Printable Form 2026

IRS Instruction 965-C – Instructions for Form 965-C, Transfer Agreement Under Section 965(h)(3)

IRS Instruction 965-C – If you’re dealing with remaining Section 965(h) net tax liability from the 2017 Tax Cuts and Jobs Act transition tax, understanding IRS Instruction 965-C is critical. This official guide explains exactly how to prepare and file Form 965-C to enter a Transfer Agreement Under Section 965(h)(3) and prevent acceleration of deferred tax payments.

The IRS has not issued updated instructions since the December 2019 revision, and the form remains current as of the latest IRS updates in 2025. All guidance below comes directly from the official IRS PDF (https://www.irs.gov/pub/irs-pdf/i965c.pdf) and the About Form 965-C page.

What Is Form 965-C and Why Does It Matter?

Form 965-C (Transfer Agreement Under Section 965(h)(3)) allows an eligible section 965(h) transferor and an eligible section 965(h) transferee to jointly agree that the transferee will assume the remaining unpaid installments of the transferor’s Section 965(h) net tax liability.

Section 965 required U.S. shareholders to include accumulated post-1986 deferred foreign income of specified foreign corporations (the “transition tax”). Taxpayers who elected under Section 965(h) can pay the resulting net tax liability in eight annual installments. However, certain acceleration events normally make the entire unpaid balance due immediately—unless a valid transfer agreement is filed.

A properly executed Form 965-C qualifies for the “eligible transferee exception” under Treas. Reg. §1.965-7(b)(3)(iii), so the covered acceleration event does not trigger immediate payment.

Who Must File Form 965-C?

Both parties must complete and file the form together:

  • Eligible section 965(h) transferor — A U.S. person experiencing a covered acceleration event.
  • Eligible section 965(h) transferee — A single U.S. person (not a domestic pass-through entity) that meets one of the six specific requirements in Treas. Reg. §1.965-7(b)(3)(iii)(B)(1)(i)–(vi).

Only these parties can use Form 965-C. Domestic pass-through entities do not qualify as transferees.

When and Where to File Form 965-C (Critical 30-Day Rule)?

  • Original Form 965-C must be mailed within 30 days of the covered acceleration event to:
    Memphis CSCO
    5333 Getwell Road MS 81
    Memphis, TN 38118
  • Attach a duplicate copy of Form 965-C to both the transferor’s and transferee’s income tax returns for the year the acceleration event occurs (due date includes extensions).
  • No extensions are available. Late filing relief under Reg. §§301.9100-2 or 301.9100-3 is not granted.
  • Include a copy of the transferor’s most recent Form 965-A (individuals) or Form 965-B (corporations/REITs).

Important note: If the Section 965(h) net tax liability is later adjusted on an amended return, do not file an amended transfer agreement.

Step-by-Step Instructions for Completing Form 965-C

Follow the official line-by-line guidance in IRS Instruction 965-C.

Part I – Transferor Information
Enter the transferor’s complete legal name, TIN, and address.

Part II – Transferee Information
Enter the transferee’s complete legal name, TIN, and address.

Part III – Acceleration Event
Check the appropriate box for the type of covered acceleration event:

  • Box a — Liquidation, sale, exchange, or other disposition of substantially all assets (other than death). Answer the three yes/no questions.
  • Box b — Transferor becomes a member of a consolidated group.
  • Box c(1)–c(3) — Various consolidated group cessation scenarios (acquisition, successor entity, or S-election termination). Answer the relevant yes/no question.

Line 2: Date of the covered acceleration event.
Line 3: Detailed description of the event.

Part IV – Report of Unpaid Section 965(h) Net Tax Liability Being Assumed

  • Line 4: Amount of remaining unpaid Section 965(h) net tax liability (subject to IRS adjustment).
  • Line 5: Date the next installment is due (annually, by the transferee’s return due date).

Part V – Eligible Section 965(h) Transferee’s Ability To Pay

  • Line 6: Confirm the transferee can make the remaining payments (must be “Yes”).
  • Line 7: Does the transferee’s leverage ratio exceed 3:1? (Leverage ratio = total indebtedness ÷ (money + adjusted basis of assets), reduced but not below zero by indebtedness.)
  • Line 8: Provide any additional information about the transferee’s ability to pay (income, assets, access to capital).

Part VI – Terms of Agreement
Both parties sign under penalties of perjury. The agreement:

  • Makes the transferee liable for all remaining installments.
  • Requires compliance with Section 965(h) and all related regulations.
  • Keeps the transferor (if it continues to exist) and any successor jointly and severally liable.

Signatures must be from persons authorized to sign the respective tax returns.

Required Attachments and Signature Rules

  • Copy of the transferor’s latest Form 965-A or 965-B.
  • Original mailed to Memphis; duplicates attached to both tax returns.
  • Corporate signatures: Corporate name followed by authorized officer’s signature and title.
  • The IRS may request additional information about the transferee’s ability to pay and can reject the agreement for material misrepresentation or failure to respond timely.

Key Definitions from IRS Instruction 965-C

  • Section 965(h) net tax liability: Excess of net income tax with all Section 965 amounts included over the net income tax computed without Section 965 (see Reg. §1.965-7(g)(10)).
  • Covered acceleration event: Specific events listed in Part III that qualify for the transfer agreement exception.

Common Questions About Form 965-C

Q: Can I file electronically?
No — the original must be mailed to Memphis CSCO.

Q: What if the transferee cannot pay?
The agreement is invalid if Line 6 is marked “No.”

Q: Is there a leverage ratio limit?
A ratio over 3:1 is a negative factor but not automatically disqualifying; the IRS evaluates overall ability to pay.

Q: Do I need a new agreement if the tax liability changes later?
No — do not file an amended Form 965-C.

Download Official IRS Form 965-C and Instructions

Related forms: Form 965-A, Form 965-B, Form 965-D, Form 965-E.

Final Advice

Filing Form 965-C correctly within the strict 30-day window is the only way to avoid acceleration of your entire remaining Section 965(h) net tax liability after a covered event. Because the rules are highly technical and the IRS can reject agreements for omissions or misrepresentations, strongly consider working with a qualified tax professional experienced in Section 965 matters.

Always verify the latest information directly on IRS.gov/Form965C, as future legislative or regulatory changes could affect requirements (none as of February 2026).

Keywords for this guide: IRS Instruction 965-C, Form 965-C instructions, Transfer Agreement Under Section 965(h)(3), Section 965(h) net tax liability, eligible transferee exception, acceleration event Form 965-C, how to file Form 965-C.

This article is for informational purposes only and is not tax or legal advice. Consult a professional for your specific situation. All information is sourced from official IRS publications.