Additional Filing Requirements

Category 3 filers.   Category 3 filers must attach a statement that includes:

1. The amount and type of any indebtedness the foreign corporation has with the related persons described in Regulations section 1.6046-1(b)(11) and
2. The name, address, identifying number, and number of shares subscribed to by each subscriber to the foreign corporation's stock.

Foreign sales corporations (FSCs).  

• Category 2 and Category 3 filers who are shareholders, officers, and directors of a FSC (as defined in section 922) do not have to file Form 5471 and separate Schedule O to report the organization of a FSC. However, Form 5471 must be filed to report any subsequent reorganization, transfer, acquisition, or disposition of stock of the FSC.
• Category 5 shareholders of a FSC are not subject to the subpart F rules for:
  1. Exempt foreign trade income,
  2. Deductions that are apportioned or allocated to exempt foreign trade income,
  3. Nonexempt foreign trade income (other than section 923(a)(2) nonexempt income, within the meaning of section 927(d)(6)), and
  4. Any deductions that are apportioned or allocated to the nonexempt foreign trade income described above.
• Shareholders of a FSC are subject to the subpart F rules for:
  1. All other types of FSC income (including section 923(a)(2) nonexempt income within the meaning of section 927(d)(6)),
  2. Investment income and carrying charges (as defined in section 927(c) and (d)(1)), and
  3. All other FSC income that is not foreign trade income or investment income or carrying charges.
• Category 5 shareholders of a FSC are not required to file a Form 5471 if the FSC has filed a Form 1120-FSC. See Regulations section 1.921-1T(b)(3).

Section 338 election.   If a section 338 election is made with respect to any qualified stock purchase for a foreign corporation for which a Form 5471 must be filed:

• A purchaser (or its U.S. shareholder) must attach a copy of Form 8023, Elections Under Section 338 for Corporations Making Qualified Stock Purchases, to the first Form 5471 for the new foreign target corporation. For qualified stock purchases after March 15, 2001, the purchaser (or its U.S. shareholder) may also be required to attach Form 8594, Asset Allocation Statement Under Sections 338 and 1060. See the instructions for Forms 8023 and 8594 for details and transition rules. (Forms 8023 and 8594 will be revised during 2001.)
• A seller (or its U.S. shareholder) must attach a copy of Form 8023 to the last Form 5471 for the old foreign target corporation. For qualified stock purchases after March 15, 2001, the seller (or its U.S. shareholder) may also be required to attach Form 8594. See the instructions for Forms 8023 and 8594 for details and transition rules. (Forms 8023 and 8594 will be revised during 2001.)

Penalties

Failure to file information required by section 6038(a) (Form 5471 and Schedule M).  

• A $10,000 penalty is imposed for each annual accounting period of each foreign corporation for failure to furnish the required information within the time prescribed. If the information is not filed within 90 days after the IRS has mailed a notice of the failure to the U.S. person, an additional $10,000 penalty (per foreign corporation) is charged for each 30-day period, or fraction thereof, during which the failure continues after the 90-day period has expired. The additional penalty is limited to a maximum of $50,000 for each failure.
• Any person who fails to file or report all of the information required within the time prescribed will be subject to a reduction of 10% of the foreign taxes available for credit under sections 901, 902, and 960. If the failure continues 90 days or more after the date the IRS mails notice of the failure to the U.S. person, an additional 5% reduction is made for each 3-month period, or fraction thereof, during which the failure continues after the 90-day period has expired. See section 6038(c)(2) for limits on the amount of this penalty.

Failure to file information required by sections 6035 and 6046 and the related regulations (Form 5471 and Schedules N and O).  

• Any person who fails to file or report all of the information requested by section 6035 is subject to a $1,000 penalty for each such failure for each reportable transaction.
• Any person who fails to file or report all of the information requested by section 6046 is subject to a $10,000 penalty for each such failure for each reportable transaction. If the failure continues for more than 90 days after the date the IRS mails notice of the failure, an additional $10,000 penalty will apply for each 30-day period or fraction thereof during which the failure continues after the 90-day period has expired. The additional penalty is limited to a maximum of $50,000.

Criminal penalties.   Criminal penalties under sections 7203, 7206, and 7207 may apply for failure to file the information required by sections 6038 and 6046.

Note:   Any person required to file Form 5471 and Schedule J, M, N, or O who agrees to have another person file the form and schedules for him or her may be subject to the above penalties if the other person does not file a correct and proper form and schedule.

Other Reporting Requirements

Electronic Filing of Form 5471

Form 5471 and the related Schedules J, M, N, and O can be filed by magnetic media (magnetic tapes, floppy diskettes) or electronically. Approval must be received from the IRS prior to filing. The reporting agent can request approval by submitting Form 9041, Application/Registration for Electronic/Magnetic Media Filing of Business Returns. This form can be obtained from the IRS Web Site at www.irs.gov or by calling 1-800-829-2437.

If unable to obtain Form 9041, a letter of application requesting approval can be submitted. The request should include the following:

• Organization name, address, and identification number;
• Name and title of person to contact;
• Telephone number and best time to call;
• Expected return volume; and
• Method of filing (electronic or magnetic media) and whether the software will be developed or modified for commercial use.

For more information on filing electronically for partnerships, call 901-546-2690 (not a toll-free number). For more information regarding filing for estates and trusts, call 1-800-829-6945.

Computer-Generated Form 5471 and Schedules

A computer-generated Form 5471 and its schedules may be filed if they conform to and do not deviate from the official form and schedules. Generally, all computer-generated forms must receive prior approval from the IRS and are subject to an annual review.

Submit all requests for approval to: Internal Revenue Service, Attention: Substitute Forms Program, W:CAR:MP:FP:S:SP, 1111 Constitution Avenue, NW, Room 5244, Washington, DC 20224.

Important:   Be sure to attach the approval letter to Form 5471.

Every year, the IRS issues a revenue procedure to provide guidance for filers of computer-generated forms. In addition, every year the IRS issues Pub. 1167, Substitute Printed, Computer-Prepared, and Computer-Generated Tax Forms and Schedules, which reprints the most recent applicable revenue procedure. Pub. 1167 can be ordered by calling 1-800-TAX-FORM (1-800-829-3676). This publication is also available from the IRS Web Site at www.irs.gov.

Dormant Foreign Corporations

Rev. Proc. 92-70, 1992-2 C.B. 435, provides a summary filing procedure for filing Form 5471 for a dormant foreign corporation (defined in sec. 3 of Rev. Proc. 92-70). This summary filing procedure will satisfy the reporting requirements of sections 6038 and 6046.

If the filer elects the summary procedure, only page 1 of Form 5471 is completed for each dormant foreign corporation as follows:

• The top margin of the summary return must be labeled Filed Pursuant to Rev. Proc. 92-70 for Dormant Foreign Corporation.
• Complete filer information such as name and address, Items A through C, and tax year.
• Include corporate information such as the dormant corporation's annual accounting period (below the title of the form) and Items 1a, 1b, 1c, and 1e.

For more information, see Rev. Proc. 92-70.

File page 1 in duplicate with each filer's regularly filed income tax return. See When and Where To File on page 1.

Treaty-Based Return Positions

File Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b), to disclose a return position that any treaty of the United States (such as an income tax treaty, an estate and gift tax treaty, or a friendship, commerce, and navigation treaty):

• Overrides or modifies any provision of the Internal Revenue Code and
• Causes, or potentially causes, a reduction of any tax incurred at any time.

Failure to make such a report may result in a $1,000 penalty ($10,000 for a C corporation). See section 6712.

Specific Instructions

Important:   If the information required in a given section exceeds the space provided within that section, do not write see attached in the section and do not attach all of the information on additional sheets. Instead, complete all entry spaces in the section and attach the remaining information on additional sheets. The additional sheets must conform with the IRS version of that section.

Identifying Information

Annual Accounting Period

Enter, in the space provided below the title of Form 5471, the annual accounting period of the foreign corporation for which you are furnishing information. Except for information contained on Schedule O, report information for the tax year of the foreign corporation that ends with or within your tax year. When filing Schedule O, report acquisitions, dispositions, and organizations or reorganizations that occurred during your tax year.

Specified foreign corporation.   The annual accounting period of a specified foreign corporation is generally required to be the tax year of the corporation's majority U.S. shareholder. If there is more than one majority shareholder, the required tax year will be the tax year that results in the least aggregate deferral of income to all U.S. shareholders of the foreign corporation.

A specified foreign corporation is any foreign corporation:

1. That is treated as a CFC under subpart F or is a foreign personal holding company and
2. In which more than 50% of the total voting power or value of all classes of stock of the corporation is treated as owned by a U.S. shareholder.

For more information, see section 898.

Exception.   Any specified foreign corporation that wishes to change its U.S. tax year back to its pre-change year must get the consent of the IRS using the procedures of section 442 and the related regulations. For details, see Notice 95-13, 1995-1 C.B. 296.

Name Change

If either the name of the person filing this return or the corporation whose activities are being reported has changed since the last time information was reported, attach a statement that explains the change and shows the prior name.

Address

Include the suite, room, or other unit number after the street address. If the Post Office does not deliver mail to the street address and the U.S. person has a P.O. box, show the box number instead.

Foreign address.   Enter the information in the following order: city, province or state, and country. Follow the country's practice for entering the postal code, if any. Do not abbreviate the country name.

Item A - Identifying Number

The identifying number of an individual is his or her social security number (SSN). The identifying number of all others is their employer identification number (EIN). If a U.S. corporation that owns stock in a foreign corporation is a member of a consolidated group, list the common parent as the person filing the return and enter its EIN in Item A. Identify the direct owner in Item D.

Item B - Category of Filer

Complete Item B to indicate the category or categories that describe the person filing this return. If more than one category applies, check all boxes that apply.

Item C - Percentage of Voting Stock Owned

Enter the total percentage of the foreign corporation's voting stock you owned directly, indirectly, or constructively at the end of the corporation's annual accounting period.

Item D - Person(s) on Whose Behalf This Information Return Is Filed

The person that files the required information on behalf of other persons must complete Item D. See Multiple filers of same information on page 3. In addition, a separate Schedule I must be filed for each person described in Category 5.

Except for members of the filer's consolidated return group, all persons identified in Item D must attach a statement to their income tax returns that includes the following information:

• A statement that their filing requirements have been or will be satisfied;
• The name, address, and identifying number of the return with which the information was or will be filed; and
• The IRS Service Center where the return was or will be filed.

Items 1f and 1g - Principal Business Activity

Enter the principal business activity code number and the description of the activity from the list beginning on page 14.

Item 1h - Functional Currency

Enter the foreign corporation's functional currency. Regulations sections 1.6038-2(h) and 1.6046-1(g) require that certain amounts be reported in U.S. dollars and/or in the foreign corporation's functional currency. The specific instructions for the affected schedules state these requirements.

Special rules apply for foreign corporations that use the U.S. dollar approximate separate transactions method of accounting (DASTM) under Regulations section 1.985-3. See the instructions for Schedule C and Schedule H.

Schedule B

Category 1, 3, and 4 filers must complete Schedule B for U.S. persons that owned (at any time during the annual accounting period), directly or indirectly through foreign entities, 10% or more in value or voting power of any class of the corporation's outstanding stock.

Column (e).   Enter the shareholder's allocable percentage of the foreign corporation's subpart F income or, for a foreign personal holding company, foreign personal holding company income.

Schedule C

If the foreign corporation uses the U.S. dollar approximate separate transactions method of accounting (DASTM) under Regulations section 1.985-3, the functional currency column should reflect local hyperinflationary currency amounts computed in accordance with U.S. Generally Accepted Accounting Principles (GAAP). The U.S. dollar column should reflect such amounts translated into dollars under U.S. GAAP translation rules. Differences between this U.S. dollar GAAP column and the U.S. dollar income or loss figured for tax purposes under Regulations section 1.985-3(c) should be accounted for on Schedule H. See Schedule H, Special rules for DASTM, on this page.

Line 19.   The terms extraordinary items and prior period adjustments have the same meaning given to them by U.S. GAAP (see Opinion No. 30 of the Accounting Principles Board and Statement No. 16 of the Financial Accounting Standards Board).

Line 20.   Enter the income, war profits, and excess profits taxes deducted in accordance with U.S. GAAP.

Important:   Differences between this functional currency amount and the amount of taxes that reduce U.S. E&P should be accounted for on line 2g of Schedule H.

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