T.D. 9796 – Disregarded entity wholly owned by a foreign person as domestic corporation
Final regulations treating a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for the limited purposes of the reporting, record maintenance and associated compliance requirements that apply to 25 percent foreign-owned domestic corporations under section 6038A of the Code.
This document contains final regulations that treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for the limited purposes of the reporting, record maintenance and associated compliance requirements that apply to 25 percent foreign-owned domestic corporations under section 6038A of the Internal Revenue Code.
Instructions for Form 5472 (12/2019)
Foreign-owned U.S. DE.
A foreign-owned U.S. DE is a domestic DE that is wholly owned by a foreign person. For tax years beginning on or after January 1, 2017, and ending on or after December 13, 2017, a foreign-owned U.S. DE is treated as an entity separate from its owner and classified as a corporation for the limited purposes of the requirements under section 6038A that apply to 25% foreign-owned domestic corporations. See the final regulations at IRS.gov/irb/2017-03_IRB#TD-9796.
Who Must File
Exceptions from filing.
A reporting corporation is not required to file Form 5472 if any of the following apply.
- It had no reportable transactions of the types listed in Parts IV and VI of the form.
- A U.S. person that controls the foreign related corporation files Form 5471 for the tax year to report information under section 6038. To qualify for this exception, the U.S. person must complete Schedule M (Form 5471) showing all reportable transactions between the reporting corporation and the related party for the tax year. This exception does not apply to foreign-owned U.S. DEs.
- The related corporation qualifies as a foreign sales corporation for the tax year and files Form 1120-FSC. This exception does not apply to foreign-owned U.S. DEs.
- It is a foreign corporation that does not have a permanent establishment in the United States under an applicable income tax treaty and timely files Form 8833.
- It is a foreign corporation all of whose gross income is exempt from taxation under section 883 and it timely and fully complies with the reporting requirements of sections 883 and 887.
- Both the reporting corporation and the related party are not U.S. persons as defined in section 7701(a)(30) and the transactions will not generate in any tax year:
- Gross income from sources within the United States or income effectively connected, or treated as effectively connected, with the conduct of a trade or business within the United States; or
- Any expense, loss, or other deduction that is allocable or apportionable to such income.
When and Where To File
File Form 5472 as an attachment to the reporting corporation’s income tax return by the due date (including extensions) of that return.
Foreign-owned U.S. DEs.
While a foreign-owned U.S. DE has no income tax return filing requirement, as a result of final regulations under section 6038A, it will now be required to file a pro forma Form 1120 with Form 5472 attached by the due date (including extensions) of the return. The only information required to be completed on Form 1120 is the name and address of the foreign-owned U.S. DE and items B and E on the first page. The foreign-owned U.S. DE has the same tax year used by its owner for U.S. tax filing requirements or, if none, the calendar year.“Foreign-owned U.S. DE” should be written across the top of Form 1120. File these forms by:
- Fax (300 DPI or higher) to 855-887-7737, or
- Mail to:
Internal Revenue Service
1973 Rulon White Blvd
M/S 6112 Attn: PIN Unit
Ogden, Utah 84201
Foreign-owned U.S. DEs are required to use the special mailing address, earlier. These filers do not use the mailing addresses provided in the instructions for Form 1120.
A foreign-owned U.S. DE required to file Form 5472 can request an extension of time to file by filing Form 7004. The DE must file Form 7004 by the regular due date of the return. Because the Form 5472 of a DE must be attached to a pro forma Form 1120, the code for Form 1120 should be entered on Form 7004, Part I, line 1. “Foreign-owned U.S. DE” should be written across the top of Form 7004.
The DE must fax or mail the Form 7004 to the fax number or mailing address identified, earlier, by the due date (excluding extensions) of the return. For these entities, do not use the regular filing address listed in the Instructions for Form 7004.
For further general information, see the Instructions for Form 7004.