Notice 2018-13 describes regulations that the Treasury Department and the IRS intend to issue, including rules addressing the calculation of earnings under the transition tax and other rules to clarify certain aspects of the law.

It also amends the prior notice issued on 29 December 2017, regarding the repatriation of earnings subject to the transition tax.

For this purpose, the term ‘annualised earnings and profits amount’ means, with respect to a specified foreign corporation, the amount equal to the product of two (the number of days after 31 October 2017, and on or before the measurement date on 2 November 2017) multiplied by the daily earnings amount of the specified foreign corporation.

The notice goes some way to address the use of 2 November 2017 as the date for determining earnings, rather than conventional month ends used in accounting.

The notice states that ‘the term “daily earnings amount” means, with respect to a specified foreign corporation, the post-1986 earnings and profits (including a deficit) of the specified foreign corporation as of the close of 31 October 2017, that were earned (or incurred) during the specified foreign corporation’s taxable year that includes October 31, 2017, divided by the number of days that have elapsed in such taxable year as of the close of 31 October 2017’.

In the case of a specified foreign corporation that has a 52-53-week taxable year (see §1.441-2(a)(1)), an election may be made to use the alternative method to determine its post-1986 earnings and profits as of both measurement dates based on the amount of post-1986 earnings and profits (including a deficit) as of the closest end of a fiscal month to each measurement date consistent with the over-riding principles of the law.

In order to use the alternative method for any measurement date, the election must be made for both measurement dates.

Finally, the notice provides taxpayers targeted relief from certain unintended regulatory and reporting consequences arising from a change to existing stock attribution rules in the recent tax legislation.

Additionally, Treasury and the IRS request comments on the rules described in the notice and on what additional guidance should be issued to assist taxpayers in computing the transition tax. Additional guidance will be issued in the future.

Joint Treasury/IRS Notice 2018-13 Additional Guidance Under section 965 and Guidance under sections 863 and 6038 in connection with repeal of section 958(b)(4)

This guidance supports the initial information released on 29 December 2017, available in Notice 2018-07.