On 2 April 2018, the Treasury Department and the Internal Revenue Service published additional guidance (Notice 2018-26) for computing the “transition tax” on the untaxed foreign earnings of foreign subsidiaries of U.S. companies under the Tax Cuts and Jobs Act enacted on Dec. 22, 2017. The Treasury Department and the IRS provided prior guidance on the transition tax in Notice 2018-07, Notice 2018-13, and Revenue Procedure 2018-17.
Notice 2018-26 describes regulations that the Treasury Department and the IRS intend to issue, including rules intended to prevent the avoidance of section 965, rules and procedures relating to certain special elections under section 965, and guidance on the reporting and payment of the transition tax. The notice also provides relief to taxpayers from certain estimated tax requirements and penalties arising from the enactment of the transition tax and the change to existing stock attribution rules in the Tax Cuts and Jobs Act.
Additionally, Treasury and the IRS request comments on the rules described in the notice and requests comments on what additional guidance should be issued to assist taxpayers in computing the transition tax. The Treasury Department and the IRS expect to issue additional guidance in the future.
