On Wednesday, the Illinois Department of Revenue (Department) issued additional guidance concerning its treatment of the new deemed repatriated foreign earnings provisions found in Internal Revenue Code Section 965, enacted in the federal tax reform bill (known as the Tax Cuts and Jobs Act, or “TCJA”).  The Department confirmed key aspects of Illinois’ treatment of the repatriation provisions, including:

  • Both the income inclusion and deduction provided for in the deemed repatriated foreign earnings provisions will be taken into account in determining a taxpayer’s tax base, so that the inclusion in Illinois will be net. The Department’s guidance references the new federal IRC 965 Transition Tax Statement, which a taxpayer must file with its 2017 federal return when reporting deemed repatriated foreign earnings; that statement includes both income under IRC 965(a) and the corresponding participation deduction under IRC 965(c).
  • Additionally, the Department’s guidance also confirms that the net amount included as deemed repatriated foreign earnings will be treated as a foreign dividend eligible for Illinois’ dividend-received deduction, which can be a 70 percent, 80 percent or 100 percent deduction depending on a taxpayer’s percentage share of ownership of the foreign subsidiary subject to the repatriation provisions. See 35 ILCS 5/203(b)(2)(O). (For tax periods beginning on or after January 1, 2018, 80 percent is reduced to 65 percent and 70 percent is reduced to 50 percent because this provision incorporates the federal dividend-received deduction rates found in IRC 243, which was amended as such by the TCJA.)

Continue Reading Illinois Confirms Treatment of Deemed Repatriated Foreign Earnings Provisions

It’s been nearly three months since the federal tax reform bill (commonly referred to as the Tax Cuts and Jobs Act, or “TCJA”) was enacted and states continue to respond to the various provisions of the TCJA. Recently, there have been notable legislative efforts in New York, Idaho, Iowa and Minnesota.

New York

Starting with the release of the Governor’s Budget Bill in January 2018, the 30-day amendments to that Bill on February 15, and the amendments to the Assembly Bill and Senate Bill this month, there has been much action this legislative session concerning the potential response to federal tax reform. The proposed response in the two latest bills—the Assembly Bill (AB 9509) and the Senate Bill (SB 7509)—is discussed below. Continue Reading More States Respond to Federal Tax Reform

Virginia and Georgia are two of the latest states to pass laws responding to the federal tax reform passed in December 2017, known as the Tax Cuts and Jobs Act (TCJA). Both states updated their codes to conform to the current Internal Revenue Code (IRC) with some notable exceptions.

Virginia

On February 22, 2018, and February 23, 2018, the Virginia General Assembly enacted Chapter 14 (SB 230) and Chapter 15 (HB 154) of the 2018 Session Virginia Acts of Assembly, respectively. Before this legislation was enacted, the Virginia Code conformed to the IRC in effect as of December 31, 2016. While the new legislation conforms the Virginia Code to the IRC effective as of February 9, 2018, there are some very notable exceptions. The legislation explicitly provides that the Virginia Code does not conform to most provisions of the TCJA with an exception for “any… provision of the [TCJA] that affects the computation of federal adjusted gross income of individuals or federal taxable income of corporations for taxable years beginning after December 31, 2016 and before January 1, 2018…” Thus, despite Virginia’s update of its IRC conformity date, Virginia largely decouples from the TCJA. Continue Reading Southeast States Respond to Federal Tax Reform and NJ Senate Leader Talks Tax Surcharge to Limit Corporate “Windfall”