IRS grants relief for U.S. persons who own stock in certain foreign corporations

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IRS grants relief for U.S. persons who own stock in certain foreign corporations

An official website of the United States Government

IR-2019-162, October 1, 2019

WASHINGTON — The Department of the Treasury and the Internal Revenue Service today issued Revenue Procedure 2019-40 (PDF) and proposed regulations that provides relief to certain U.S. persons that own stock in certain foreign corporations.

The Revenue Procedure limits the inquiries required by U.S. persons to determine whether certain foreign corporations are controlled foreign corporations (“CFCs”). The Revenue Procedure also allows certain unrelated minority U.S. shareholders to rely on specified financial statement information to calculate their subpart F and GILTI inclusions and satisfy reporting requirements with respect to certain CFCs if more detailed tax information is not available. It also provides penalty relief to taxpayers in the specified circumstances.

Finally, the Revenue Procedure announces that the IRS intends to amend the instructions for Form 5471 to reduce the amount of information that certain unrelated minority U.S. shareholders of the CFC are required to provide. It will also limit the filing requirements of U.S. shareholders who only constructively own stock of the CFC solely due to downward attribution from another person.

The proposed regulations provide additional relief to taxpayers affected by the repeal of section 958(b)(4). These regulations also propose modifications to existing regulations that are intended to ensure, in certain appropriate circumstances, that the operation of certain rules is consistent with their application before the repeal of section 958(b)(4).

The repeal of section 958(b)(4) was part of the Tax Cuts and Jobs Act. For more information about this and other TCJA provisions, visit IRS.gov/taxreform.

An official website of the United States Government

IR-2019-162, October 1, 2019

WASHINGTON — The Department of the Treasury and the Internal Revenue Service today issued Revenue Procedure 2019-40 (PDF) and proposed regulations that provides relief to certain U.S. persons that own stock in certain foreign corporations.

The Revenue Procedure limits the inquiries required by U.S. persons to determine whether certain foreign corporations are controlled foreign corporations (“CFCs”). The Revenue Procedure also allows certain unrelated minority U.S. shareholders to rely on specified financial statement information to calculate their subpart F and GILTI inclusions and satisfy reporting requirements with respect to certain CFCs if more detailed tax information is not available. It also provides penalty relief to taxpayers in the specified circumstances.

Finally, the Revenue Procedure announces that the IRS intends to amend the instructions for Form 5471 to reduce the amount of information that certain unrelated minority U.S. shareholders of the CFC are required to provide. It will also limit the filing requirements of U.S. shareholders who only constructively own stock of the CFC solely due to downward attribution from another person.

The proposed regulations provide additional relief to taxpayers affected by the repeal of section 958(b)(4). These regulations also propose modifications to existing regulations that are intended to ensure, in certain appropriate circumstances, that the operation of certain rules is consistent with their application before the repeal of section 958(b)(4).

The repeal of section 958(b)(4) was part of the Tax Cuts and Jobs Act. For more information about this and other TCJA provisions, visit IRS.gov/taxreform.

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