Instructions for Form 5471 (Revised January 1999) Information Return of U.S. Persons With Respect to Certain Foreign Corporations Section references are to the Internal Revenue Code unless otherwise noted. Department of the Treasury Internal Revenue Service Paperwork Reduction Act Notice.   We ask for the information on this form to carry out the Internal Revenue laws of the United States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax. You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by section 6103. The time needed to complete and file this form and related schedules will vary depending on individual circumstances.   The estimated average times are: If you have comments concerning the accuracy of these time estimates or suggestions for making this form and related schedules simpler, we would be happy to hear from you. See the instructions for the tax return with which this form is filed. Changes To Note l  The new principal business activity (PBA) codes beginning on page 13 of these instructions are based on the North American Industry Classification System (NAICS), which was developed by the statistical agencies of Canada, Mexico, and the United States in cooperation with the Office of Management and Budget. The NAICS-based codes replace the PBA codes previously based on the Standard Industrial Classification (SIC) system. l  The Small Business Job Protection Act of 1996 repealed section 956A, which required U.S. shareholders of controlled foreign corporations (CFCs) to include in income their share of the CFC's earnings invested in excess passive assets. This is effective for tax years of foreign corporations beginning after December 31, 1996, and for tax years of U.S. shareholders ending within which or with which such tax years of foreign corporations end. l   For tax years beginning in 1998 only, the Taxpayer Relief Act of 1997 (“1997 Act”) provides temporary exceptions from the definition of foreign personal holding company income, for subpart F purposes, income from the active conduct of a banking, financing, insurance, or similar business, but only if the corporation is predominantly engaged in the active conduct of such business (within the meaning of section 954(h)(3)) or a qualifying insurance company. For more information, see sections 954(e)(2)(c) and 954(h) and Act section 1175.   The Tax and Trade Relief Extension Act of 1998 (“1998 Act”) extended the exceptions above (with modifications) to tax years beginning in 1999 only. For more information, see sections 954(e)(2) and 954(h), as amended, and Act section 1005. l  For tax years beginning after August 5, 1997, the 1997 Act excludes from the definition of foreign personal holding company income certain property acquired by a dealer in the l  For annual accounting periods beginning after August 5, 1997, the penalty for failure to file an information return or disclose the required information under sections 6038 and 6046 increases to $10,000.   An additional penalty ($50,000 maximum) may apply if the failure continues after notice from the IRS. See Penalties on page 3. l  For tax years beginning after August 5, 1997, the statute of limitation with respect to the period to which the information required by sections 6038 and 6046 relates does not expire until 3 years after the date on which the information is provided. See section 6501(c)(8). l  For transactions occurring after August 5, 1997, certain gains on dispositions of stock in a related corporation are treated as foreign personal holding company income, and the same-country exception of section 954(c)(3)(A) does not apply. See section 964(e). l  For dispositions after August 5, 1997, in determining a U.S. shareholder's pro rata share of subpart F income, any gains included in the gross income of any person as a dividend under section 1248 shall be treated as a distribution received by such person with respect to the stock involved. See section 951(a)(2)(B). General Instructions Purpose of Form Form 5471 is used by certain U.S. citizens and residents who are officers, directors, or shareholders in certain foreign corporations. The form and schedules are used to satisfy the reporting requirements of sections 6035, 6038, 6046, and the related regulations. Who Must File Generally, the U.S. persons described in Categories of Filers must complete the schedules, statements, and/or other information requested in the chart, Filing Requirements For Categories of Filers, on page 2. Read the information for each of the categories of filers carefully to determine which schedules, statements, and/or information apply. If the filer is described in more than one filing category, do not duplicate information. However, complete all schedules that apply. For example, if you are the sole owner of a CFC that is also a foreign personal holding company (i.e., you are described in Categories (1), (4), and (5)), you would complete all four pages of Form 5471 and separate Schedules J, M, and N. When and Where To File Form 5471 is due when your income tax return is due, including extensions. File two copies of the form and required schedules.   Attach one copy to your income tax return. Send the other copy to the Internal Revenue Service Center, Philadelphia, PA 19255. Form Recordkeeping Learning about the law or the form Preparing and sending the form to the IRS 5471 81 hr., 19 min. 26 hr., 50 min. 32 hr., 56 min. Sch. J (5471) 3 hr., 50 min. 1 hr., 5 min. 1 hr., 12 min. Sch. M (5471) 26 hr., 33 min. 6 min. 32 min. Sch. N (5471) 8 hr., 22 min. 2 hr., 47 min. 3 hr.,    2 min. Sch. O (5471) 10 hr., 46 min. 30 min. 42 min. ordinary course of business. See section 954(c)(2)(C).   For tax years beginning in 1999 only, the 1998 Act provides an additional exception for certain income derived by a securities dealer. See section 954(c)(2)(C) as amended. For more formation regarding changes to foreign personal holding company income, see the instructions for Worksheet A on page 6. The 1997 Act also made the following changes to the tax law regarding information reporting with respect to certain foreign corporations. l  For transactions occurring after December 31, 1997, the threshold for stock ownership of a foreign corporation that results in the information reporting obligations of section 6046 has increased from 5% (in value) to 10% (of value or vote).   This affects the reporting requirements for Category (2) and (3) filers. See Categories of Filers, on page 2. l  For taxes paid or accrued in tax years beginning after December 31, 1997, the appropriate exchange rate for translating a CFC's functional currency into U.S. dollars is the average exchange rate for the foreign corporation's tax year. See section 989(b). l  For tax years of foreign corporations beginning after December 31, 1997, and for tax years of U.S. shareholders ending within which or with which such tax years of foreign corporations end, in determining a U.S. shareholder's pro rata share of earnings of a CFC invested in U.S. property, the definition of U.S. property does not include certain assets received by dealers. See section 956(c)(2)(J) and (K). l  For tax years beginning after August 5, 1997, in computing a U.S. shareholder's pro rata share of income of a CFC, gross foreign personal holding company income includes net income from a notional principal contract (section 954(c)(1)(F)) and payments in lieu of dividends (section 954(c)(1)(G)). Cat. No. 49959G