Wednesday, June 15, 2011

Temp Regs Remove Duplicate Form 5472 Filing Requirement

T.D. 9529, 06/09/2011; Reg. §1.6038A-1T, Reg. §1.6038A-2T; Preamble to Prop Reg 06/09/2011

IRS has issued temporary regs that remove the duplicate filing requirement for Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business, effective for tax years ending on or after June 10, 2011. IRS has determined that duplicate filing is no longer necessary because of advances in electronic processing and IRS data collection. The text of the temporary regs also serves as the text of proposed regs.

Background. Form 5472 is filed by a “reporting corporation” with respect to certain related-party transactions. A reporting corporation is:

... a 25% foreign-owned domestic corporation; or

... a foreign corporation engaged in a “trade or business” within the U.S. at any time during the tax year. (Code Sec. 6038A, Code Sec. 6038C)

Former Reg. §1.6038A-2(d) (i.e., before amendment by T.D. 9161, 09/14/2004) required that Form 5472 must be timely filed with a corporate income tax return, or filed separately when the return was due (including extensions) at the IRS Center where the corporation files its return. A duplicate Form 5472 (with attachments) also had to be filed at the same time with IRS in Philadelphia, PA.

In September of 2004, IRS issued final regs that provided that the duplicate filing requirement of Reg §1.6038A-2(d) was satisfied if Form 5472 was timely filed electronically (electronic filing provision), for tax years ending on or after Jan. 1, 2003 (T.D. 9161, 09/14/2004). The regs didn't add a conforming electronic filing provision to existing Reg §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, wasn't technically possible at that time.

Simplified filing. The temporary regs now provide that the duplicate filing of Form 5472 that was required by existing Reg §1.6038A-2(d) (i.e., before amendment by T.D. 9529, 06/09/2011) is no longer necessary, regardless of whether the reporting corporation files a paper or an electronic income tax return. This change is implemented by removing the duplicate filing and electronic filing provision from existing Reg §1.6038A-2(d), and the duplicate filing requirement from the untimely filed return provision of existing Reg §1.6038A-2(e). In addition, Reg §1.6038A-2(e) is clarified to avoid any implication that the untimely filed return provision can only be satisfied by filing a paper Form 5472. (Reg. §1.6038A-2T(d), Reg. §1.6038A-2T(e))

While IRS intends that a timely filed electronic Form 5472 would be treated as satisfying the untimely filed return provision, there are currently no procedures for electronically filing Form 5472 independent of an electronically filed income tax return. Thus, a reporting corporation that doesn't timely file an income tax return must still timely file a paper Form 5472 in order to satisfy the untimely filed return provision. If IRS institutes procedures for the separate electronic filing of Form 5472, reporting corporations will no longer be required to file a paper Form 5472 when filing the Form 5472 separate from an income tax return. (T.D. 9529, 06/09/2011)

References: For Form 5472 filing requirements, see FTC 2d/FIN ¶S-5148; United States Tax Reporter ¶60,414.001; TaxDesk ¶815,504; TG ¶60,606.

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