PDF document

- 1 -

Userid: CPM Schema: instrx Leadpct: 100% Pt. size: 9 Draft Ok to Print
AH XSL/XML Fileid: … ns/I965B/202101/A/XML/Cycle05/source (Init. & Date) _______

Page 1 of 4 15:09 - 15-Dec-2020

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Department of the Treasury
Internal Revenue Service
Instructions for Form 965-B

(Rev. January 2021)
Corporate and Real Estate Investment Trust (REIT) Report of Net 965 Tax Liability
and Electing REIT Report of 965 Amounts

Section references are to the Internal Revenue Code unless election to pay a net 965 tax liability over 8 years, and (ii) an
otherwise noted. election by real estate investment trusts (REITs) to take into
account a section 965(a) inclusion and section 965(c) deduction
over an 8-year time period beginning in the year such amounts
Future Developments would otherwise have been taken into account. An electing REIT
For the latest information about developments related to Form must complete Part III of Form 965-B.
965-B and its instructions, such as legislation enacted after they
were published, go to IRS.gov/Form965B.
General Instructions

What’s New Purpose of Form
In Parts I, II, and III of the form, line 4 is now designated for use This form should be used by corporate taxpayers and REITs.
for 2020 reporting. This form is used to report a taxpayer’s net 965 tax liability for
Changes to the carryback of net operating losses. The each tax year in which a taxpayer must pay or include section
Coronavirus Aid, Relief, and Economic Security Act (CARES 965 amounts. In addition, this form is used to report the
Act) added section 172(b)(1)(D)(i), which provides for a determination of a taxpayer’s net 965 tax liability, whether or not
carryback of any net operating loss (NOL) arising in a taxable it is to be paid in installments; the payments of a net 965 tax
year beginning after December 31, 2017, and before January 1, liability; and adjustments of any net 965 tax liabilities
2021, to each of the five taxable years preceding the taxable outstanding, including any net 965 tax liability of the taxpayer
year in which the loss arises, including those years in which a that has been assumed by another taxpayer or any net 965 tax
taxpayer had a section 965(a) inclusion (section 965 years). A liability that the taxpayer has assumed. For an electing REIT, this
taxpayer applying for a tentative refund resulting from the form also is used to report the section 965 amounts it elects to
carryback of an NOL to a section 965 year must include with the take into account over an 8-year time period; the portion of the
Form 1139 an amended Form 965-B to record the amount of the amounts taken into account for each reporting year; and the
change in the section 965 net tax liability, if any, caused by the amount remaining to be taken into account after a reporting year.
NOL carryback, and a statement of explanation to explain the In summary, this form is intended to be a cumulative report of a
change in the section 965 net tax liability. See Rev. Proc. taxpayer’s net 965 tax liabilities through payment in full, and for
2020-24, 2020-18 I.R.B. 750, and Frequently asked questions an electing REIT, a report of section 965 amounts taken into
about carrybacks of NOLs for taxpayers who have had Section account over time until such amounts are fully taken into
965 inclusions for additional information regarding the account. This form must be completed by a taxpayer for every
consequences of carrying back an NOL to a section 965 year, tax year for which the taxpayer has any net 965 tax liability
including limitations on refunds for taxpayers that carry back outstanding and not fully paid at any point during the tax year.
NOLs to section 965 years. Furthermore, this form must be completed by an electing REIT
for every tax year for which the REIT has any section 965
Reminders amounts taken into account in accordance with section 965(m)
The IRS has developed Form 965-C, Transfer Agreement Under or not fully taken into account at any point during the tax year.
Section 965(h)(3). The instructions for this form contain
information that may be useful to filers of Form 965-B. As such, Definitions
references to the instructions for Form 965-C have been added Deferred foreign income corporation (DFIC). A DFIC is, with
to Part I of these instructions for Form 965-B. respect to any U.S. shareholder, any specified foreign
corporation (as defined under section 965(e)) of a U.S.
Background shareholder that has accumulated post-1986 deferred foreign
On December 22, 2017, section 965 of the Code was amended. income (as defined under section 965(d)(2)) as of November 2,
As a result of the amendment, certain taxpayers are required to 2017, or December 31, 2017, that is greater than zero.
include in income an amount (a section 965(a) inclusion amount)
based on the accumulated post-1986 deferred foreign income of U.S. shareholder. For tax years of foreign corporations
certain foreign corporations (specified foreign corporations) that beginning before January 1, 2018, a U.S. shareholder is a U.S.
are deferred foreign income corporations (DFICs) that they own person who owns (directly, indirectly, or constructively) 10% or
either directly or indirectly through other entities. Other taxpayers more of the total combined voting power of all classes of stock of
may have inclusions in income under section 951(a) by reason a foreign corporation. A U.S. person for this purpose is defined
of section 965 due to ownership of DFICs through domestic in section 957(c) of the Code.
pass-through entities that are U.S. shareholders of the DFICs. Net income tax liability. The taxpayer’s regular income tax
When referring to both amounts in the preceding two sentences, liability reduced by the credits allowed under subparts A, B, and
these instructions use the term “section 965(a) inclusion.” D of part IV of subchapter A (generally non-refundable credits;
Section 965 also allows for a deduction (section 965(c) specifically, those credits allowed under sections 21 through
deduction). Section 965(a) inclusions and corresponding section 30D and sections 38 through 45T).
965(c) deductions are taken into account based on the last tax
year of the DFIC that begins before January 1, 2018. Net 965 tax liability. The excess of the taxpayer’s net income
tax liability computed with all section 965 amounts included
Certain taxpayers may make certain elections with respect to (“with calculation”) over the taxpayer’s net income tax liability
section 965. Relevant to this form, these elections include (i) an

Dec 15, 2020 Cat. No. 71281P

- 2 -

Page 2 of 4 Fileid: … ns/I965B/202101/A/XML/Cycle05/source 15:09 - 15-Dec-2020

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

without regard to section 965 (“without calculation”). See was transferred to a taxpayer (transferee) in 2022, in 2022 the
Regulations section 1.965-7(g)(10) for rules for computing the taxpayer (transferee) reports “2017” in column (a).
net 965 tax liability. • Skip columns (b) through (g).
Reporting year. The tax year of the return with which this form • In column (h), report, as a positive number, the remaining
installment payment liability assumed by the taxpayer as
is being filed.
transferee. Then report the tax identification number of the
Who Must File transferor in column (i). Payments of such liability would then be
reported on the corresponding line of Part II in the same manner
Any corporate taxpayer who has a net 965 tax liability for any tax as if the taxpayer were the transferor.
year or has any net 965 tax liability remaining unpaid at any time
during a tax year, or an electing REIT with any section 965 For example, assume Transferor had an original net 965 tax
amount taken into account in accordance with section 965(m) or liability of $100 in year 1, when an installment payment election
not taken into account at any time during a tax year, must file this was made. In years 1 through 5, Transferor reports payments of
form. five 8% installments. Then, in year 6, the liability to pay the
remaining installments (15%, 20%, and 25%) totaling $60 is
When and Where To File transferred to Taxpayer as transferee. Taxpayer would report on
a line in Part I the tax year of the net 965 tax liability for which the
File Form 965-B with the income tax return of the taxpayer for
installment payment liability is being assumed in column (a); the
the reporting year by the due date (taking into account
$60 amount of the transfer as a positive number in column (h);
extensions, if any) of the return.
and the tax identification number of Transferor in column (i). In
Electronic Filing of Form 965-B addition, on the corresponding line in Part II, Taxpayer would
report the $15 installment payment made in column (g), Paid for
If you file your income tax return electronically, Form 965-B is Year 6 (the installment year as if Taxpayer were paying as
filed with the electronic income tax return. See the instructions Transferor). In the next reporting year, Taxpayer would report all
for your income tax return for general information about the same information in Part II, plus the payment of $20 (20% of
electronic filing. the original $100 liability) in column (h), Paid for Year 7. In the
following reporting year, Taxpayer would report all the same
information as in year 7, plus the final payment of $25 (25% of
Specific Instructions the original $100 liability) in column (i), Paid for Year 8.
Amended Report Note. If lines 5 through 8 do not provide enough lines to report
Check the amended report box at the top of page 1 of the form if all the taxpayer’s transactions described above, an additional
Form 965-B is filed with an amended return that is filed to Form 965-B should be used.
change any reporting related to section 965, regardless of
whether a Form 965-B has previously been filed. The amended Note. Even if a net 965 tax liability was reported on a taxpayer’s
return box must also be checked for any amended Form 965-B income tax return and fully paid, because no elections were
filed with a Form 1139 applying for a tentative refund resulting made, the taxpayer must complete the appropriate line in Part I
from the carryback of an NOL to a section 965 year pursuant to and report the related payment in Part II, column (b).
section 172(b)(1)(D)(i).
Note. If an installment election under section 965(h) was made,
Part I – Report of Net 965 Tax Liability the taxpayer must complete the appropriate line in Part I as well
as the corresponding line in Part II to report the status of the net
and Election To Pay in Installments 965 tax liability and any related adjustments for the reporting
Lines 1 through 8. Report in Part I net 965 tax liability amounts year.
as follows. Column (b). Report the taxpayer’s net income tax liability for
On lines 1, 2 and 3, you must continue to report 2017, 2018, the tax year reported in column (a), with all section 965 amounts
and/or 2019 amounts for all columns, including the original included (“with calculation”).
computation of net 965 tax liability reported in columns (b) Column (c). Report the taxpayer’s net income tax liability for
through (g) on a prior-year Form 965-B. Report in column (h) any the tax year reported in column (a), without regard to section 965
current tax year net 965 tax liability transferred out (that is, for (“without calculation”).
which you filed a valid transfer agreement as the transferor) or
any current tax year subsequent adjustments. Also complete Column (d). Report the excess of the taxpayer’s “with
column (i) if applicable. calculation” reported in column (b) over the “without calculation”
reported in column (c). This is the taxpayer’s net 965 tax liability
For 2020 tax years, use line 4 to report section 965(a) for the tax year reported in column (a).
inclusions derived solely through interests in pass-through
entities that are U.S. shareholders of DFICs. For tax year 2020, corporations are required to enter the
amount from Form 965-B, Part I, column (d), line 4, on Form
Use lines 5 through 8 to report other amounts of net 965 tax 1120, Schedule J, Part III, line 22, or on the corresponding line of
liability of the taxpayer, such as: other corporate income tax returns.
• Installment liability transfers in. The taxpayer may, in
certain circumstances, and by agreement with the Secretary, Column (e). If the taxpayer made an election to pay a net 965
assume as transferee the installment payment liability for the tax liability in installments over 8 years as provided for in section
transferor's remaining net 965 tax liability and pay it in the same 965(h) and in the manner described in Regulations section
manner as if the taxpayer were the transferor. (See instructions 1.965-7(b)(2), enter a check mark in the “Yes” column. If “Yes,”
for Form 965-C for more details.) If this occurs, the transferee skip column (f) and enter the amount from column (d) in column
should complete one of lines 5 through 8 in Part I as follows: (g). Otherwise, enter a check mark in the “No” column. If “No,”
• In column (a), enter the tax year of the net 965 tax liability for enter the amount from column (d) in column (f) and skip column
which the installment payment liability is being assumed. For (g).
example, if a net 965 tax liability incurred in tax year 2017 (with
respect to which an installment payment election was made)

-2- Instructions for Form 965-B (Rev. 01-2021)

- 3 -

Page 3 of 4 Fileid: … ns/I965B/202101/A/XML/Cycle05/source 15:09 - 15-Dec-2020

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

The actual payment of the first installment is due no later
Part II – Record of Amount of Net 965
! than the due date of the return for the tax year without
CAUTION extension, even if the election is made on a return filed Tax Liability Paid by the Taxpayer
by the extended due date. Part II is intended to be a cumulative record of the actual
A REIT electing to account for its section 965 amounts over 8 payments the taxpayer has made with respect to the net 965 tax
years may not make an installment election for any net 965 tax liabilities reported in Part I.
liability for a tax year in which a portion of such section 965 Line 1. This line records the actual payments with respect to the
amounts is taken into account. If an election is made to account net 965 tax liability reported on line 1 of Part I for the tax year
for a REIT's section 965 amounts over 8 years, the portion of the 2017.
net 965 tax liability attributable to the section 965 amounts The general installment payment schedule for a net 965 tax
included in each year must be paid in full for that year. liability subject to an election to pay in installments is:
Column (h). Report the following in column (h): 1. 8% of the net 965 tax liability payable in year 1, the year
• Report, as a negative number, any net 965 tax liability for the of the section 965(a) inclusion,
year reported in column (a) that has been transferred out to a
transferee by agreement with the Secretary, under which the 2. 8% of the net 965 tax liability payable in year 2,
transferee becomes liable for the remaining installments due on 3. 8% of the net 965 tax liability payable in year 3,
the liability in the same manner as if such transferee were the 4. 8% of the net 965 tax liability payable in year 4,
taxpayer. (See instructions for Form 965-C for more details.) In 5. 8% of the net 965 tax liability payable in year 5,
addition, provide the tax identification number of the transferee
in column (i). For example, if the taxpayer (transferor) incurred a 6. 15% of the net 965 tax liability payable in year 6,
net 965 tax liability in tax year 2017, for which an installment 7. 20% of the net 965 tax liability payable in year 7, and
payment election was made, then properly transferred the 8. 25% of the net 965 tax liability payable in year 8.
liability net of payments previously made to a transferee in 2022,
the taxpayer (transferor) would report, on line 1, column (h), as a If, for any reason, the actual payment differs from the
negative number, the amount of the net liability transferred out. schedule, report the actual payment made.
The making and reporting of payments on such liability should Example. If the reporting year is 2020 and the taxpayer is
generally cease. However, reporting with respect to the net 965 reporting a 2017 net 965 tax liability for which an installment
tax liability is still required for the reporting year if any net 965 tax payment election was made, because the 2020 reporting year is
liability of the taxpayer remains unpaid at any time during the “Year 4” with respect to a 2017 net 965 tax liability being paid in
reporting year. installments, installment payments reported in Part II on line 1,
• Report any transfer in of a net 965 tax liability from a the line for 2017, should generally be:
transferor by a transferee (see instructions for lines 1 through 8, • In column (b), Paid for Year 1, report 8% of the 2017 net 965
earlier). tax liability;
• Report subsequent adjustments to the net 965 tax liability for • In column (c), Paid for Year 2, report 8% of the 2017 net 965
the tax year reported in column (a) for which no amended return tax liability;
was required to be filed, such as an audit adjustment. A liability • In column (d), Paid for Year 3, report 8% of the 2017 net 965
increase should be reported as a positive number and a tax liability; and
decrease as a negative number. • In column (e), Paid for Year 4, report 8% of the 2017 net 965
tax liability.
Note. An adjustment of a net 965 tax liability elected to be paid
in installments generally is prorated to all installments. Column (a). For lines 5 through 8, report the tax year of the
For example, for tax year 2017, a taxpayer (TP) reported a section 965(a) inclusion or the net 965 tax liability for which an
$100 net 965 tax liability for which an installment election was installment payment liability is being assumed, as reported on
made. For each of years 1 through 5, TP pays and reports an $8 the corresponding line of Part I, column (a).
installment. Also, in year 5, an audit adjustment increases the Columns (b) through (i). These columns are used to record
2017 net 965 tax liability to $150, a $50 positive adjustment. No the taxpayer’s cumulative payments, made each reporting year,
amended return was required and there was no negligence, for the net 965 tax liability reported on the corresponding line in
intentional disregard, or fraud on the part of TP. This adjustment Part I.
would be prorated to all the installments. TP would report the
$50 adjustment in Part I, line 1, column (h) as a positive number, If no installment election is made, the net 965 tax liability
so the reported adjusted liability would be $150. In addition, TP reported in Part I, column (f), should be paid and reported on the
would pay and report (in addition to the original $8 installment corresponding line of Part II, column (b), Paid for Year 1, and the
reported for year 5) $20 on Part II, line 1, column (f), remaining payment columns (c) through (i) left blank.
representing 8% of the adjustment prorated to each of years 1 If an installment election is made, and no transfers,
through 5, for which the installment due date had already acceleration events, or adjustments occur during the 8-year
arrived. For year 6, TP would pay and report $22.50 (15% of the installment period, then:
adjusted liability); for year 7, $30 (20% of the adjusted liability); • 8% of the net 965 tax liability should be paid and reported in
and for year 8, $37.50 (25% of the adjusted liability). column (b), Paid for Year 1 (the year of the installment payment
In a case in which a net 965 tax liability for a tax year is both election).
adjusted and transferred, report the net adjustment/transfer • In the next reporting year, the relevant information from the
number in column (h), a transferee tax identification number in prior reporting year should be carried forward, plus 8% of the net
column (i), and provide a statement attached to this form which 965 tax liability should be paid and reported in column (c), Paid
includes details of the amounts netted in column (h). for Year 2.
• In future reporting years, the payments and payment reporting
should continue similarly in accordance with the general
installment payment schedule described above.
If the taxpayer transfers out a net 965 tax liability, then the
making and reporting of installment payments should generally

Instructions for Form 965-B (Rev. 01-2021) -3-

- 4 -

Page 4 of 4      Fileid: … ns/I965B/202101/A/XML/Cycle05/source                                  15:09 - 15-Dec-2020

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

cease for the transferred net 965 tax liability in the year of            deduction for which an election was made to report the section 
transfer. However, reporting with respect to the net 965 tax              965 amounts over time, because the 2020 reporting year is 
liability is still required for the reporting year if any net 965 tax     “Year 4” with respect to the 2017 section 965 amounts, the 
liability of the taxpayer remains unpaid at any time during the           portions of the amounts taken into account should generally be 
reporting year.                                                           reported as:
  If an acceleration event occurs, then the unpaid portion of all         • Column (c), Portion Accounted for in Year 1, report 8% of the 
remaining installments is generally due on the date of the                2017 section 965(a) inclusion and 8% of the section 965(c) 
acceleration event and should be paid and reported in the                 deduction,
column for the year in which the acceleration event occurs.               • Column (d), Portion Accounted for in Year 2, report 8% of the 
However, reporting with respect to the net 965 tax liability is still     2017 section 965(a) inclusion and 8% of the section 965(c) 
required for the reporting year if any net 965 tax liability of the       deduction,
taxpayer remains unpaid at any time during the reporting year.            • In column (e), Portion Accounted for in Year 3, report 8% of 
                                                                          the 2017 section 965(a) inclusion and 8% of the section 965(c) 
  If an adjustment occurs to a net 965 tax liability for which an         deduction, and
installment election has been made, including on an amended                 In column (f), Portion Accounted for in Year 4, report 8% of 
                                                                          •
return, the adjustment generally should be prorated over all the          the 2017 section 965(a) inclusion and 8% of the section 965(c) 
installment payments. For the part of the adjustment prorated to          deduction.
installments whose payment date has already arrived, adjust the 
payment for the reporting year in which the adjustment is made              In future reporting years, report the amounts taken into 
and report accordingly. For the part of the adjustment prorated to        account in prior years in the appropriate columns plus the 
installments for which the payment date has not yet arrived, pay          amounts taken into account in the reporting year in the 
and report in accordance with the installment schedule.                   appropriate column in accordance with the above general 
                                                                          schedule for taking into account the section 965 amounts, 
  Payments should include both actual installment payments                assuming no acceleration events occur.
made and excess payments of other income tax liabilities 
applied to the taxpayer’s net 965 tax liability.                            If an acceleration event occurs, the section 965(a) inclusion 
                                                                          and 965(c) deduction remaining to be taken into account must 
Column (j).  Report the net 965 tax liability remaining unpaid            be taken into account as of the day before the acceleration event 
after the payment for the reporting year. This amount should              occurs and reported for the year in which the acceleration event 
equal the amount reported on the corresponding line in Part I,            occurs. An acceleration event is a liquidation, sale, exchange, or 
column (d), plus or minus any amount reported on the                      other disposition of substantially all of the assets of the REIT 
corresponding line in Part I, column (h), less any payments               (including in a bankruptcy proceeding or similar case), or a 
reported in Part II, columns (b) through (i).                             cessation of business by the REIT.
Column (k).  For each line, report only the payment made (if              Column (k). Report the amount of the section 965(a) inclusion 
any) for the reporting year.                                              and section 965(c) deduction remaining to be taken into account 
  For tax year 2020, corporations are required to enter the               at the end of the reporting year. This should equal the amount 
amount from Form 965-B, Part II, column (k), line 4, on Form              reported in column (b) less any amounts reported in columns 
1120, Schedule J, Part II, line 12, or on the corresponding line of       (c)-(j).
other corporate income tax returns.                                       Column (l). For each line, report only the portion of the section 
                                                                          965(a) inclusion and section 965(c) deduction taken into account 
Part III – Electing REIT Report of                                        for the reporting year.
Section 965 Amounts Accounted for 
Over Time                                                                 Paperwork Reduction Act Notice
                                                                          We ask for the information on this form to carry out the Internal 
Column (b).  Report the amount of the section 965(a) inclusion            Revenue laws of the United States. You are required to give us 
and the section 965(c) deduction to which the election relates.           the information. We need it to ensure that you are complying 
Columns (c) through (j).     Report the portion of the section            with these laws and to allow us to figure and collect the right 
965(a) inclusion and 965(c) deduction taken into account for the          amount of tax.
year to which the election relates and subsequent years in the              You are not required to provide the information requested on 
elected 8-year time period. The reporting should generally follow         a form that is subject to the Paperwork Reduction Act unless the 
the schedule immediately below.                                           form displays a valid OMB control number. Books or records 
  The general schedule for taking into account the section                relating to a form or its instructions must be retained as long as 
965(a) inclusion and section 965(c) deduction is:                         their contents may become material in the administration of any 
• 8% of the amounts are taken into account in year 1 (year to             Internal Revenue law. Generally, tax returns and return 
which the election relates),                                              information are confidential, as required by section 6103.
• 8% of the amounts are taken into account in year 2,
• 8% of the amounts are taken into account in year 3,                       The time needed to complete and file this form will vary 
• 8% of the amounts are taken into account in year 4,                     depending on individual circumstances. The estimated burden 
• 8% of the amounts are taken into account in year 5,                     for business taxpayers filing this form is approved under OMB 
• 15% of the amounts are taken into account in year 6,                    control number 1545-0123 and is included in the estimates 
• 20% of the amounts are taken into account in year 7, and                shown in the instructions for their business income tax return.
• 25% of the amounts are taken into account in year 8.
  For example, if the reporting year is 2020, and a REIT is 
reporting a 2017 section 965(a) inclusion and section 965(c) 

                                                                      -4-               Instructions for Form 965-B (Rev. 01-2021)

PDF file checksum: 3879508083

(Plugin #1/8.13/12.0)