Dividend Payouts Trigger Second Tax on Gains Unless IRS Steps In

U.S. shareholders who receive midyear dividends could end up with a higher tax bill unless the IRS addresses a gap in international tax guidance.

The 2017 tax law increased the amount of previously taxed earnings and profits companies have, but didn’t change rules for how the income was accounted for or treated for future tax purposes.

That’s creating a problem because under the current system, midyear payouts to U.S. shareholders by certain U.S.-owned foreign corporations are tabulated at the end of the year instead of when the payouts occur, practitioners said. That mismatch on timing could result in the recognition ...