[Federal Register Volume 59, Number 239 (Wednesday, December 14, 1994)]
[Unknown Section]
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From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-30586]
[[Page Unknown]]
[Federal Register: December 14, 1994]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
[TD 8573]
RIN 1545-AQ06
Information Returns Required of United States Persons With
Respect To Certain Foreign Corporations
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
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SUMMARY: This document contains final Income Tax Regulations relating
to information returns required of United States persons with respect
to annual accounting periods of certain foreign corporations. These
regulations clarify certain requirements of the Income Tax Regulations
relating to Form 5471 and affect controlled foreign corporations and
their United States shareholders.
EFFECTIVE DATE: January 13, 1995.
FOR FURTHER INFORMATION CONTACT: Carl Cooper, 202-622-3840, not a toll
free number.
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained in these final regulations
has been reviewed and approved by the Office of Management and Budget
in accordance with the Paperwork Reduction Act (44 U.S.C. 3504(h))
under control number 1545-1317. Estimates of the reporting burden in
these final regulations will be reflected in the burden of Form 5471.
Comments concerning the accuracy of this burden estimate and
suggestions for reducing this burden should be sent to the Internal
Revenue Service, Attn: IRS Reports Clearance Officer, PC:FP,
Washington, DC 20224, and to the Office of Management and Budget,
Attention: Desk Officer for the Department of the Treasury, Office of
Information and Regulatory Affairs, Washington, DC 20503.
Background
On July 7, 1992, the IRS published a notice of proposed rulemaking
in the Federal Register (57 FR 29851) proposing amendments to the
Income Tax Regulations (26 CFR part 1) under sections 6035, 6038, and
6046 of the Internal Revenue Code of 1986 (Code). These amendments were
proposed to clarify the requirements of Secs. 1.6035-1, 1.6038-2, and
1.6046-1 of the Income Tax Regulations relating to Form 5471. Written
comments responding to the notice were received. No public hearing was
requested and, therefore, no public hearing was held. Some commentators
suggested that the amendment to Sec. 1.6038-2(h) would impose a greater
burden with respect to ongoing compliance and conversion of data
gathering routines than present requirements; however, the majority of
the responses to this amendment have been favorable. After
consideration of these comments, the Service has determined that the
overall burden is alleviated. Thus, having considered all comments
regarding the proposed amendments, those amendments are adopted (with
certain effective date changes) by this Treasury decision.
The changes to paragraph (h) (and corresponding changes in
Sec. 1.6046-1(g)) are effective for taxable years ending after December
31, 1994, but only for returns filed after December 31, 1995.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in EO 12866. 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)
and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to
these regulations, and, therefore, a Regulatory Flexibility Analysis is
not required. Pursuant to section 7805(f) of the Internal Revenue Code,
the notice of the proposed rulemaking preceding these regulations was
submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on its impact on small business.
Drafting Information
The principal author of these regulations is Carl Cooper of the
Office of Associate Chief Counsel (International), IRS. However,
personnel from other offices of the IRS and Treasury Department
participated in their development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 602
Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR parts 1 and 602 are amended as follows:
PART 1--INCOME TAXES
Paragraph 1. The authority for part 1 continues to read in part as
follows:
Authority: 26 U.S.C. 7805 * * *
Sec. 1.6035 [Amended]
Par. 2. Section 1.6035-1, paragraph (a)(1) is amended by adding a
sentence at the end to read as follows:
Sec. 1.6035-1 Returns of U.S. officers, directors and 10-percent
shareholders of foreign personal holding companies for taxable years
beginning after September 3, 1982.
(a) * * *
(1) * * * In the case of a foreign personal holding company which
is a specified foreign corporation (as defined in section 898), the
taxable year of such corporation shall be treated as its annual
accounting period.
* * * * *
Sec. 1.6038 [Amended]
Par. 3. Section 1.6038-2 is amended as follows:
1. Paragraph (d)(5) is added following paragraph (d)(4) and
immediately before the concluding text.
2. Paragraph (e) is amended by removing the third sentence and
adding two new sentences in its place.
3. Paragraph (f)(10)(iii) is amended by removing the word ``and''
immediately following the semicolon and paragraph (f)(10)(iv) is
amended by removing the colon and adding a semicolon in its place.
4. Paragraph (f)(10)(v) is added.
5. Paragraph (g) is amended as follows:
a. The introductory text of paragraph (g) is amended by replacing
the colon with a period and adding a second sentence at the end.
b. The concluding text of paragraph (g) is amended by removing the
words ``form and''.
6. Paragraph (h) is revised.
7. The additions and revisions read as follows:
Sec. 1.6038-2 Information returns required of United States persons
with respect to annual accounting periods of certain foreign
corporations beginning after December 31, 1962.
* * * * *
(d) * * *
(5) For taxable years ending after December 31, 1987, with respect
to a corporation organized under the laws of American Samoa, the term
does not include an individual who is a bona fide resident of American
Samoa, provided--
(i) 80 percent or more of the gross income of the corporation for
the 3-year period ending at the close of the taxable year (or for such
part of such period as such corporation or any predecessor has been in
existence) was derived from sources within American Samoa or was
effectively connected with the conduct of a trade or business in
American Samoa; and
(ii) 50 percent or more of the gross income of such corporation for
such period (or part) was derived from the conduct of an active trade
or business within American Samoa.
* * * * *
(e) * * * In the case of a specified foreign corporation (as
defined in section 898), the taxable year of such corporation shall be
treated as its annual accounting period. The term annual accounting
period may refer to a period of less than one year, where, for example,
the foreign income, war profits, and excess profits taxes are
determined on the basis of an accounting period of less than one year
as described in section 902 (c) (5). * * *
(f) * * *
(10) * * *
(v) For Forms 5471 filed for taxable years ending after December
15, 1990, such earnings and profits information as the form shall
prescribe, including post-1986 undistributed earnings described in
section 902(c)(1), pre-1987 amounts, total earnings and profits, and
previously taxed earnings and profits described in section 959(c); and
* * * * *
(g) Financial statements. * * * Forms 5471 filed after September
30, 1991, shall contain this information in such form or manner as the
form shall prescribe with respect to each foreign corporation:
* * * * *
(h) Method of reporting. Except as provided in this paragraph (h),
all amounts furnished under paragraphs (f) and (g) of this section
shall be expressed in United States dollars with a statement of the
exchange rates used. The following rules shall apply for taxable years
ending after December 31, 1994, with respect to returns filed after
December 31, 1995. All amounts furnished under paragraph (g) of this
section shall be expressed in United States dollars computed and
translated in conformity with United States generally accepted
accounting principles. Amounts furnished under paragraph (g)(1) of this
section shall also be furnished in the foreign corporation's functional
currency as required on the form. Earnings and profits amounts
furnished under paragraphs (f)(10) (i), (iii), (iv), and (v) of this
section shall be expressed in the foreign corporation's functional
currency except to the extent the form requires specific items to be
translated into United States dollars. Tax amounts furnished under
paragraph (f)(10)(ii) of this section shall be furnished in the foreign
currency in which the taxes are payable and in United States dollars
translated in accordance with section 986(a). All amounts furnished
under paragraph (f)(11) of this section shall be expressed in U.S.
dollars translated from functional currency at the weighted average
exchange rate for the year as defined in Sec. 1.989(b)-1. The foreign
corporation's functional currency is determined under section 985. All
statements submitted on or with the return required under this section
shall be rendered in the English language.
* * * * *
Sec. 1.6046-1 [Amended]
Par. 4. Section 1.6046-1 is amended as follows:
1. Paragraph (b)(10) introductory text is amended by removing the
language ``A copy of the following statements'' and adding ``The
following information'' in its place; and by removing the language
``form and''.
2. Paragraph (f)(5) is added.
3. Paragraph (g) is amended by adding three sentences at the end.
4. The additions and revisions read as follows:
Sec. 1.6046-1 Returns as to organization or reorganization of foreign
corporations and as to acquisitions of their stock, on or after January
1, 1963.
* * * * *
(f) * * *
(5) Accounting period and taxable year. In the case of a specified
foreign corporation (as defined in section 898), the taxable year of
such corporation shall be treated as its annual accounting period.
(g) * * * For taxable years ending after December 31, 1994, with
respect to returns filed after December 31, 1995, all amounts furnished
under paragraph (c) of this section shall be expressed in United States
dollars computed and translated in conformity with United States
generally accepted accounting principles. Amounts furnished under
paragraph (c)(3)(i) of this section shall also be furnished in the
foreign corporation's functional currency as required on the form.
Information described in paragraphs (b)(10) and (c)(3) of this section
shall be submitted in such form or manner as the form shall prescribe.
* * * * *
PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT
Par. 6. The authority for part 602 continues to read as follows:
Authority: 26 U.S.C. 7805.
Par. 7. Section 602.101, paragraph (c) is amended by removing the
existing entries for 1.6038-2 and 1.6046-1 from the table and adding
the following entries to the table in numerical order to read as
follows:
Sec. 602.101 OMB Control numbers.
* * * * *
(c) * * *
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Current OMB
CFR part or section where identified and described control No.
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*****
1.6038-2................................................... 1545-0704
1545-0805
1545-1317
*****
1.6046-1................................................... 1545-0704
1545-0794
1545-1317
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Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved: November 10, 1994.
Leslie Samuels,
Assistant Secretary of the Treasury.
[FR Doc. 94-30586 Filed 12-13-94; 8:45 am]
BILLING CODE 4830-01-U