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April 13, 2018 - Phil Hodgen

June 15 Payment Dates for Section 965

Sometimes you need to confirm situation normal. This is one of those times. Thanks to correspondent BZ for triggering the discussion of this topic.

Here is the conclusion up front, in case you want to go outside and have fun:

Americans abroad with tax caused by Section 965 (you know who you are) can pay that tax over eight years. The first installment is due June 15 — the regular tax payment due date.

That seems unremarkable.

Americans abroad have a June 15 filing deadline for their income tax returns, and can pay their tax due by that date without incurring late payment penalties.

Why are we even talking about this? Because of sloppy government prose, that’s why.

Background: New Section 965

Section 965 is a new tax law. It applies to U.S. shareholders of certain foreign corporations. These people have extra income included on their 20171 income tax return.

How much extra income? Why is this happening? That’s not what I’m looking at right now.

All I care about is that extra income is added to that American abroad’s income, and that creates an extra income tax liability on the 2017 income tax return.

When is that extra income tax payable? Two choices (it’s up to the taxpayer) are available:

  • Pay it all with the 2017 income tax return; or
  • Pay it over eight years, with the first payment due with the 2017 income tax return.

Pay Installments

Let’s look at the installment plan scenario.

First Installment Due April 17, 2018 Says Congress

For taxpayers who want to make an election to pay the Section 965-induced tax over eight years (rather than all at once), Congress gave an explicit deadline:

the first installment shall be paid on the due date (determined without regard to any extension of time for filing the return) for the return of tax for the taxable year.2

The filing deadline for 2017 income tax returns is April 17, 2018.3 That’s when Congress requires you to make the first installment payment if you want to pay your Section 965-caused tax over eight years rather than all at once when you file your 2017 income tax return.

The Conundrum

For Americans abroad, the default April 15 deadline (April 17, 2018 for 2017 income tax returns) is automatically extended to June 15 for them.4

This extension applies to both the filing deadline for the tax return and the payment deadline for tax due.5

Here is the conundrum:

  • Section 965(h)(2) says that the installment payments are due on the payment deadline not counting extensions.
  • The extra two months for the filing and payment deadline is an extension of time granted by the IRS.
  • So logically the Section 965 installment deadline should be April 15 (April 17 in 2018) rather than the “caused by extension” June 15 we all know and love.

First Installment Due on June 15, 2018, Says the IRS

The IRS has solved the problem by announcing that June 15, 2018 is the correct answer:

The Treasury Department and the IRS intend to issue regulations providing that, if a specified individual receives an extension of time to file and pay under §1.6081-5(a)(5) or (6), then the individual’s due date for an installment payment under section 965(h) is also the fifteenth day of the sixth month following the close of a taxable year.6

Congress sets the deadlines for tax payments.7 But Congress also gave the IRS leeway to extend the deadlines.8

Long ago, the IRS used that authority from Congress to extend the general filing and payment deadline to June 15 for Americans abroad.

And just this year, the IRS also used that authority to confirm the same principle applies to the installment plan payments under Section 965.

That Pesky Conundrum Banished

Note that the IRS originally extended the tax payment deadline for Americans abroad from April 15 to June 15, even though the tax payment deadline is “determined without regard to any extension of time for filing the return”.9

So it makes sense that the IRS can extend the due date for the Section 965(h)(2) installment payment for Americans abroad, even though Section 965(h)(2) contains the same pesky “determined without regard to any extension of time for filing the return” language.

Symmetry and Balance

It would indeed be strange for the 2017 tax bill to be due partly on April 17 and partly on June 15.

The IRS has restored symmetry and balance to the universe. All tax payments due for 2017 — including an installment payment made because of an election under Section 965(h)(2) — will be due on June 15.

Thanks and Disclaimer

Thanks to Haoshen Zhong digesting this topic and pulling together the research.

Don’t take this too seriously, and do your own research. Please don’t rely on what I write as being the Gospel.


  1. Exceptions apply in a very few cases. 
  2. IRC §965(h)(2). Emphasis added. 
  3. The actual deadline in the Internal Revenue Code is April 15. But if April 15 falls on a weekend (as it does in 2018), then the deadline is the next business day. April 16, 2018 is a Monday but it is a public holiday in Washington D.C. If the filing deadline falls on a public holiday anywhere, then the new filing deadline is the next business day. Tuesday, April 17, 2018 is the next business day available. 
  4. Reg. §1.6081-5(a)(5). 
  5. Reg. §1.6081-5(a). 
  6. Notice 2018-26, Section 3.05(e). 
  7. IRC §6151(a). 
  8. IRC §6161(a)(1). 
  9. IRC §6151(a). 
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