U.S. property is measured on a quarterly average basis. These changes to columns (a) through (d) take into account that post-TCJA, taxes paid or accrued by a CFC are only relevant for foreign tax credit purposes if they are current year taxes. "field, "47.Shareholders pro rata share of line 41. You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. This is the seventh of a series of articles designed to provide a basic overview of the Internal Revenue Service ("IRS") Form . For more information, see section 954(b)(4) and Regulations section 1.954-1(d)(1). Income described in section 952(a)(5). Specifically, if the foreign corporation was a controlled participant (as defined in Regulations section 1.482-7(j)) in more than one cost sharing arrangement (as defined in Regulations section 1.482-7(b)) during the tax year, the filer is required to complete Schedule G-1 for each cost sharing arrangement. See section 989(b). 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. 818, available at IRS.gov/irb/2007-42_IRB#RP-2007-64. A CFC shareholder required to complete Schedule Q is required to disclose subpart F income in functional currency by relevant country. These principal business activity codes are based on the North American Industry Classification System. If there is an income tax expense amount on line 21a or 21b, subtract that amount from the line 19 net income or (loss) amount in arriving at line 22 current year net income or (loss) per the books. Use lines 1a through 1e to enter the passive category foreign personal holding company income of the CFC under the appropriate income group (dividends, interest, rents, royalties, and annuities; net gain from certain property transactions; net gain from commodities transactions; net foreign currency gain; and income equivalent to interest), each of which is also treated as a separate subpart F income group under Regulations section 1.960-1. This amount is the sum of post-2017 E&P not previously taxed, post-1986 undistributed earnings, pre-1987 E&P not previously taxed, and PTEP. Conclusion Braun and Clarke's six steps of thematic analysis were used to analyze data and put forward findings relating to the research questions and interview questions. 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. As a result of the addition of these new lines, all subsequent lines of Schedule M have been renumbered, as appropriate. The amounts reported in columns (x) and (xii) on line 1(a) are the sum of the amounts reported in each column on lines 1(a)(2) and 1(a)(3), which is equal to $8 ($5 + $3). As a result, the amount reported on line 4 for column (ii) is the sum of the amounts reported in column (ii) on lines 1(a)(1), 3(1), and 4(1), which equals $600 ($100 + $200 + $300). Name of person filing Form 5471 Street address City State (if U.S. address) ZIP code (if U.S. address) Region (if foreign address) ZIP code (if foreign address) Country (if foreign address) Identifying number Annual tax year beginning Annual tax year ending Mark any applicable Category filer checkboxes. If the subpart F income of any CFC for any tax year was reduced because of the current E&P limitation, any excess of the E&P of the CFC for any subsequent tax year over the subpart F income of the CFC for the tax year must be recharacterized as subpart F income. If Yes, enter the amount from the prior year Form 8990, line 31. See Regulations section 1.861-20(d)(3)(v)(C). For more information, see Rev. Enter the total of any illegal bribes, kickbacks, or other payments (within the meaning of section 162(c)) paid by or on behalf of the corporation, directly or indirectly, to an official, employee, or agent of a government. Use the December 2012 revision of the schedule. If there is a difference between last years ending balance on Schedule J and the amount that should be last years ending balance, taking into account modifications in Schedule J, include the difference on line 1b and attach an explanation for the difference. Reportable transactions by material advisors. 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. 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. U.S. shareholder's pro rata share of the amount on line 3" field, "5. Schedule Q (Form 5471), CFC Income by CFC Income Groups, is used to report the CFC's income in each CFC income group to the U.S. shareholders of the CFC so that the U.S. shareholders can use it to properly complete Form 1118 (Foreign Tax Credit - Corporations) to compute the high-tax exception, high-tax kickout, and Code Sec. 5471 A bill to amend the Occupational Safety and Health Act of 1970 to prohibit the Secretary of Labor from issuing a temporary standard with respect to COVID-19 vaccination or testing, and for other purposes; to the Committee on Education and Labor. The instructions have been updated for each of the aforementioned changes to Form 5471 and separate schedules. The functional currency of Domestic Corporation, CFC1, CFC2, and CFC3 is the U.S. dollar. The amounts reclassified are reported as negative numbers in columns (a) through (c) and positive numbers in column (e)(iii), as applicable. Such taxes may include, but are not limited to, certain taxes on the purchase or sale of oil and gas (section 901(f)), certain taxes used to provide subsidies (section 901(i)), and taxes for which no credit is allowed because of the boycott provisions of section 908. Enter the appropriate code from the table below for the separate category of income with respect to which the Schedule Q is being completed. Schedules E and E-1 are required for an. Enter the principal business activity code number and the description of the activity from the list at the end of these instructions. Attach a statement with a description and the amount of any required adjustments to taxes of the foreign corporation not already taken into account on this schedule. See section 959(a). This line is only applicable if a U.S. person appropriately amended a prior year return and there were intervening years between the amended year return and the current year return for which an amended return was not filed. Form 5471 and Schedule J, M, or O who agrees to have another person file the form and schedules for him or her may be subject to the above penalties if the other person does not file a correct and proper form and schedule. Only those answering yes to Form 5471, Schedule G, question 7 are required to complete and file separate Schedule G-1. 2019-40 Examples 1, 2 and 3. 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. However, the foreign corporations reference ID number should also be entered on Form 8858 if the foreign corporation is listed as a tax owner of a foreign disregarded entity (FDE) or foreign branch (FB) on Form 8858. Enter the employer identification number (EIN) or reference ID number of the lower-tier foreign corporation listed in column (a). See section 986(a). Failure to file information required by section 6038(a) (Form 5471 and Schedule M). "field, "54.Shareholders pro rata share of export trade income that applies to line 53 amount. Enter the line 5c functional currency amount translated into U.S. dollars at the average exchange rate for the foreign corporation's tax year. Such taxes are reported in Part III. Use the December 2020 revision of the schedule. "field, "1. Is required to file Form 5471 solely because of constructive ownership from a nonresident alien. Column (e)(vi) is PTEP attributable to section 965(a) inclusions (section 959(c)(2) amounts). For the remaining columns, combine lines 8 through 12. 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. The U.S. shareholders U.S. dollar basis is used by the U.S. shareholder to determine the amount of foreign currency gain or loss on the PTEP that the U.S. shareholder is required to recognize under section 986(c). In that case, see the example in the instructions for Schedule P for reporting information. As a result, the amount reported in column (ii) on line 1(a) is the sum of the amounts reported in column (ii) on line 1(a)(2) and 1(a)(3), which is equal to $175 ($100 + $75). 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. If the answer to the question on line 17a was Yes, complete the question on line 17b. 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. Use Part III to report taxes for which foreign tax credits are not allowed. Proc. CFC2 pays withholding tax of $4 on the distribution from CFC3. These amounts are included in the totals for each respective column on line 4. With respect to line a at the top of page 1 of Schedule E, there is a new code TOTAL that is required for Schedule E and Schedule E-1 filers in certain circumstances. Column (xii). Earnings and profits described in section 959(c)(1)" field, "12. In doing so, the corporate U. S. shareholder must determine whether it meets the statutory and regulatory requirements for section 245A DRD. If the Schedule Q is being prepared to report the FOGEI or FORI of a CFC, check the box for Item D. Indicate the amount of FOGEI and FORI in each income group. Domestic Corporation, a U.S. shareholder, wholly owns the only class of stock of CFC1, a foreign corporation. Report actual distributions as negative numbers. Check the appropriate box on line 6c to indicate whether any stock-based compensation was granted during the term of the CSA to individuals who performed functions in business activities that generate cost shared intangibles that were not treated as directly identified with, or reasonably allocable to, the IDA as defined in Regulations section 1.482-7(d)(1)(i). The U.S. person(s) for which the Category 2 filer is required to file Form 5471 does not directly own an interest in the foreign corporation but is required to furnish the information solely because of constructive stock ownership from a U.S. person and the person from whom the stock ownership is attributed furnishes all of the required information. Enter the foreign corporation's RAB share of the total present value of all platform contributions made by the U.S. taxpayer during the tax year with respect to the foreign corporation on line 5b. field, "27.Enter the portion of line 14e that is U.S. source income effectively connected with a U.S. trade or business (section 952(b))" field, "28.Exclusions under section 959(b) that apply to line 14e amount" field, "29.Section 954(d) subpart F Foreign Base Company Sales Income. Report the exchange rate using the divide-by convention specified under Reporting Exchange Rates on Form 5471, earlier. These are also reported in column (e). If no deduction is being claimed, check the No box and go to line 7. "field, "45.Shareholders pro rata share of export trade income that applies to line 44 amount. 851, available at IRS.gov/irb/2006-45_IRB#2006-45, as modified by Rev. See the instructions for lines 1 through 4. For a noncorporate U.S. shareholder, enter the result on Schedule 1 (Form 1040), line 8m (other income - section 951(a) inclusion), or on the comparable line of other noncorporate tax returns. The total of all amounts entered in Schedule R (Form 5471), column (d) must equal the amount on line 9, column (f) of the Schedule J (Form 5471) that is filed with code TOTAL entered on line a of that Schedule J. Failure to make a required disclosure may result in a $1,000 penalty ($10,000 for a C corporation). In item 1g, enter a brief description of the company's business activity. See Regulations section 1.245A(e)-1(d) for additional information about hybrid deduction accounts. Mr. Lyons, a U.S. person, acquires a 10% ownership in foreign corporation F. F is the 100% owner of two foreign corporations, FI and FJ. 1167 is available at IRS.gov/Pub. During the tax year, did the CFC derive income (either directly or through a branch or similar establishment, for example, disregarded entity) in connection with the purchase or sale from, to, or on behalf of a related person, of personal property manufactured in the same country under the laws of which the CFC is created or organized? Sum of the amounts from lines 13b, 13d, 13e, 14b, 15b, and 16b. See section 59A(c)(2)(A) and (B) for further details. If a U.S. person has appropriately amended the immediately prior year return, including its Schedule E-1, to redetermine its U.S. tax liability, no adjustment should be included on this line. In addition, a copy of the election statement it filed to make the election to defer income must be filed annually (also in the manner specified in the Caution below). This total also should be reported on Schedule E-1, line 4. The extraction (by the corporation or any other person) of minerals from oil or gas wells located outside the United States and its possessions. A separate Schedule P must be completed by each Category 1, 4, or 5 U.S. shareholder of the foreign corporation with respect to which reporting is furnished on this Form 5471. A corporate distribution to a shareholder is generally treated as a distribution of earnings and profits. A Schedule I-1 that includes passive category income on line 6 must include the code for passive category income (PAS) in the entry space for separate category (at the top of Schedule I-1). During Year 2, CFC3 distributes $40 to CFC2. In general, a taxpayer that is subject to tax as a domestic corporation that is a U.S. shareholder (corporate U.S. shareholder) of a CFC is deemed to pay all or a portion of the foreign income taxes paid or accrued by the CFC that are properly attributable to subpart F income or tested income included in gross income by the corporate U.S. shareholder. Enter the number of shares acquired indirectly (within the meaning of section 958(a)(2)) by the shareholder listed in column (a). During the tax year, did the CFC receive or accrue from a related CFC dividends, interest (including factoring income treated as income equivalent to interest for purposes of section 954(c)(1)(E)), rents, or royalties attributable or properly allocable to income of the related person which is neither subpart F income nor income treated as effectively connected with the conduct of a trade or business in the United States? Do not include foreign income taxes that are disallowed and are reported on Schedule E, Part III. If so, an adjustment for the prior year amended return (and its impact on intervening years) should be reflected on line 2. The line 4 result can be positive or negative. If the shareholder acquired the stock in more than one transaction, use a separate line to report each transaction. Report the exchange rate using the "divide-by convention" specified under, Report the exchange rate using the divide-by convention specified under, Enter the amount of interest expense included on line 5. Do not abbreviate the country name. Report on line 10, column (e), the taxes that relate to PTEP of the foreign corporation that are deemed paid by a shareholder of the foreign corporation, either an upper-tier foreign corporation or a U.S. shareholder, with respect to a distribution of PTEP made by the foreign corporation. The additional penalty is limited to a maximum of $50,000 for each failure. Corporation A will report $20x of PTEP as a result of its section 951A inclusion on its Form 5471, Schedule P, line 7, column (h), with respect to CFC1. Proc. These changes were made because it is possible that, in certain circumstances, a taxpayer may have a negative amount to enter on line 1 or on one or more of the exclusion lines (lines 2a through 2e). Category 1a, 3, and 5a filers should list all direct owners of the SFC or CFC through which such filer indirectly owns the SFC or CFC as described in section 958(a)(2). If any amount is excluded under the subpart F high-tax exception, do not include it in the total for line 1a through 1i, but instead add the amount to the total for line 4. See the instructions for Schedule M, later, for additional information, including the information required on the required statement for lines 14 and 29. Instructions for Form 5471, Information Return of U.S. Schedule Q (Form 5471), CFC Income by CFC Income Groups, is used to report the CFC's income in each CFC income group to the U.S. shareholders of the CFC so that the U.S. shareholders can use it to properly complete Form 1118 (Foreign Tax Credit - Corporations) to compute the high-tax exception, high-tax kickout, and Code Sec. Every year, the IRS issues a revenue procedure to provide guidance for filers of computer-generated forms. PTEP attributable to subpart F income inclusions (not described in any other column) and reclassified as investments in U.S. property. Form 5471 (Schedule E) Income, War Profits, and Excess Profits Taxes Paid or Accrued. The repeal of section 902 is effective for tax years of foreign corporations beginning after December 31, 2017, and to tax years of U.S. shareholders in which or with which such tax years of foreign corporations end. Use the December 2020 revision of the schedule. Such tax is a tax related to previously taxed earnings and profits that were included as subpart F income and is reported on line 4, column (e)(x), of Schedule E1 of CFC2s Form 5471. On line 15, report reductions for foreign income taxes attributable to the column (b) tested income group that are not deemed paid as a result of the inclusion percentage or the 80% limitation. The filer is a U.S. shareholder that only owns stock, within the meaning of section 958(b), in the foreign corporation. See Categories of Filers, earlier. Subtract line 5 from line 4 and enter the result on line 6. The term base erosion tax benefit generally means any U.S. deduction that is allowed under chapter 1 for the tax year with respect to any base erosion payment. For example: Enter the deductions (including taxes) properly allocable to the amount on line 4 (or to which such deductions would be allocable if there were such gross income). Is related (using principles of section 954(d)(3)) to the foreign-controlled corporation. Check the Item E checkbox if any excepted specified foreign financial assets are reported on Form 5471. Therefore, Schedule I-1 is completed once (for general category income, passive category income, or both). "field, "58.Dividends paid to any other person with respect to your stock during the tax year"field, "59.Divide the number of days in the tax year you did not own such stock by the number of days in the tax year and multiply the result by line 56. "field, "66.Amount of line 61 that applies to section 954(c) subpart F Foreign Base Company Services Income. For purposes of this Schedule J, include in each separate category of income, foreign source and U.S. source income. Instead, enter the total amount of cash distributions and . See specific instructions for Item FAlternative Information Under Rev. Failure to file information required by section 6046 and the related regulations (Form 5471 and Schedule O). "field, "41.Section 954(c) subpart F Foreign Base Company Sales Income subtotal. 960 deemed paid taxes. Enter foreign income taxes that are disallowed under section 901(k), which generally applies to certain taxes paid on dividends if the minimum holding period is not met with respect to the underlying stock, or if the corporation is obligated to make related payments with respect to positions in similar or related property. Proc. The instructions to Form 5471, Schedule E note: "adjustments to foreign income taxes paid or accrued in a prior year should not be reflected on Schedule E in the year of adjustment. The foreign corporation is a related party to the U.S. filer within the meaning of section 59A(g); and. However, see the instructions for Schedule R, later, for changes that affect how the schedule is completed. At the time of investment in such property, CFC2 continues to maintain a $36 balance in its section 959(c)(2) previously taxed E&P account. A separate Schedule G-1 must be filed for each cost sharing arrangement (CSA) as defined in Regulations section 1.482-7(b) in which the foreign corporation was a controlled participant (as defined in Regulations section 1.482-7(j)) during the tax year. Column (e)(v) is PTEP described in the following three subgroups (which are aggregated into a single PTEP group). From the sale or other disposition of such a contract. See section 962(b) and Regulations section 1.962-2(b). Step 2: Now, you can start filling out the form step by step. With respect to a taxpayer completing Schedule I-1 with respect to a foreign corporation with only general category income (and no passive category income) on line 6, the taxpayer should enter the code GEN in the entry space for separate category. See Regulations section 1.960-3(c)(1). CFC2 reclassifies such amount as section 959(c)(1) previously taxed E&P on Schedule J. Mr. Lyons would prepare a list showing the corporations as follows. During the tax year, did the CFC receive dividends* or interest** from a related person that (i) is a corporation created or organized under the laws of the same country under the laws of which the CFC is created or organized, and (ii) has a substantial part of its assets used in its trade or business located in the same foreign country?