Use Schedule I to report in U.S. dollars the U.S. shareholder's pro rata share of income from the foreign corporation reportable under subpart F and other income realized from a corporate distribution. If the shareholder's latest tax return was filed electronically, enter e-filed in column (b)(3) instead of a service center. The information in this schedule will be used by the U.S. shareholder(s) of the CFC to file Form 8992, U.S. Filers are permitted to enter both an EIN and a reference ID number. Column (e)(ix) is PTEP described in the following three subgroups (which are aggregated into a single PTEP group). For more information, see section 954(b)(4) and Regulations section 1.954-1(d)(1). A CFC shareholder required to complete Schedule Q is required to disclose subpart F income in functional currency by relevant country. Cosponsors added, H1014 [7FE] From the Congressional Record, Volume 167 (2021) Enter the employer identification number (EIN) or reference ID number of the lower-tier foreign corporation listed in column (a). If "Yes," enter the Corresponding Code(s) from the table in the entry space provided on line 14 of the form. Use the December 2020 revision of the schedule. See the Instructions for Form 8886 for details on these and other penalties. You are required to give us the information. Include net income from notional principal contracts (except a contract entered into to hedge inventory property). Such amounts are reported as negative numbers. The name, address, and EIN (or reference ID number) of the foreign corporation(s). If so, did the foreign corporation derive any item of income, gain, deduction, or loss (other than any item described in section 954(c)(1)(A), (E), or (G)) from any transaction entered into in the ordinary course of its trade or business as a regular dealer? Also, timely information reporting is important to the extent the U.S. shareholder chooses to amend its return in a later year to make the election under section 962. During the tax year, did the subpart F income of the CFC exceed the earnings and profits of such corporation? The corporation is required to complete line 5 only if the corporation itself incurred intangible development costs. Schedule Q (Form 5471) (Rev. For a noncorporate U.S. shareholder, include the result as Other income on Schedule 1 (Form 1040), line 8z (other income), or on the comparable line of other noncorporate tax returns. Enter the net amount of any additional adjustments not included on lines 2a through 2h. Every U.S. person described in Category 3 must complete Part II. As a result, if the foreign corporation has E&P for the tax period covered by this return that is subject to recapture as a result of a prior-year E&P limitation, add such recapture amount to the result from Worksheet A, line 69, and include the combined amount on line 1h (Other subpart F income). Do not include the amounts of any dividend income received from a related person that are already included in the amounts entered on line 2b or line 2c. See Regulations section 1.904-4(c)(3)(iii). Instead, enter the total amount of cash distributions and . Page 33 No 7004 Extension Required Some forms require the taxpayer to file a Form 7004 in order to request an extension. 2019-40 provides relief for certain types of Category 5 filers. Section 960(b)(1). As a result, the total amount entered on line 3 may not equal the sum of the amounts reported in columns (ii) through (xiii) on lines 3(1), 3(2), etc., if any tested units tentative tested income is excluded under the GILTI high-tax exclusion (these amounts are included in the total amounts reported on line 4). In other words, is line 7 less than line 8 and less than $1 million? 55, available at IRS.gov/irb/2003-28_IRB#RP-2003-47, for procedural rules regarding the election under section 953(d). File this summary return in the manner described in When and Where To File, earlier. No credit is allowed for these taxes because only foreign income taxes paid or accrued to a foreign country or possession of the United States are allowed as a credit. See Part I Taxes for Which a Foreign Tax Credit Is Allowed, earlier, for instructions regarding these columns. An estate or trust that is not a foreign estate or trust as defined in section 7701(a)(31). See sections 962(a)(1) and 951A(f)(1)(A). See Multiple filers of same information, earlier. This line of column (d) accounts for foreign income taxes that are suspended in the current tax year. In this case, enter zero on line 10 and skip lines 11 through 19. Check the box if the foreign income taxes reported in column (j) were paid or accrued by the corporation during prior tax years and were suspended due to the application of the rules of section 909 and that are unsuspended in the current year because related income is taken into account by the foreign corporation, certain U.S. corporate owners of the foreign corporation, or a member of such U.S. corporate owners consolidated group. When filing Schedule O, report acquisitions, dispositions, and organizations or reorganizations that occurred during your tax year. Enter the subpart F income inclusion attributable to tiered extraordinary reduction amounts resulting from extraordinary reductions. (i) Country Code (ii) PTEP attributable to hybrid dividends under section 245A(e)(2). Mr. Lyons is also required to submit a chart if the foreign corporation is a member of a chain of corporations, and to indicate if he is a 10% or more shareholder in any of those corporations. The amount reported in column (xii) may not be the same as the sum of the amounts in columns (viii) through (x) if columns (viii) through (x) include taxes that are not creditable, including taxes paid or accrued to sanctioned countries, foreign taxes disallowed under sections 901(k), (m), and (l), and taxes paid or accrued to the United States. Otherwise, enter zero. Dividends, interest, rent, or royalty income from related corporate payors described in section 954(c)(3) or (6). Reclassified section 951A PTEP and section 951A PTEP that is in the section 951A category should be reported on the Schedule P completed for the general category. See Regulations section 1.245A(e)-1(d) for additional information about hybrid deduction accounts. Therefore, the revised tax liability is $2. Form 5471, officially called the Information Return of U.S. On pages 2 and 3, Schedule E-1, former line 15 is now line 13 and now requests filers to combine lines 8 through 12 in columns (a), (b), and (c). From the sale or other disposition of such a contract. Elects to treat its related person insurance income for the tax year as income effectively connected with the conduct of a trade or business in the United States, Elects to waive all treaty benefits (other than from section 884) for related person insurance income, and. A hybrid deduction includes a deduction allowed to the CFC under a foreign tax law with respect to equity (such as a notional interest deduction). "field, "61.Shareholders pro rata share of subpart F income. In such a case, the Schedule P must be attached to the statement described above.. A reference ID number (defined below) is required on line 1b(2) only in cases where no EIN was entered on line 1b(1) for the foreign corporation. Persons With Respect To Certain Foreign Corporations. A corporation that uses an accrual method of accounting must use accrued payments and accrued receipts for purposes of computing the total amount to enter on each line of Schedule M. Schedule O is used to report the organization or reorganization of a foreign corporation and the acquisition or disposition of its stock. Subtract the sum of lines 24 and 25 from line 13h." Subtract line 51 from line 50. For details, see the Instructions for Form 8918. Income, gain, deduction, or loss from any transaction (including a hedging transaction) and transactions involving physical settlement of a regular dealer in property, forward contracts, option contracts, and similar financial instruments (section 954(c)(2)(C)). Report the opening balance, current year additions and subtractions, and the closing balance in the foreign corporation's E&P described in section 959(c)(3). If an amount is entered on line 29, you must attach a statement that includes the following information. field, "37.Current E&P limitation computation:" field, "37b.Tested loss (enter as a positive numbersee instructions)"field, "37c.Total of line 37a and line 37b"field, "38.Enter the smaller of line 36 or line 37c" field, "39.If the amount on line 37c is less than the amount on line 36, allocate the subpart F income remaining (after having been limited) to lines 40, 41, 42, and 43 below in the manner prescribed by Regulations section 1.952-1(e). Such tax is attributable to previously taxed subpart F income and is reported on line 6, column (e)(x), of Schedule E1 of CFC1s Form 5471. To determine the appropriate code, see Categories of Income in the Instructions for Form 1118. See the instructions for lines 1 through 4. On pages 2 and 3, Schedule E-1, line 14 (taxes related to hovering deficits offset of undistributed post-transaction E&P) of the previous revision has been deleted. 170, available at IRS.gov/irb/2009-31_IRB#NOT-2009-55. All taxes relate to general category income. Corporation A, a domestic corporation, owns 50% of the only class of stock of CFC1 and Corporation B, a domestic corporation, owns the remaining 50% of the stock of CFC1. Section 5 of Rev. If there is more than one such date, use the most recent date. The amounts reclassified are reported as negative numbers in columns (a) through (c) and positive numbers in column (e)(iii), as applicable. Instructions for Form 5471, Information Return of U.S. Otherwise, check No. Apply Regulations section 1.385-3(b)(3)(iii)(E) to determine when a debt instrument is treated as issued for purposes of Regulations section 1.385-3(b)(3)(iii). PTEP attributable to section 1248 amounts from the gain on the sale of foreign corporation stock by a CFC and reclassified as investments in U.S. property. In general, this is E&P of the foreign corporation that has not been included in gross income of a U.S. person under section 951(a)(1) and section 951A. In other words, are any amounts described in section 954(c)(2)(B) excluded from line 1a of Worksheet A? Excess of foreign currency gains over foreign currency losses (section 954(c)(1)(D))" field, "1e.Income equivalent to interest (section 954(c)(1)(E))" field, "1f.Net income from a notional principal contract (section 954(c)(1)(F))" field, "1g.Payments in lieu of dividends (section 954(c)(1)(G))" field, "1h.Certain amounts received for services under personal service contracts (see section 954(c)(1)(H)", "1i.Certain amounts from sales of partnership interests to which the look-through rule of section 954(c)(4) applies", "2.Gross foreign personal holding company income. However, in the case of Schedule Q (Form 5471) filers, if a foreign corporation has more than one of those categories of income, the filer must also complete and file a separate Schedule Q using code TOTAL that aggregates all amounts listed for each line and column of all other Schedules Q. For example, if you are completing Schedule J for the passive category (that is, you have entered "PAS" on line a at the top of page 1 of Schedule J), enter the current year E&P (or deficit in E&P) amount from Schedule H (Form 5471), line 5c(ii), in the applicable column. If the foreign corporation uses the DASTM under Regulations section 1.985-3, the functional currency column should reflect local hyperinflationary currency amounts computed in accordance with U.S. GAAP. Exempt insurance income under section 953(e) and certain investment income of a qualifying insurance company or a qualifying insurance branch (sections 953(a)(2) and 954(i)). Do not include an account receivable or payable balance arising in connection with the provision of services or the sale or processing of property if the amount of such balance does not, at any time during the tax year, exceed what is ordinary and necessary to carry on the trade or business. Line 6. These principal business activity codes are based on the North American Industry Classification System. The foreign corporation's E&P is determined in the foreign corporation's functional currency. This adjustment is necessary because foreign taxes imposed on PTEP distributions do not reduce current year E&P. Report the exchange rate using the divide-by convention specified under Reporting exchange rates on Form 5471, earlier. Include filer information such as name and address, Items A through C, and tax year. Worksheet- -Summary: This is an example of worksheet A, page 2, which is used to determine the shareholder's share of Subpart F income. The balance of foreign income taxes paid or accrued with respect to the three income groups that is entered on line 16 should equal zero after taking into account the reductions. The corporation should specifically identify. Any foreign income taxes paid or accrued (but not deemed paid) by the foreign corporation with respect to a PTEP distribution from a lower-tier foreign corporation (whether or not such PTEP distribution is reported in Section 2), such as withholding taxes imposed on the PTEP distribution, are reported in Section 1. Any other current year foreign tax is allocated to the CFC income group to which the items of foreign gross income are assigned under the rules of Regulations section 1.861-20. This column is used to report current-year tax imposed solely by reason of the receipt of a disregarded payment that is a reattribution payment. 92-70, 1992-2 C.B. Enter the income tax expense (benefit) allocated to OCI items in the intraperiod allocation. During the tax year, did the CFC receive, from a corporation that is a related person, rents or royalties* for the use of, or privilege of using, property within the country under the laws of which the CFC is created or organized? Information Return of U.S. Form 5471 is an important IRS tool for assessing the scope of a taxpayer's foreign holdings and operations. Indicate the regarded entity owner's name in parentheses after the FDE's name. No changes have been made to Schedule O (Form 5471). Corporate U.S. shareholders should enter the foreign-source portion of any subpart F income inclusions attributable to the sale or exchange by a CFC of stock of another foreign corporation that is eligible for the section 245A dividends received deduction pursuant to section 964(e)(4). 0122. Section 956(a) amount. These amounts are included in the totals for each respective column on line 4. Accordingly, there can be no deemed-paid foreign taxes with respect to a PTEP distribution from a lower-tier foreign corporation that is the lowest foreign-tier foreign corporation in a chain, and therefore no such distributions will be reported in Section 2. On page 2, Schedule E-1, columns (a), (b), and (c) have been repurposed. Report the exchange rate using the "divide-by convention" specified under Reporting exchange rates on Form 5471. Enter the amount of the CFCs income or loss described in section 952(b), which is generally income or loss from sources within the United States that is effectively connected to the conduct of a trade or business by the CFC in the United States and not reduced or exempt from tax pursuant to an income tax treaty with the United States. A U.S. person described in Category 1, 3, 4, or 5 (shareholder) does not have to file Form 5471 if all of the following conditions are met. For these purposes, section 898(b) defines an SFC as any foreign corporation: That is treated as a CFC under subpart F, and. Also, new lines 14 and 29 were added for reporting other amounts received (line 14) and other amounts paid (line 29). If the controlling domestic shareholder(s) of a CFC made an election in 2009 or 2010 to defer income from cancellation of debt in connection with the CFCs reacquisition of an applicable debt instrument, a statement must be filed (in the manner specified in the Caution below) beginning with the tax year following the tax year for which the controlling domestic shareholder of the CFC made the election, and ending the first tax year all income deferred has been included in income. This list of principal business activities and their associated codes is designed to classify an enterprise by the type of activity in which it is engaged to facilitate the administration of the Internal Revenue Code. See Regulations section 1.960-3(c)(1). Qualified interest expense is defined in Regs. Each year certain U.S. persons with interests in foreign corporations must file an IRS Form 5471 otherwise known as " Information Return of U.S. Otherwise, go to line 11. Category 4 and 5 filers are not subject to the subpart F rules for: Deductions that are apportioned or allocated to exempt foreign trade income; Nonexempt foreign trade income (other than section 923(a)(2) nonexempt income, within the meaning of A Category 1 or 5 filer does not have to file Form 5471 if no U.S. shareholder (including such U.S. person) owns, within the meaning of section 958(a), stock in the foreign corporation on the last day in the year of the foreign corporation in which it was an SFC or CFC, and the foreign corporation is an SFC or CFC solely because one or more U.S. persons is considered to own the stock of the foreign corporation owned by a foreign person under section 318(a)(3). A person that is both a category 3 and category 5 filer because it is treated as a U.S. shareholder under section 953(c)(1)(A) with respect to the foreign corporation must complete Schedule B, Part 1 for U.S. persons that owned (on the last day of the foreign corporations taxable year), directly or indirectly through foreign entities, any of the foreign corporation's outstanding stock. Translate the taxes entered in column (j) into dollars at the average exchange rate for the tax year to which the tax relates unless one of the exceptions below applies. 6038 and 6046, Form 5471 is required to be filed by certain U.S. persons who are officers, directors, or shareholders in certain foreign corporations. A "reference ID number" is a number established by or on behalf of the U.S. person identified at the top of page 1 of the form that is assigned to a foreign corporation with respect to which Form 5471 reporting is required. The corporate U.S. shareholder should include the line 5a amount on Form 1120, Schedule C, line 13, column (a), or the comparable line of other corporate income tax returns. corporation, you could be required to file Form 5471 and/or Form 926. If previously taxed E&P (PTEP) were distributed, enter the amount of foreign currency gain or (loss) recognized on the distribution, computed under section 986(c). Note that an amount determined under section 956(a) is not considered subpart F income. For example, with respect to line A at the top of page 1 of Schedule Q, there is a new code TOTAL that is required for Schedule Q filers in certain circumstances. Except for columns (a), (b), and (c), which are new this year, if the balance on line 18 of prior year Schedule E-1 was adjusted after the filing of the original prior year Form 5471, such adjustments should be reflected on line 1b. The corporate U.S. shareholder should include the line 5e amount on Form 1120, Schedule C, line 14, column (a), or the comparable line of other corporate income tax returns. "field, "65.Translate the amount on line 64 from functional currency to U.S. dollars at the average exchange rate. When completing Item H with respect to members of a consolidated group, identify only the direct owners in Item H (constructive owners are not required to be listed). Complete a separate Schedule Q for foreign source income in each separate category and U.S. source income in each separate category. Columns (e)(i) and (e)(ii) are PTEP originally attributable to inclusions under section 965(a) and E&P treated as PTEP under section 965(b)(4)(A), respectively, and reclassified as investments in U.S. property (section 959(c)(1)(A) amounts). Specified tangible property means any tangible property used in the production of tested income. Page Last Reviewed or Updated: 20-Apr-2022, Request for Taxpayer Identification Number (TIN) and Certification, Employers engaged in a trade or business who pay compensation. Category 2: A person who owns at least 10% or more of the foreign corporation. In general, a CFC is a foreign corporation that has U.S. shareholders that own (directly, indirectly, or constructively, within the meaning of sections 958(a) and (b)) on any day of the tax year of the foreign corporation, more than 50% of: The total combined voting power of all classes of its voting stock, or. In general, see Regulations section 1.951A4(b)(1) to determine how to compute the CFCs tested interest expense. A foreign corporation may have PTEP in a PTEP group within any of the separate categories of income, with the exception of foreign branch category income. If a GILTI high-tax exclusion under Regulations section 1.951A-2(c)(7)(viii) is effective with respect to the CFC for the CFC inclusion year, check the box in column (xiv) that corresponds to the item(s) of income to which the exception applies. Noncorporate U.S. shareholders should leave line 1a blank. As to a domestic corporation that is a U.S. shareholder with respect to both CFCs, the tiered hybrid dividend is treated as subpart F income of the receiving CFC, and the U.S. shareholder must include in its gross income its pro rata share of the tiered hybrid dividend. If the foreign corporation is the tax owner of an FDE or FB and you are a Category 4, 5a, or 5c filer of Form 5471, you are required to attach Form 8858 to Form 5471. This is the annual PTEP account. See section 59A(c)(2)(A) and (B) for further details. Qualified Interest Expense Next, we will calculate "qualified interest expense". Enter the excess of gains over losses from the sale or exchange of: Property that produces the type of income reportable on line 1a; An interest in a trust, partnership, or REMIC; however, see the instructions for Line 1i for an exception that provides for look-through treatment for certain sales of partnership interests; or. If an individual, estate, or trust that is a U.S. shareholder of a CFC makes an election under section 962 (962 electing shareholder), any inclusions under section 951 or 951A of the U.S. shareholder will be treated as received by a corporate U.S. shareholder for purposes of section 960. Schedule I-1 is now completed once. Add lines 6 and 7" field, "9.Enter 5% of total gross income (as computed for income tax purposes)" field, "10.Enter 70% of total gross income (as computed for income tax purposes)" field, "11.If line 8 is less than line 9 and less than $1 million, enter 0 on this line and skip lines 12 through 21" field, "12.If line 8 is more than line 10, enter total gross income (as computed for income tax purposes)" field, "13.Total adjusted gross foreign base company income and insurance income (enter the greater of line 8 or line 12)" field, "14. A corporate distribution to a shareholder is generally treated as a distribution of earnings and profits. Columns (b) through (f) should request dollar amounts of the specified other amounts received during the annual accounting period by the foreign corporation from the persons listed in the headings for columns (b) through (f). If you and one or more other persons are required to furnish information for the same foreign corporation for the same period, a joint information return that contains the required information may be filed with your tax return or with the tax return of any one of the other persons. PTEP attributable to section 1248 amounts from the gain on the sale of a foreign corporation stock by a CFC. If the box on line F is checked, enter the applicable code from the list provided below. The facts are the same as in Example 2, except that during Year 4, CFC1 distributes $36 to Domestic Corporation. If necessary, enter negative amounts on line 15 of columns (a), (b), and (c) in amounts sufficient to reduce line 16, columns (a), (b), and (c), to zero. Line 7. If the foreign surviving corporation had a deficit in E&P prior to a transaction described in section 381, such deficit is recharacterized as a hovering deficit after such nonrecognition transaction. Enter the foreign corporations share of reasonably anticipated benefits (RAB) for the CSA during the tax year. Click on "Open File" and select the form 5471 and open it with the program. In addition to the separate category codes referred to above, if you have more than one of the categories of income referred to above, you must complete and file a separate Schedule Q using code TOTAL that aggregates all amounts listed for each line and column in all other Schedules Q. The name of the person filing Form 5471 is generally the name of the U.S. person described in the category or categories of filers (see Categories of Filers, earlier). For purposes of Category 1 filers, an SFC (as defined in section 965) is: A CFC (see Category 5 Filers, later, for definition), or. Use Worksheet A, later in these instructions, to compute the U.S. shareholder's pro rata share of subpart F income of the CFC, which is reportable on lines 1e through 1h.