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

(Rev. January 2020)
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 liability that the taxpayer has assumed. For an electing REIT, this
otherwise noted. form also is used to report the section 965 amounts it elects to
take into account over an 8-year time period; the portion of the
amounts taken into account for each reporting year; and the
Future Developments amount remaining to be taken into account after a reporting year.
For the latest information about developments related to Form In summary, this form is intended to be a cumulative report of a
965-B and its instructions, such as legislation enacted after they taxpayer’s net 965 tax liabilities through payment in full, and for
were published, go to IRS.gov/Form965B. an electing REIT, a report of section 965 amounts taken into
account over time until such amounts are fully taken into
account. This form must be completed by a taxpayer for every
What’s New tax year for which the taxpayer has any net 965 tax liability
In Parts I, II, and III of the form, line 3 is now designated for use outstanding and not fully paid at any point during the tax year.
for 2019 reporting. Furthermore, this form must be completed by an electing REIT
The IRS has developed new Form 965-C, Transfer for every tax year for which the REIT has any section 965
Agreement Under Section 965(h)(3). Although this form was not amounts taken into account in accordance with section 965(m)
released in time for reporting for 2019 tax years, the instructions or not fully taken into account at any point during the tax year.
for this new form contain information that may be useful to filers
of Form 965-B. As such, references to the instructions for Form Definitions
965-C have been added to Part I of these instructions for Form Deferred foreign income corporation (DFIC). A DFIC is, with
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)
deduction). Section 965(a) inclusions and corresponding section Net 965 tax liability. The excess of the taxpayer’s net income
965(c) deductions are taken into account based on the last tax tax liability computed with all section 965 amounts included
year of the DFIC that begins before January 1, 2018. (“with calculation”) over the taxpayer’s net income tax liability
without regard to section 965 (“without calculation”). See
Certain taxpayers may make certain elections with respect to Regulations section 1.965-7(g)(10) for rules for computing the
section 965. Relevant to this form, these elections include (i) an net 965 tax liability.
election to pay a net 965 tax liability over 8 years, and (ii) an
election by real estate investment trusts (REITs) to take into Reporting year. The tax year of the return with which this form
account a section 965(a) inclusion and section 965(c) deduction is being filed.
over an 8-year time period beginning in the year such amounts
would otherwise have been taken into account. An electing REIT Who Must File
must complete Part III of Form 965-B. Any corporate taxpayer who has a net 965 tax liability for any tax
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
General Instructions amount taken into account in accordance with section 965(m) or
not taken into account at any time during a tax year, must file this
Purpose of Form form.
This form should be used by corporate taxpayers and REITs.
This form is used to report a taxpayer’s net 965 tax liability for When and Where To File
each tax year in which a taxpayer must pay or include section File Form 965-B with the income tax return of the taxpayer for
965 amounts. In addition, this form is used to report the the reporting year by the due date (taking into account
determination of a taxpayer’s net 965 tax liability, whether or not extensions, if any) of the return.
it is to be paid in installments; the payments of a net 965 tax
liability; and adjustments of any net 965 tax liabilities Electronic Filing of Form 965-B
outstanding, including any net 965 tax liability of the taxpayer If you file your income tax return electronically, Form 965-B is
that has been assumed by another taxpayer or any net 965 tax filed with the electronic income tax return. See the instructions

Jan 29, 2020 Cat. No. 71281P

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

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tax liability is still required for the reporting year if any net 965 tax • In column (b), Paid for Year 1, report 8% of the 2017 net 965
liability of the taxpayer remains unpaid at any time during the tax liability;
reporting year. • In column (c), Paid for Year 2, report 8% of the 2017 net 965
• Report any transfer in of a net 965 tax liability from a tax liability; and
transferor by a transferee (see instructions for lines 1 through 8, • In column (d), Paid for Year 3, report 8% of the 2017 net 965
earlier). tax liability.
• Report subsequent adjustments to the net 965 tax liability for
the tax year reported in column (a) for which no amended return Column (a). For lines 4 through 8, report the tax year of the
was required to be filed, such as an audit adjustment. A liability section 965(a) inclusion or the net 965 tax liability for which an
increase should be reported as a positive number and a installment payment liability is being assumed, as reported on
decrease as a negative number. the corresponding line of Part I, column (a).
Columns (b) through (i). These columns are used to record
Note. An adjustment of a net 965 tax liability elected to be paid
the taxpayer’s cumulative payments, made each reporting year,
in installments generally is prorated to all installments.
for the net 965 tax liability reported on the corresponding line in
For example, for tax year 2017, a taxpayer (TP) reported a Part I.
$100 net 965 tax liability for which an installment election was
If no installment election is made, the net 965 tax liability
made. For each of years 1 through 5, TP pays and reports an $8
reported in Part I, column (f), should be paid and reported on the
installment. Also, in year 5, an audit adjustment increases the
corresponding line of Part II, column (b), Paid for Year 1, and the
2017 net 965 tax liability to $150, a $50 positive adjustment. No
remaining payment columns (c) through (i) left blank.
amended return was required and there was no negligence,
intentional disregard, or fraud on the part of TP. This adjustment If an installment election is made, and no transfers,
would be prorated to all the installments. TP would report the acceleration events, or adjustments occur during the 8-year
$50 adjustment in Part I, line 1, column (h) as a positive number, installment period, then:
so the reported adjusted liability would be $150. In addition, TP • 8% of the net 965 tax liability should be paid and reported in
would pay and report (in addition to the original $8 installment column (b), Paid for Year 1 (the year of the installment payment
reported for year 5) $20 on Part II, line 1, column (f), election).
representing 8% of the adjustment prorated to each of years 1 • In the next reporting year, the relevant information from the
through 5, for which the installment due date had already prior reporting year should be carried forward, plus 8% of the net
arrived. For year 6, TP would pay and report $22.50 (15% of the 965 tax liability should be paid and reported in column (c), Paid
adjusted liability); for year 7, $30 (20% of the adjusted liability); for Year 2.
and for year 8, $37.50 (25% of the adjusted liability). • In future reporting years, the payments and payment reporting
In a case in which a net 965 tax liability for a tax year is both should continue similarly in accordance with the general
adjusted and transferred, report the net adjustment/transfer installment payment schedule described above.
number in column (h), a transferee tax identification number in If the taxpayer transfers out a net 965 tax liability, then the
column (i), and provide a statement attached to this form which making and reporting of installment payments should generally
includes details of the amounts netted in column (h). cease for the transferred net 965 tax liability in the year of
transfer; however, reporting with respect to the net 965 tax
Part II – Record of Amount of Net 965 liability is still required for the reporting year if any net 965 tax
liability of the taxpayer remains unpaid at any time during the
Tax Liability Paid by the Taxpayer reporting year.
Part II is intended to be a cumulative record of the actual
payments the taxpayer has made with respect to the net 965 tax If an acceleration event occurs, then the unpaid portion of all
liabilities reported in Part I. remaining installments is generally due on the date of the
acceleration event and should be paid and reported in the
Line 1. This line records the actual payments with respect to the column for the year in which the acceleration event occurs;
net 965 tax liability reported on line 1 of Part I for the tax year however, reporting with respect to the net 965 tax liability is still
2017. required for the reporting year if any net 965 tax liability of the
The general installment payment schedule for a net 965 tax taxpayer remains unpaid at any time during the reporting year.
liability subject to an election to pay in installments is: If an adjustment occurs to a net 965 tax liability for which an
1. 8% of the net 965 tax liability payable in year 1, the year installment election has been made, including on an amended
of the section 965(a) inclusion, return, the adjustment generally should be prorated over all the
installment payments. For the part of the adjustment prorated to
2. 8% of the net 965 tax liability payable in year 2, installments whose payment date has already arrived, adjust the
3. 8% of the net 965 tax liability payable in year 3, payment for the reporting year in which the adjustment is made
4. 8% of the net 965 tax liability payable in year 4, and report accordingly. For the part of the adjustment prorated to
5. 8% of the net 965 tax liability payable in year 5, installments for which the payment date has not yet arrived, pay
and report in accordance with the installment schedule.
6. 15% of the net 965 tax liability payable in year 6,
Payments should include both actual installment payments
7. 20% of the net 965 tax liability payable in year 7, and made and excess payments of other income tax liabilities
8. 25% of the net 965 tax liability payable in year 8. applied to the taxpayer’s net 965 tax liability.
If, for any reason, the actual payment differs from the Column (j). Report the net 965 tax liability remaining unpaid
schedule, report the actual payment made. after the payment for the reporting year. This amount should
Example. If the reporting year is 2019 and the taxpayer is equal the amount reported on the corresponding line in Part I,
reporting a 2017 net 965 tax liability for which an installment column (d), plus or minus any amount reported on the
payment election was made, because the 2019 reporting year is corresponding line in Part I, column (h), less any payments
“Year 3” with respect to a 2017 net 965 tax liability being paid in reported in Part II, columns (b) through (i).
installments, installment payments reported in Part II on line 1, Column (k). For each line, report only the payment made (if
the line for 2017, should generally be: any) for the reporting year.

Instructions for Form 965-B (01-2020) -3-

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  For tax year 2019, corporations are required to enter the             In future reporting years, report the amounts taken into 
amount from Form 965-B, Part II, column (k), line 3, on Form            account in prior years in the appropriate columns plus the 
1120, Schedule J, Part II, line 12, or on the corresponding line of     amounts taken into account in the reporting year in the 
other corporate income tax returns.                                     appropriate column in accordance with the above general 
                                                                        schedule for taking into account the section 965 amounts, 
Part III – Electing REIT Report of                                      assuming no acceleration events occur.
Section 965 Amounts Accounted for                                       If an acceleration event occurs, the section 965(a) inclusion 
                                                                        and 965(c) deduction remaining to be taken into account must 
Over Time                                                               be taken into account as of the day before the acceleration event 
                                                                        occurs and reported for the year in which the acceleration event 
Column (b).  Report the amount of the section 965(a) inclusion          occurs. An acceleration event is a liquidation, sale, exchange, or 
and the section 965(c) deduction to which the election relates.         other disposition of substantially all of the assets of the REIT 
Columns (c) through (j). Report the portion of the section              (including in a bankruptcy proceeding or similar case), or a 
965(a) inclusion and 965(c) deduction taken into account for the        cessation of business by the REIT.
year to which the election relates and subsequent years in the          Column (k). Report the amount of the section 965(a) inclusion 
elected 8-year time period. The reporting should generally follow       and section 965(c) deduction remaining to be taken into account 
the schedule immediately below.                                         at the end of the reporting year. This should equal the amount 
  The general schedule for taking into account the section              reported in column (b) less any amounts reported in columns 
965(a) inclusion and section 965(c) deduction is:                       (c)-(j).
• 8% of the amounts are taken into account in year 1 (year to 
which the election relates),                                            Column (l). For each line, report only the portion of the section 
• 8% of the amounts are taken into account in year 2,                   965(a) inclusion and section 965(c) deduction taken into account 
• 8% of the amounts are taken into account in year 3,                   for the reporting year.
• 8% of the amounts are taken into account in year 4,
• 8% of the amounts are taken into account in year 5,                   Paperwork Reduction Act Notice
• 15% of the amounts are taken into account in year 6,                  We ask for the information on this form to carry out the Internal 
• 20% of the amounts are taken into account in year 7, and              Revenue laws of the United States. You are required to give us 
• 25% of the amounts are taken into account in year 8.                  the information. We need it to ensure that you are complying 
  For example, if the reporting year is 2019, and a REIT is             with these laws and to allow us to figure and collect the right 
reporting a 2017 section 965(a) inclusion and section 965(c)            amount of tax.
deduction for which an election was made to report the section 
965 amounts over time, because the 2019 reporting year is               You are not required to provide the information requested on 
“Year 3” with respect to the 2017 section 965 amounts, the              a form that is subject to the Paperwork Reduction Act unless the 
portions of the amounts taken into account should generally be          form displays a valid OMB control number. Books or records 
reported as:                                                            relating to a form or its instructions must be retained as long as 
• Column (c), Portion Accounted for in Year 1, report 8% of the         their contents may become material in the administration of any 
2017 section 965(a) inclusion and 8% of the section 965(c)              Internal Revenue law. Generally, tax returns and return 
deduction,                                                              information are confidential, as required by section 6103.
• Column (d), Portion Accounted for in Year 2, report 8% of the 
2017 section 965(a) inclusion and 8% of the section 965(c)              The time needed to complete and file this form will vary 
deduction, and                                                          depending on individual circumstances. The estimated burden 
• In column (e), Portion Accounted for in Year 3, report 8% of          for business taxpayers filing this form is approved under OMB 
the 2017 section 965(a) inclusion and 8% of the section 965(c)          control number 1545-0123 and is included in the estimates 
deduction.                                                              shown in the instructions for their business income tax return.

                                                                    -4-                        Instructions for Form 965-B (01-2020)

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