Publish Date

Jan 03, 2018

IRS Raises the Toll – Borrow a Playbook

A&M Tax Advisor Weekly

Kudos to the IRS and the SEC for giving us much-needed guidance as we emerge from our holiday week. For many of us, the toll charge on deferred foreign income is now the first order of business. Thankfully, the IRS released Notice 2018-07 last week, and the SEC issued Staff Accounting Bulletin No. 118 the week before. Impressive response times by both agencies during the holiday season!

The good news is that the IRS filled in a few of the key gaps pertaining to the toll charge that Congress left open in the Tax Cuts and Jobs Act. See below for a summary of the highlights of the Notice. In addition, the SEC chimed in and provided some leniency for reporting the impact of the Tax Cuts and Jobs Act in U.S. GAAP financial statements.

On the other hand, the IRS Notice brings to light many nuances of the toll charge and adds several new mandatory calculations. Unfortunately, we have no extension of time to pay the tax, which for many companies can begin as early as April 15. And we have no comfort that an election to spread payments over eight years would be valid if the first payment is later considered inadequate.

The SEC Bulletin might provide some companies with up to a one-year window to account for the impact of the Act. But many companies will have a hard time arguing that they cannot calculate the toll charge, especially when the first payment is due so quickly. In addition, investors will soon ask questions about the charge, e.g., during earnings calls. And the Bulletin still requires disclosures that many companies will prefer to avoid.

The bottom line: most taxpayers are still under tremendous time pressure to calculate and pay the toll charge and to disclose the impact of the Tax Cuts and Jobs Act in their financial statements.

Our Solution:

We’ve been helping our clients with a sample calculation and step plan…