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Department of the Treasury
Internal Revenue Service
Instructions for Form 965-E
(December 2019)
Consent Agreement Under Section 965(i)(4)(D)
Section references are to the Internal Revenue Code unless from, or an inclusion under sections 951(a)(1)(B) and 956 with
otherwise noted. respect to, a DFIC and paid during, or included with respect to,
the DFIC's inclusion year.
Future Developments Section 965(i)(2)(A)(ii) triggering event. A section 965(i)(2)
For the latest information about developments related to Form (A)(ii) triggering event is, with respect to an S corporation with
965-E and its instructions, such as legislation enacted after they one or more shareholders that have made section 965(i)
were published, go to IRS.gov/Form965E. elections, the liquidation, sale, exchange, or other disposition of
substantially all of the assets of the S corporation (including in a
Background title 11 or similar case), the cessation of business of the S
corporation, or the S corporation ceasing to exist.
On December 22, 2017, section 965 of the Code (section 965)
was amended. As a result of the amendment, certain taxpayers Purpose of Form
are required to include in income an amount (a section 965(a)
inclusion amount) based on the accumulated post-1986 deferred Form 965-E should be used by a shareholder in an S corporation
foreign income of certain foreign corporations (specified foreign who has an outstanding section 965(i) net tax liability with
corporations) they own either directly or indirectly through other respect to which a section 965(i)(2)(A)(ii) triggering event has
entities. occurred to obtain consent to make a section 965(h) election as
required by section 965(i)(4)(D) and Regulations section
Taxpayers that are S corporation shareholders may have a 1.965-7(c)(3)(v)(D)(1).
section 965(a) inclusion amount due to ownership of deferred
foreign income corporations (DFICs) through S corporations that This form requests the information and representations that
are themselves U.S. shareholders of the DFICs. A taxpayer that must be provided to meet the requirements of Regulations
is a shareholder in an S corporation that is a U.S. shareholder of section 1.965-7(c)(3)(v)(D)(1) in order to enter into a consent
a DFIC and that has a section 965(i) net tax liability (as defined agreement under section 965(i)(4)(D). If the shareholder
later in these instructions) with respect to the S corporation may properly completes and files Form 965-E in accordance with
make a deferral election under section 965(i) (section 965(i) these instructions, the shareholder will be considered to have
election). A shareholder’s section 965(i) net tax liability with properly obtained consent under section 965(i)(4)(D). However,
respect to an S corporation is calculated on an individual S the Commissioner may review the consent agreement and may
corporation basis, and the section 965(i) election is also made ask additional questions or require additional information,
on an S corporation-by-S corporation basis and on a including, for example, about the shareholder’s ability to make
shareholder-by-shareholder basis. A section 965(i) election the payments required under section 965(h) with respect to the
allows a shareholder in an S corporation to defer payment of its outstanding section 965(i) net tax liability covered by the consent
section 965(i) net tax liability until a triggering event occurs. In agreement. If the Commissioner determines that the consent
addition, when a triggering event occurs, the shareholder may agreement contains a material misrepresentation or material
then make an election under section 965(h) (section 965(h) omission, or if the additional information is not provided within a
election) to pay the section 965(i) net tax liability with respect to reasonable timeframe (as communicated by the Commissioner),
which the triggering event occurred in installments over 8 years. then the consent agreement may be rejected as of the date of
However, when the triggering event is a liquidation, sale, the triggering event. If the consent agreement is rejected, the
exchange, or other disposition of substantially all the assets of entire amount of the section 965(i) net tax liability with respect to
the S corporation (including in a title 11 or similar case), a which the triggering event occurred will be due and payable for
cessation of business by the S corporation, or the S corporation the year the triggering event occurred.
ceasing to exist, then the shareholder must obtain the consent of Form 965-E is only the consent agreement under section
the Commissioner in order to make the section 965(h) election. ! 965(i)(4)(D) required by Regulations section 1.965-7(c)
CAUTION (3)(v)(D)(1). It does not include the section 965(h)
election for which consent is requested. You must separately
General Instructions make the section 965(h) election in accordance with the
requirements in Regulations section 1.965-7(c)(3)(v)(b)(2). If you
Definitions do not properly make the section 965(h) election, you will be
required to pay the full amount of the section 965(i) net tax
Section 965(i) net tax liability. The section 965(i) net tax liability with respect to which the triggering event occurred for the
liability is, with respect to an S corporation and a shareholder of year the triggering event occurred.
the S corporation that has made a section 965(i) election, the
excess (if any) of the S corporation shareholder's net income tax
for the tax year in which the S corporation shareholder includes Who Must File
a section 965(a) inclusion in income, determined as if the only An S corporation shareholder with an outstanding section 965(i)
section 965(a) inclusions included in income by the S net tax liability with respect to which a section 965(i)(2)(A)(ii)
corporation shareholder are domestic pass-through entity triggering event has occurred must file Form 965-E to obtain
shares of section 965(a) inclusions by the S corporation with consent to make a section 965(h) election.
respect to DFICs of which the S corporation is a U.S.
shareholder, over the S corporation shareholder's net income Note. Each shareholder must file its own Form 965-E to obtain
tax for the tax year determined without regard to section 965, consent to make a section 965(h) election, and each
and without regard to any income, deduction, or credit properly shareholder must make its own section 965(h) election. An S
attributable to a dividend received (directly or through a chain of corporation cannot file Form 965-E or make section 965(h)
ownership described in section 958(a)) by the S corporation elections on behalf of its shareholders.
Jan 20, 2020 Cat. No. 73449L
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