any required inclusion. Connecticut, a rolling conformity state, has not decoupled from the federal deemed repatriation rules under IRC 965, as amended by the Tax Cuts and Jobs Act of 2017 (TCJA) and the state has issued official guidance requiring the full amounts included in federal taxable income pursuant to IRC §965 to also be included in Connecticut taxable income on Line 9 of Form CT-1120, Schedule D and Form CT-1120 ATT, Schedule I, Column A.
However, Connecticut provides a dividend received deduction that fully offsets dividend income received from foreign corporations. In addition, Connecticut requires a corporation that claims a dividend received deduction to add back expenses related to such dividend income. The amount of reportable expenses would equal 5% of IRC 965 income.
Reporting Information: Federal 965 amounts need to be added to Line 9 on CT-1120. Additionally, CT corporate taxpayers are allowed a dividend received reduction to fully offset the 965 amounts; however, the taxpayer must add back expenses related to dividend income which is set at a statutory rate of 5% of 965 amounts. The 965 amounts also need to be reported on form CT-1120 ATT, Schedule I, Column A, Lines 1 and 3 to claim the Dividends Received Deduction (DRD). Flow-through entity taxpayers/individuals will have their 965 amounts automatically included in Federal taxable income when completing their Connecticut return. Connecticut did not adopt the election to defer payment within an 8-year installment period.
Additional Information: Connecticut's dividend received deduction fully offsets the amount of any required inclusion. Connecticut, a rolling conformity state, has not decoupled from the federal deemed repatriation rules under IRC 965, as amended by the Tax Cuts and Jobs Act of 2017 (TCJA) and the state has issued official guidance requiring the full amounts included in federal taxable income pursuant to IRC §965 to also be included in Connecticut taxable income on Line 9 of Form CT-1120, Schedule D and Form CT-1120 ATT, Schedule I, Column A.
However, Connecticut provides a dividend received deduction that fully offsets dividend income received from foreign corporations. In addition, Connecticut requires a corporation that claims a dividend received deduction to add back expenses related to such dividend income. The amount of reportable expenses would equal 5% of IRC 965 income.
Does the State Conform to Federal Guidelines? No
Reporting Information: Sec 965 income should be included in the computation of Delaware taxable income; however, taxpayers are afforded an exclusion for Subpart F income.
Additional Information: Delaware, a rolling conformity state, has not decoupled from the federal deemed repatriation rules under IRC 965, as amended by the Tax Cuts and Jobs Act of 2017 (TCJA). However, Delaware does not conform to the federal treatment of Subpart F income. Thus, Delaware does not conform to the federal deemed repatriation rules under IRC 965, as amended by the TCJA.
Reporting Information: Sec 965 income should be included in the computation of Delaware taxable income; however, taxpayers are afforded an exclusion for Subpart F income.
Additional Information: Delaware, a rolling conformity state, has not decoupled from the federal deemed repatriation rules under IRC 965, as amended by the Tax Cuts and Jobs Act of 2017 (TCJA). However, Delaware does not conform to the federal treatment of Subpart F income. Thus, Delaware does not conform to the federal deemed repatriation rules under IRC 965, as amended by the TCJA.
Does the State Conform to Federal Guidelines? No (pending guidance)
Reporting Information: In the absence of official guidance, it is unclear how any repatriation transition tax amounts should be reported for District income tax purposes.
Additional Information: The District of Columbia, a rolling conformity state, has not decoupled from the federal deemed repatriation rules under IRC 965, as amended by the Tax Cuts and Jobs Act of 2017 (TCJA). However, a deduction is available for Subpart F income as defined in IRC 952. Guidance has not been issued indicating whether the District will interpret this deduction as applicable to Subpart F income that is included in gross income under IRC 951(a), pursuant to IRC 965.
Reporting Information: In the absence of official guidance, it is unclear how any repatriation transition tax amounts should be reported for District income tax purposes.
Additional Information: The District of Columbia, a rolling conformity state, has not decoupled from the federal deemed repatriation rules under IRC 965, as amended by the Tax Cuts and Jobs Act of 2017 (TCJA). However, a deduction is available for Subpart F income as defined in IRC 952. Guidance has not been issued indicating whether the District will interpret this deduction as applicable to Subpart F income that is included in gross income under IRC 951(a), pursuant to IRC 965.
Does the State Conform to Federal Guidelines? No
Reporting Information: Section 965 amounts are not included in FL taxable income, and should be excluded from FL return.
Additional Information: Although the Florida corporate income tax calculation begins with a taxpayer's "taxable income" as defined under IRC § 63 as amended and in effect on January 1, 2018, which includes any IRC § 965 income required to be included in the last tax year beginning before January 1, 2018, repatriation income under IRC § 965 does not flow into federal taxable income and there is no Florida addition for repatriated income excluded from the federal income tax computation. Thus, no Florida corporate income tax is due on repatriation income that is excluded from the standard computation of federal taxable income. In addition, such repatriation income is excluded from the Florida apportionment fraction computation. However, if the repatriation income flows into federal taxable income (e.g., federal Form 1120-REIT), it is included in the starting point of the Florida corporate income tax computation but the repatriated amount is subtracted as subpart F income, net of direct and indirect expenses incurred in the tax year. Thus, Florida does not conform to the federal deemed repatriation rules under IRC § 965, as amended by the Tax Cuts and Jobs Act of 2017 (TCJA).
Reporting Information: Section 965 amounts are not included in FL taxable income, and should be excluded from FL return.
Additional Information: Although the Florida corporate income tax calculation begins with a taxpayer's "taxable income" as defined under IRC § 63 as amended and in effect on January 1, 2018, which includes any IRC § 965 income required to be included in the last tax year beginning before January 1, 2018, repatriation income under IRC § 965 does not flow into federal taxable income and there is no Florida addition for repatriated income excluded from the federal income tax computation. Thus, no Florida corporate income tax is due on repatriation income that is excluded from the standard computation of federal taxable income. In addition, such repatriation income is excluded from the Florida apportionment fraction computation. However, if the repatriation income flows into federal taxable income (e.g., federal Form 1120-REIT), it is included in the starting point of the Florida corporate income tax computation but the repatriated amount is subtracted as subpart F income, net of direct and indirect expenses incurred in the tax year. Thus, Florida does not conform to the federal deemed repatriation rules under IRC § 965, as amended by the Tax Cuts and Jobs Act of 2017 (TCJA).
Does the State Conform to Federal Guidelines? No
Reporting Information: Georgia does not require Sec 965 amounts to be included on Georgia income tax returns; however, if the amounts are included in the starting point of Federal taxable income, then the amounts need to be removed.
Additional Information: Georgia's corporate income tax calculation begins with a taxpayer's "taxable income" as defined under the IRC as enacted on or before February 9, 2018. However, Georgia requires Subpart F income (as defined by the IRC) to be subtracted from taxable income, and does not permit a taxpayer to take the subtraction under IRC § 965 to the extent the income to which it relates has been subtracted. Thus, Georgia does not conform to the federal repatriation rules under IRC § 965, as amended by the Tax Cuts and Jobs Act.
Reporting Information: Georgia does not require Sec 965 amounts to be included on Georgia income tax returns; however, if the amounts are included in the starting point of Federal taxable income, then the amounts need to be removed.
Additional Information: Georgia's corporate income tax calculation begins with a taxpayer's "taxable income" as defined under the IRC as enacted on or before February 9, 2018. However, Georgia requires Subpart F income (as defined by the IRC) to be subtracted from taxable income, and does not permit a taxpayer to take the subtraction under IRC § 965 to the extent the income to which it relates has been subtracted. Thus, Georgia does not conform to the federal repatriation rules under IRC § 965, as amended by the Tax Cuts and Jobs Act.
Does the State Conform to Federal Guidelines? No
Reporting Information: Section 965 amounts should not be included on HI income tax returns.
Additional Information: Applicable to taxable years beginning after December 31, 2017, the IRC Section 951A inclusion and IRC Section 250 deduction are not operative for Hawaii tax purposes and so Hawaii does not conform to the Global Intangible Low-Taxed Income (GILTI) provisions enacted by the Tax Cuts and Jobs Act of 2017 (TCJA).
Reporting Information: Section 965 amounts should not be included on HI income tax returns.
Additional Information: Applicable to taxable years beginning after December 31, 2017, the IRC Section 951A inclusion and IRC Section 250 deduction are not operative for Hawaii tax purposes and so Hawaii does not conform to the Global Intangible Low-Taxed Income (GILTI) provisions enacted by the Tax Cuts and Jobs Act of 2017 (TCJA).
Does the State Conform to Federal Guidelines? No
Reporting Information: Section 965 amounts must be included in ID taxable income, and the participation deduction allowed under Section 965(C) must be added back when computing Idaho taxable income.
Additional Information: Idaho conforms to the federal deemed repatriation rules under IRC § 965, as amended by the Tax Cuts and Jobs Act of 2017 (TCJA), but requires corporate taxpayers to add back the amount deducted under IRC § 965(c), as amended by the TCJA, when computing Idaho taxable income.
For 2017 Idaho income tax returns, taxpayers must report and pay tax on the repatriation of previously unreported overseas earnings that could apply to 2017. Taxpayers who file on a water's-edge basis should attach their IRC § 965 Transition Tax Statement to their Idaho return.
Reporting Information: Section 965 amounts must be included in ID taxable income, and the participation deduction allowed under Section 965(C) must be added back when computing Idaho taxable income.
Additional Information: Idaho conforms to the federal deemed repatriation rules under IRC § 965, as amended by the Tax Cuts and Jobs Act of 2017 (TCJA), but requires corporate taxpayers to add back the amount deducted under IRC § 965(c), as amended by the TCJA, when computing Idaho taxable income.
For 2017 Idaho income tax returns, taxpayers must report and pay tax on the repatriation of previously unreported overseas earnings that could apply to 2017. Taxpayers who file on a water's-edge basis should attach their IRC § 965 Transition Tax Statement to their Idaho return.
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