The “Tax Cuts and Jobs Act” of 2017 introduced several major federal tax reforms affecting offshore income. One of the most noted tax reforms enacted was the incorporation of Reparation Tax. The provision was introduced with the intention to force large U.S. companies, like Apple and Google, to pay a sizeable tax on profits held in foreign subsidiaries (controlled foreign corporations). Under the reform, all profits of CFC’s that were accumulated post-1986 will be treated as income of their U.S. parent company and taxed a 15.5% for profits held in cash form, and 8% for profit held in non-cash form.
As a result many U.S. expatriates have fallen further into the IRS’s long arm. U.S. citizens living outside of the U.S. who own or have interest in companies incorporated outside of the USA will also be subject to paying the Reparation Tax. This is because the U.S. tax reform regards such individuals in the same light as the large U.S. corporations. Therefore, American expatriates owning more than 10% of a Controlled Foreign Corporation (CFC) will have to pay repatriation tax within eight years.