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.
Fiduciary (Click to View):
Enter an amount to override the IRC Section § 965 deferred foreign income add back. This amount is included in the total additions that print on North Dakota Form 38, page 2, Part 1, line 2 with a statement "IRC §965 deferred foreign income".
- Go to Screen 55.441, North Dakota Modifications.
- Enter the adjusted amount in the field IRC Section 965 deferred foreign income [O] (code 33).
Corporate (Click to View):
Enter the amount to override the section 965 deduction carried from the federal return. This entry prints on Form 40, Schedule SA, line 2.
- Go to Screen 47.411, North Dakota Adjustments.
- Enter the adjusted amount in the field Section 965 deduction [O] (code 27).
North Dakota Tax Treatment of International Tax Provisions: https://www.nd.gov/tax/data/upfiles/media/tcja-guidance_1.pdf?20180912210258