[Federal Register Volume 79, Number 109 (Friday, June 6, 2014)]
[Proposed Rules]
[Pages 32687-32689]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-13254]


 ========================================================================
 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 79, No. 109 / Friday, June 6, 2014 / Proposed 
Rules  

[[Page 32687]]



DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-114942-14; 1545-BM08]


Filing of Form 5472

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document contains proposed regulations concerning the 
manner of filing Form 5472, ``Information Return of a 25% Foreign-Owned 
U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or 
Business.'' The proposed regulations would remove a current provision 
for timely filing of Form 5472 separately from an income tax return 
that is untimely filed. As a result, Form 5472 would be required to be 
filed in all cases only with the filer's income tax return for the 
taxable year by the due date (including extensions) of that return. The 
proposed regulations affect certain 25-percent foreign-owned domestic 
corporations and certain foreign corporations that are engaged in a 
trade or business in the United States that are required to file Form 
5472. Regulations finalizing the temporary provisions of TD 9529 (76 FR 
33997, 2011-30 IRB 57), also about requirements for taxpayers filing 
Form 5472, will be published in the same issue of the Federal Register 
as these proposed regulations.

DATES: Written or electronic comments and requests for a public hearing 
must be received by August 5, 2014.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-114942-14), Room 
5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
114942-14), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue NW., Washington, DC, or sent electronically via the Federal 
eRulemaking Portal at http://www.regulations.gov (indicate IRS and REG-
114942-14).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Anand Desai at (202) 317-6939; concerning submission of comments and 
request for hearing, Oluwafunmilayo (Funmi) Taylor at (202) 317-6901 
(not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

    This document contains proposed amendments to the Income Tax 
Regulations (26 CFR Part 1) under sections 6038A and 6038C of the 
Internal Revenue Code (Code).
    Section 6038A generally requires information reporting by a 25-
percent foreign-owned domestic corporation with respect to certain 
transactions between such a corporation and certain related parties. 
Similarly, section 6038C generally requires a foreign corporation 
engaged in a trade or business within the United States at any time 
during the taxable year to report the information described in section 
6038A with respect to certain transactions between such corporation and 
certain related parties.
    On June 19, 1991, the IRS and the Treasury Department published in 
the Federal Register (56 FR 28056) final regulations (TD 8353, 1991-2 
CB 402) under section 6038A (1991 final regulations). The 1991 final 
regulations contained guidance under a number of provisions including 
Sec. Sec.  1.6038A-1 and 1.6038A-2 regarding information reporting 
requirements under sections 6038A and 6038C and Sec.  1.6038A-4 
regarding the imposition of penalties for failure to satisfy reporting 
requirements. Section 1.6038A-1(c)(1) defines a reporting corporation 
as (i) a domestic corporation that is 25-percent foreign-owned; (ii) a 
foreign corporation that is 25-percent foreign-owned and engaged in 
trade or business within the United States; or (iii) after November 4, 
1990, a foreign corporation engaged in a trade or business within the 
United States at any time during a taxable year. Section 1.6038A-
2(a)(1) generally requires a reporting corporation to file a separate 
annual information return on Form 5472 with respect to each related 
party with which the reporting corporation has had any reportable 
transaction during the taxable year. Section 1.6038A-2(d) of the 1991 
regulations required a reporting corporation to file Form 5472 with its 
income tax return for the taxable year by the due date (including 
extensions) of that return. Section 1.6038A-2(d) of the 1991 final 
regulations also required a reporting corporation to file a duplicate 
Form 5472 with the Internal Revenue Service Center in Philadelphia, PA 
(duplicate filing requirement). Section 1.6038A-2(e) of the 1991 final 
regulations provided that if a reporting corporation's income tax 
return is not timely filed, Form 5472 nonetheless was required to be 
filed (with a duplicate to the Internal Revenue Service Center in 
Philadelphia, PA) at the service center where the return is due 
(untimely filed return provision).
    On February 9, 2004, the IRS and the Treasury Department published 
in the Federal Register (69 FR 5931) final regulations and temporary 
regulations (2004 temporary regulations) (TD 9113, 2004-1 CB 524) under 
section 6038A regarding the duplicate filing requirement. The text of 
the 2004 temporary regulations also served as the text of proposed 
regulations (REG-167217-03, 2004-1 CB 540) set forth in the proposed 
rules section of the same issue of the Federal Register (69 FR 5940-01) 
(2004 proposed regulations). The 2004 temporary regulations provided 
that the duplicate filing requirement of Sec.  1.6038A-2(d) is 
satisfied if Form 5472 is timely filed electronically (electronic 
filing provision). The 2004 temporary regulations did not add a 
conforming electronic filing provision to Sec.  1.6038A-2(e) 
(containing the untimely filed return provision) because the electronic 
filing of Form 5472 other than as an attachment to an electronically 
filed income tax return was not technically possible when the 2004 
temporary regulations were published. On September 15, 2004, the IRS 
and the Treasury Department published in the Federal Register (69 FR 
55499-02) final regulations (TD 9161, 2004-2 CB 704) that adopted the 
2004 proposed regulations without change. TD 9161 also removed the text 
of the 2004 temporary regulations.
    As a result of advances in electronic processing and data 
collection in the IRS, the duplicate filing requirement contained in 
Sec.  1.6038A-2(d) was no longer necessary. Accordingly, on June 10, 
2011, temporary regulations (TD

[[Page 32688]]

9529, 2011-30 IRB 57) (2011 temporary regulations) under sections 6038A 
and 6038C were published in the Federal Register (76 FR 33997). On the 
same day, a notice of proposed rulemaking (REG-101352-11, 2011-30 IRB 
75) (2011 proposed regulations) was published by cross-reference to the 
2011 temporary regulations in the Federal Register (76 FR 34019). The 
2011 temporary regulations provided that duplicate filing of Form 5472 
will no longer be required regardless of whether the reporting 
corporation files a paper or an electronic income tax return. The 2011 
temporary regulations implemented this change by removing the duplicate 
filing requirement and the electronic filing provision. As a result, 
the only remaining provision in the regulation for filing Form 5472 
separately from the filer's income tax return is the untimely filed 
return provision contained in Sec.  1.6038A-2T(e) of the 2011 temporary 
regulations (which are being finalized contemporaneous with the 
proposal of these regulations).
    Section 1.6038A-4(a) provides that if a reporting corporation fails 
to furnish the information described in Sec.  1.6038A-2 within the time 
and manner prescribed in Sec.  1.6038A-2(d) and (e), an initial penalty 
of $10,000 (with possible additional penalties for continued failure) 
shall be assessed for each taxable year and for each related party with 
respect to which the failure occurs (subject to reasonable cause).
    A Treasury decision is being published in this issue of the Federal 
Register that adopts the 2011 proposed regulations without substantive 
change as final regulations and removes the corresponding 2011 
temporary regulations. These proposed regulations propose new changes 
to the final regulations under Sec. Sec.  1.6038A-2 and 1.6038A-4.

Explanation of Provisions

A. In General

    As explained in the Background section, the only remaining 
provision for filing a Form 5472 separately from the filer's income tax 
return is the untimely filed return provision contained in Sec.  
1.6038A-2(e) of the final regulations. With the benefit of experience, 
the IRS and the Treasury Department believe that the untimely filed 
return provision is not conducive to efficient tax administration. More 
specifically, the method for filing a Form 5472 should not differ from 
the method (and penalties) applicable to U.S. persons that have similar 
international reporting obligations, for example, the requirement to 
file (i) Form 5471, ``Information Return of U.S. Persons With Respect 
to Certain Foreign Corporations,'' in the case of U.S. persons that 
control certain foreign corporations, and (ii) Form 8865, ``Return of 
U.S. Persons With Respect to Certain Foreign Partnerships,'' in the 
case of U.S. persons that control certain foreign partnerships. Those 
forms must be filed with the filer's income tax return for the taxable 
year by the due date (including extensions) of the return, and there is 
no provision equivalent to the untimely filed return provision under 
Sec.  1.6038A-2T(e) of the 2011 temporary regulations that would 
require or permit separate filing of those forms. See Sec. Sec.  
1.6038-2(i) and 1.6038-3(i)(1). Accordingly, it is proposed that the 
untimely filed return provision contained in Sec.  1.6038A-2(e) be 
removed.
    Corresponding amendments are proposed to Sec.  1.6038A-4 to update 
a cross-reference and delete an obsolete reference to prior internal 
organization of the IRS, and to Sec.  1.6038A-1(n)(2) and (3) with 
respect to proposed effective dates of Sec. Sec.  1.6038A-2 and 
1.6038A-4.

B. Proposed Effective/Applicability Date

    These regulations are proposed to apply to taxable years ending on 
or after the date of publication of the Treasury decision adopting 
these rules as final regulations in the Federal Register. See Sec.  
1.6038A-1(n)(2) and (3).

Special Analyses

    It has been determined that these proposed regulations are not a 
significant regulatory action as defined in Executive Order 12866, as 
supplemented by Executive Order 13563. Therefore, a regulatory 
assessment is not required. It has also been determined that section 
553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does 
not apply to these regulations, and because the regulations do not 
impose a collection of information, the Regulatory Flexibility Act (5 
U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the 
Code, this notice of proposed rulemaking has been submitted to the 
Chief Counsel for Advocacy of the Small Business Administration for 
comment on its impact on small business.

Comments and Requests for Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any comments that are submitted timely 
to the IRS as prescribed in this preamble under the ADDRESSES heading. 
The IRS and the Treasury Department request comments on all aspects of 
these proposed regulations. All comments will be available at 
www.regulations.gov or upon request. A public hearing will be scheduled 
if requested in writing by any person that timely submits written 
comments. If a public hearing is scheduled, notice of the date, time, 
and place for the public hearing will be published in the Federal 
Register.

Drafting information

    The principal author of these proposed regulations is Anand Desai, 
Office of Associate Chief Counsel (International). However, other 
personnel from the IRS and the Treasury Department participated in 
their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority:  26 U.S.C. 7805 * * *

0
Par. 2. Section 1.6038A-1 is amended by revising the third sentence of, 
and adding a new fourth sentence to, paragraph (n)(2), and adding a 
third sentence to paragraph (n)(3), to read as follows:


Sec.  1.6038A-1  General requirements and definitions.

* * * * *
    (n) * * *
    (2) Section 1.6038A-2. * * * Section 1.6038A-2(d) applies for 
taxable years ending on or after June 10, 2011. For taxable years 
ending on or after June 10, 2011, but before the date of publication of 
the Treasury decision adopting these rules as final regulations in the 
Federal Register, see Sec.  1.6038A-2(e) as contained in 26 CFR part 1 
revised as of April 1, 2014. * * *
    (3) Section 1.6038A-4. * * * For taxable years ending before the 
date of publication of the Treasury decision adopting these rules as 
final regulations in the Federal Register, see Sec.  1.6038A-4(a)(1) as 
contained in 26 CFR part 1 revised as of April 1, 2014.
* * * * *


Sec.  1.6038A-2(e)  [Removed].

0
Par. 3. Section 1.6038A-2 is amended by removing paragraph (e).

[[Page 32689]]

0
Par. 4. Section 1.6038A-4 is amended by revising paragraph (a)(1) to 
read as follows:


Sec.  1.6038A-4  Monetary penalty.

    (a) * * *
    (1) In general. If a reporting corporation fails to furnish the 
information described in Sec.  1.6038A-2 within the time and manner 
prescribed in Sec.  1.6038A-2(d), fails to maintain or cause another to 
maintain records as required by Sec.  1.6038A-3, or (in the case of 
records maintained outside the United States) fails to meet the non-
U.S. record maintenance requirements within the applicable time 
prescribed in Sec.  1.6038A-3(f), a penalty of $10,000 shall be 
assessed for each taxable year with respect to which such failure 
occurs. The filing of a substantially incomplete Form 5472 constitutes 
a failure to file Form 5472. Where, however, the information described 
in Sec.  1.6038A-2(b)(3) through (5) is not required to be reported, a 
Form 5472 filed without such information is not a substantially 
incomplete Form 5472.
* * * * *

John Dalrymple,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2014-13254 Filed 6-5-14; 8:45 am]
BILLING CODE 4830-01-P