On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (TCJA) of 2017, P.L. 115-97, which introduced a wholesale set of tax cuts and other reforms that affect substantially all U.S. taxpayers, both corporate and individual.
One of the highlights of the new law is the repatriation of foreign-sourced accumulated earnings and profits with respect to controlled foreign corporations (CFCs) as defined. Newly enacted section 965 imposes a transition tax on the accumulated (and untaxed) foreign earnings of foreign subsidiaries of US companies by constructive (mandatory) repatriation under section 951(a)(1). Foreign earnings held in the form of cash and cash equivalents are taxed at a 15.5% rate and the residual untaxed foreign earnings are taxed a rate of 8%. The “transition tax” may be paid in installments over an 8 year period.