The North Dakota Tax Commission has issued a notice offering guidance on the North Dakota tax treatment of the international tax provisions of the Tax Cuts And Jobs Act of 2017 (TCJA). (ND Office of State Tax Commissioner, Notice: North Dakota Tax Treatment Of International tax provisions of the Tax Cuts and Jobs Act of 2017 (TCJA), 08/01/2018.)

IRC § 965-Deemed repatriation of foreign income. The TCJA requires a mandatory "deemed repatriation of deferred foreign earnings" as Subpart F income. IRC § 965 requires certain foreign corporations (CFCs) to add to Subpart F income the greater of their accumulated post-1986 deferred foreign earnings and profits, and deficits of CFCs (IRC § 965Inclusion). These taxpayers are then able to deduct a portion of theIRC § 965Inclusion (IRC § 965Deduction). Both theIRC § 965Inclusion and the IRC § 965Deduction are reflected in federal taxable income which is the starting point for computingNorth Dakota taxable income. TheIRC § 965Deduction will be treated the same as other federal deductions for dividends received and must be added back to North Dakota taxable income. This results in 100% of theIRC § 965Inclusion being tentatively included in North Dakota apportionable income. Because theIRC § 965Inclusion and Deduction are reported on the Transition Tax Statement, the statement must be filed with the North Dakota return when theIRC § 965Inclusion is reported.

All taxpayers must treat theIRC § 965inclusion as Subpart F income. For taxpayers filing a return using the Worldwide Combined Reporting Method, theIRC § 965Inclusion attributable to a CFC that is included in the combined report is deducted as an intercompany dividend elimination. Taxpayers filing a return using the Water's Edge Method, 70% of theIRC § 965Inclusion is deductible as a foreign dividend.


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Resources:

North Dakota Tax Treatment of International Tax Provisions: https://www.nd.gov/tax/data/upfiles/media/tcja-guidance_1.pdf?20180912210258