Caution:

A Section 965(h) election can be made any year if a taxpayer has an already established 965(i) election that was timely made during the inclusion period (201712-201911) and subsequently experiences a triggering event. The taxpayer may make an IRC 965(h) election, at the time of the triggering event (no matter the date), to pay the triggered S corporation-related net 965 tax liability in 8 installments, beginning in the year of the triggering event.

A Transition Tax Statement & IRC 965(h) Election Statement should be attached to the TY 2017 income tax return for the purpose of reporting the 965 inclusion/election amounts.

A Form 965 and a Form 965-A, Individual Report of Net 965 Tax Liability, (Form 1041 Only) orForm 965-B, Corporate and Real Estate Investment Trust (REIT) Report of Net 965 Tax Liability and Electing REIT Report of 965 Amounts, should be attached to the inclusion year return, in lieu of a Transition Tax Statement, if the inclusion/election was made in TY 2018 or 2019.

A Form 965-A, Individual Report of Net 965 Tax Liability, (Form 1041 Only) orForm 965-B, Corporate and Real Estate Investment Trust (REIT) Report of Net 965 Tax Liability and Electing REIT Report of 965 Amounts, is required to be attached to the income tax return, each year thereafter until the Section 965 liability is paid in full.

Section 965(h) elections must be made by the due date of the inclusion year/triggering event year return (including extensions).

Section 965(h) Annual installments are due on the due date of the return (not the extended due date). Failure to timely pay a required installment could result in the assessment of an addition to tax, which could accelerate the entire IRC 965 tax balance and cause it to become immediately due.

For the convenience of the IRS, taxpayers are instructed to make two separate payments: one for the non-IRC 965 tax and another for the IRC 965 installment.