Menu
Tax Notes logo

Firm Proposes Reporting Relief for Entities Treated as CFCs

AUG. 9, 2019

Firm Proposes Reporting Relief for Entities Treated as CFCs

DATED AUG. 9, 2019
DOCUMENT ATTRIBUTES

August 9, 2019

Douglas L. Poms
International Tax Counsel
Office of the International Tax Counsel
Department of the Treasury
1500 Pennsylvania Avenue, NW, Room 3058
Washington, DC 20220

Submitted via Electronic Mail

Re: Reporting Relief with Respect to Entities Treated as CFCs Due to Downward Attribution

Dear Mr. Poms,

We would like to thank you again for your time last week and your continued attention to this important matter.

In response to your invitation to propose language providing relief to the compliance requirements and allow reporting on a group basis in appropriate cases, set out below on behalf of clients we represent is proposed language for a Notice announcing such relief.

This relief would reduce the compliance burden for taxpayers and still provide the Internal Revenue Service with substantive information. We, like many taxpayers, are still hopeful that the Department of Treasury will provide broader relief from the unintended tax consequences of the repeal of section 958(b)(4).

Please let me know if it would be helpful to discuss this proposed language or any other matters related to this issue further.

Sincerely,

Aaron Payne
Eversheds Sutherland (US) LLP
Washington, DC

cc: Brenda Zent
Special Advisor on International Taxation

Wade Sutton
Senior Counsel

Kamela Nelan
Attorney

Office of the International Tax Counsel
Department of the Treasury
1500 Pennsylvania Avenue, NW, Room 3058
Washington, DC 20220

Proposed Language:

The IRS intends to amend the Instructions for Form 5471 to permit alternative group-based filing for a United States person that is a United States shareholder with respect to a CFC if United States shareholders (including such United States person) in the aggregate own, within the meaning of section 958(a), not more than 50 percent of the stock in such CFC (by vote or value) and the foreign corporation is a CFC solely because a United States person is considered to own the stock of the CFC owned by a foreign person under section 318(a)(3). In such a case, in lieu of filing a Form 5471 with respect to each individual CFC, the relevant information may be filed for a group of related CFCs on a combined basis on a single Form 5471 if the following conditions are satisfied with respect to the group of CFCs: (1) some or all of the financial information required for the Form 5471 is prepared with respect to the group on a combined basis by a member of the group or a shareholder of the group in the ordinary course of business and (2) the same information required for Form 5471 is not prepared with respect to every CFC member of the group on an entity-by-entity basis by a member of the group or a shareholder of the group in the ordinary course of business in the same manner (or following the same reporting standard) as the information prepared with respect to the group, or such information is not made available to such United States shareholder. In reporting information on Form 5471 on a combined basis, appropriate adjustments may be made to the group information prepared in the ordinary course of business to reflect (1) minority interests in group members owned by unrelated parties, (2) United States tax entity classification, and (3) United States tax accounting principles. However, no adjustment shall be required to be made to the group information prepared in the ordinary course of business unless it is material. See § 1.964-l(a)(2).

In addition, such US shareholders will not be required to file Form 8858 with respect to foreign branches or foreign disregarded entities operated or owned by CFCs for which the alternative group-based filing method is potentially available (without regard to whether the conditions enumerated above for applying alternative group-based filing are satisfied with respect to such CFC and without regard to whether such alternative group-based filing is elected if available).

DOCUMENT ATTRIBUTES
Copy RID