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Form 965-C is easy to mistake for the installment election, and that mistake costs people their plan. The eight-year election under Section 965(h) is made on your original return and reported on Form 965-A or 965-B. Form 965-C comes later, after a covered acceleration event, to move the remaining unpaid 965(h) installments from a transferor to a single eligible transferee so they do not accelerate.
It is a two-page transfer agreement filed in duplicate, and the unforgiving part is the calendar: file the signed agreement within 30 days of the acceleration event and attach copies to both parties' returns for that year. The original installment percentages stay put, 8% across the first five years, then 15%, 20%, and 25%, because the form preserves them under the new responsible taxpayer rather than resetting them. Line 7 also asks whether the transferee's leverage ratio exceeds 3:1.
Key Takeaways
- Form 965-C is a transfer agreement used after a covered acceleration event to prevent acceleration of unpaid Section 965(h) installments by shifting the liability from an eligible transferor to a single eligible transferee, though the transferor, if it continues to exist immediately after the acceleration event, and any successor remain jointly and severally liable for the unpaid installments, so the transfer adds an obligor rather than releasing the transferor. It does not create the eight‑year schedule.
- You must file the signed agreement within 30 days of the acceleration event with the IRS Compliance Service Collection Operations and attach duplicate copies to both parties’ returns for the year of the event. Relief under Reg. 301.9100 is not available for late filing.
- The original eight‑year installment percentages remain the same, 8%, 8%, 8%, 8%, 8%, 15%, 20%, 25%, but Form 965-C does not reset them, it preserves them under the new responsible taxpayer.
- Include a copy of the most recent Form 965‑A or 965‑B with the transfer agreement, keep payment dates aligned with the transferee’s return due dates, and ensure both parties sign under penalties of perjury.
- Miss the 30‑day window or fail to pay installments on time, and the remaining Section 965 net tax liability can become immediately due. Interest and penalties may apply.
What Form 965-C actually does
Form 965-C memorializes a valid “Transfer Agreement Under Section 965(h)(3).” When a covered acceleration event occurs, the unpaid portion of the 965(h) net tax liability would normally accelerate. If the event qualifies and you timely file Form 965-C with the required statements, the transferee assumes the remaining installments and the schedule continues without acceleration. This is available in specific scenarios that include asset acquisitions of substantially all assets, certain consolidated group transactions, and particular situations involving the termination of an S election and consolidated group realignments.
Covered acceleration events, plain English
Covered acceleration events are a subset of acceleration events that qualify for a transfer agreement. Common ones include:
- A buyer acquires substantially all of the assets of the original 965(h) electing taxpayer, other than by reason of death (a disposition caused by the transferor’s death is excluded from this Line 1a event and is governed by separate 965 rules).
- Certain member departures or acquisitions inside consolidated groups, handled through the group agent.
- A consolidated group reconfiguration tied to an S election termination that results in a new consolidated group including the former members.
If your fact pattern is not within these covered events, the liability can accelerate and Form 965-C will not help. Always confirm the event type against Reg. 1.965‑7(b)(3).
The eight‑year schedule, what continues after a transfer
Here is the statutory installment schedule that governs Section 965(h). It remains in place after a successful 965‑C transfer, it is not recreated by the form.
| Installment year | Percent due |
| 1 | 8% |
| 2 | 8% |
| 3 | 8% |
| 4 | 8% |
| 5 | 8% |
| 6 | 15% |
| 7 | 20% |
| 8 | 25% |
The first installment was due on the original return due date without extension for your initial 965 inclusion year, and each subsequent installment is due on the return due date for the following tax year. After a valid transfer, the transferee continues on that cadence for the assumed unpaid amount.
Who can file Form 965-C, and who cannot
- The transferor must be an eligible Section 965(h) electing taxpayer that still has unpaid installments.
- The transferee must be a single United States person that is not a domestic pass‑through entity. Consolidated group agents often act as the transferee in group transactions. Only one transferee is permitted.
Accountably note, if your firm is advising on a sale or internal reorganization with legacy 965 liabilities, build the 965‑C workstream into the deal timeline. Missing the 30‑day window creates avoidable cash calls. A simple checklist and calendar hold can save six or seven figures in surprise payments.
Compliance note, this article is for education, not tax advice. Always review the current IRS instructions and your facts before filing. The IRS “About Form 965‑C” page was last reviewed August 2, 2025, and remains the anchoring reference as of January 2, 2026.
When, where, and how to file Form 965-C
Timing is the number one risk. A transfer agreement is considered timely only if filed within 30 days of the date the acceleration event occurs. In addition, attach a duplicate copy of the transfer agreement to the transferor’s and transferee’s tax returns for the year in which the event occurs, filed by their return due dates, including extensions. There is no 301.9100 relief for late transfer agreements.
Where to send, the Form 965‑C instructions specify mailing the original to the IRS Memphis CSCO address. Follow the address in the current instructions and keep proof of timely mailing. Some legacy FAQs still reference Brookhaven CSCO, so defer to the instructions page that governs Form 965‑C today.
What to attach, include a copy of the transferor’s most recent Form 965‑A or 965‑B, as applicable. This ties the assumed amount to the IRS’s records and your installment ledger.
Step‑by‑step completion checklist
- Part I, transferor information, legal name, TIN, and address exactly as on the return.
- Part II, transferee information, same identification discipline as Part I. Confirm the transferee is a single U.S. person, not a domestic pass‑through.
- Part III, acceleration event, check the correct box for the covered acceleration event, enter the event date, and include a clear description of the transaction. Avoid vague labels.
- Part IV, unpaid 965(h) net tax liability being assumed, enter the dollar amount still unpaid and the due date of the next installment payment that the transferee must make. Reconcile to Form 965‑A or 965‑B.
- Part V, ability to pay, certify that the transferee can make the remaining payments. Answer the leverage ratio question. If the leverage ratio exceeds three to one, disclose it as instructed (a ratio of three to one or lower is favorable but not dispositive, the Commissioner can still request additional information about the transferee’s ability to pay).
- Part VI, signatures and terms, both parties must sign under penalties of perjury, each with authority to sign the return for their entity (if either the transferor or transferee is a corporation, sign with the corporate name first, followed by the signature and title of the authorized officer).
Practical documentation pack
Build a thin but complete file so a reviewer can understand your numbers fast.
- The signed Form 965‑C, fully completed.
- Copy of the most recent Form 965‑A or 965‑B.
- A one‑page installment ledger that shows original net 965 liability, installments paid to date, unpaid balance, and the due date of the next installment.
- A one‑page transaction memo that ties the covered acceleration event to the selected box in Part III.
- Mailing proof, certified receipt or trackable carrier label, and screenshots confirming duplicate attachments to both tax returns.
Common mistakes and how to prevent them
From my side of the desk, Form 965-C goes wrong in predictable ways, almost always because a team treats it like a routine attachment instead of a binding agreement. Here are the slip-ups I flag most when our tax review team inherits one of these files.
Recommended reading and source map
- IRS, About Form 965‑C, current overview and links to the latest form and instructions, last reviewed August 2, 2025.
- Instructions for Form 965‑C, filing address, 30‑day deadline, signatures, attachments, and line‑by‑line guidance.
- Reg. 1.965‑7, elections, installments, and covered acceleration events, including eligible transferee definitions.
- Section 965(h), statutory installment schedule and due dates.
- IRS IRM references on installment enforcement and interest, helpful for process awareness and penalty risk.
- General Section 965 Q&As for payments and transfer agreements.
Implementation checklist you can copy
- Confirm your event is a covered acceleration event under the regulations.
- Choose a single eligible transferee, confirm it is not a domestic pass‑through.
- Pull the latest Form 965‑C and instructions, then prefill Parts I through V.
- Reconcile the unpaid 965(h) balance to Form 965‑A or 965‑B and your ledger.
- Obtain both signatures under penalties of perjury.
- Mail the original within 30 days, attach duplicates to both returns, and archive proof.
- Calendar the transferee’s next installment due date and payment method.
Where Accountably helps, when it truly matters
If your firm is juggling M&A and legacy 965 liabilities, the risk is not the math, it is the handoff. Our teams help CPA firms standardize the 965‑C package, confirm eligibility against the regs, assemble 965‑A or 965‑B support, and track the 30‑day mailing, all inside your systems. That means fewer last‑minute scrambles and cleaner reviews, especially during busy season.
Final word
If you remember one thing, remember the 30‑day rule. Form 965‑C protects your existing Section 965 installment plan after qualifying transactions, but only if the document is complete, signed, and mailed on time, with the right attachments. Build the checklist into your deal playbook now, and you will avoid expensive surprises later.
Reusable Checklists
These are copy-paste ready for your firm SOP library. Drop them into your deal workflow and tick each item as you work the transfer agreement.
Event and eligibility confirmation
- Confirm the transaction is a covered acceleration event under Treas. Reg. 1.965-7(b).
- Select the correct Part III box: Line 1a asset disposition, Line 1b becoming a consolidated group member, or Line 1c group ceasing to exist.
- If Line 1c applies, pick the right sub-box, 1c(1), 1c(2), or 1c(3), and answer the matching transferee question.
- Confirm the disposition is not by reason of death, which is excluded from the Line 1a event.
- Confirm the transferee qualifies as an eligible Section 965(h) transferee and capture its name, TIN, and address for Part II.
- Confirm the transferor still has unpaid Section 965(h) installments to transfer.
Form 965-C filing packet
- Complete Part I with the transferor's legal name, TIN, and address.
- Complete Part II with the eligible transferee's name, TIN, and address.
- Enter the acceleration event date on Line 2 and a clear description on Line 3.
- Enter the unpaid Section 965(h) net tax liability on Line 4 and the next installment due date on Line 5.
- Answer the Line 6 ability-to-pay question and disclose the Line 7 leverage ratio, whether it exceeds 3:1.
- Sign Part VI under penalties of perjury, transferor and transferee both, with the corporate name first if a corporation signs.
- Prepare two executed originals so the form is filed in duplicate.
Post-filing installment handoff
- Keep the transferor and any successor flagged for joint and several liability.
- Hand the transferee the schedule: 8% for years one through five, then 15%, 20%, and 25% in years six, seven, and eight.
- Calendar the transferee's next Section 965(h) installment due date from Line 5.
- Hold the Part III event documentation ready in case the Commissioner requests more information.
- Archive the filed agreement for the full period the liability remains unpaid, since the Commissioner can still reject it.
Keep 965-C Season From Stalling
Form 965-C does not arrive on a tidy seasonal calendar. It surfaces mid-transaction, when an asset sale, a consolidated group change, or an S election termination suddenly puts a legacy Section 965 installment balance in play. Section 965 was enacted by the Tax Cuts and Jobs Act in 2017 (Public Law 115-97), and its installment regime stretches across eight tax years, so unpaid balances are still riding on deals closing today.
The risk is rarely the arithmetic. It is the handoff: a transfer agreement that has to be reconciled, signed by two parties under penalties of perjury, and mailed in duplicate while the deal team is focused on closing. A repeatable packet removes that scramble.
- Standardize a 965-C packet that reconciles the Line 4 unpaid balance to the latest 965-A or 965-B before anyone signs.
- Pre-map Part III so the correct acceleration event box, Line 1a, 1b, or 1c, is selected with a clean event description on Line 3.
- Lock the Part VI signature workflow so corporate signers use the corporate name first, then the officer signature and title.
- Track the transferee's next installment from Line 5 against the back-loaded schedule, 8% through year five, then 15%, 20%, and 25%.
That is the discipline we build for clients. Accountably is an offshore and outsourced accounting and tax staffing partner built for CPA, EA, and accounting firms, and our offshore tax preparation and review teams assemble the 965-C package inside your systems, reconcile it to your installment ledger, and keep the filing on track so a one-time transition-tax obligation does not stall a live deal.
FAQs
Does Form 965-C create or change my eight‑year installment plan?
No. The eight‑year schedule is elected under Section 965(h) and reported on Form 965‑A or 965‑B. Form 965‑C only transfers the remaining unpaid installments to a qualifying transferee after a covered acceleration event so the schedule does not accelerate.
What if the 30‑day deadline has already passed?
The regulations say relief is not available under Reg. 301.9100 for late transfer agreements. If you miss the window, the remaining installments generally accelerate and become due on the event date. Speak with counsel immediately to evaluate options based on your facts.
Who can be the transferee in a transfer agreement?
A single U.S. person that is not a domestic pass‑through entity. In consolidated contexts, the group agent often serves as the eligible transferee. Only one transferee is permitted.
Where do I mail the original Form 965‑C?
Mail to the Compliance Service Collection Operations address listed in the current Form 965‑C instructions. As of the latest instructions, this is the Memphis CSCO address. Always verify the address on the IRS instructions page at the time you file.
What happens if a later amendment changes the 965 amount?
Per the instructions, if the 965(h) net tax liability changes on an amended return after the agreement’s due date, an amended transfer agreement is not required and should not be filed. Keep your records current and pay the correct next installment.
What if the transferee’s leverage ratio exceeds 3 to 1?
The form asks you to check whether the leverage ratio exceeds 3 to 1. You can still enter into a valid transfer agreement if you otherwise meet the requirements and certify ability to pay, but you must make the disclosure as instructed.