IRS Issue Statistics for CFC Holdings; Importance of Form 5471 Grows
On March 6, 2013, the IRS issued statistics for the tax year 2008 with respect to foreign corporations controlled by U.S. corporations. These statistics emphasize the important growth in controlled foreign corporations (“CFCs”) and Form 5471.
IRS Statistics Published in Statics of Income Bulletin (Winter 2013)
In the tax year 2008, some 83,642 foreign corporations controlled by U.S. multinational corporations held $14.5 trillion in assets and reported receipts of $6.0 trillion. These controlled foreign corporations (CFCs) paid $125.2 billion in income taxes on $662.0 billion of earnings and profits (less deficit) before income taxes (“E&P”). Both CFC assets and receipts increased slightly more than 24 percent from tax year 2006, while “E&P” and foreign taxes income taxes paid increased by nearly 30 percent.
For the tax year 2008, these same CFCs were incorporated in 188 different countries (based on unpublished data). More than 42 percent, or 35,856, of these CFCs were incorporated in Europe. Nearly 91 percent of the European CFCs were located in European Union countries.
Almost 79 percent, or 65,740, of CFCs for Tax Year 2008 were concentrated in three major industrial sectors: (1) services; (2) goods production; and (3) distribution and transportation of goods. These three industrial sectors accounted for 81.2 percent of total receipts ($4.9 trillion), 74.9 percent of E&P (less deficit) before income taxes ($496.0 billion), and 57.5 percent of income taxes ($72.0 billion).
Furthermore, for the tax year 2008, controlled foreign corporations were tax owners of 17,548 foreign disregarded entities (FDEs). These foreign disregarded entities reported $4.9 trillion in assets and $230.1 billion in E&P (less deficit) after taxes.
Statistics Demonstrate the Continuous Growth of CFCs and Importance of Form 5471
The IRS statistics confirmed what is already well-known – with growing globalization, the importance of CFCs is increasing with each year. This further means that Form 5471 is also increasing in its importance for the IRS, which is already stepping up the enforcement of compliance with Form 5471 requirements.
Form 5471 is used by the IRS to satisfy the informational reporting requirements of 26 U.S.C. § 6038 (“Information reporting with respect to certain foreign corporations and partnerships”) and 26 U.S.C. § 6046 (“Returns as to organization or reorganization of foreign corporations and as to acquisitions of their stock”). It must be filed by certain U.S. citizens and residents who are officers, directors, or shareholders in specified foreign corporations, if various requirements are met. The penalties can be steep, so compliance with the reporting rules is crucial.
Contact Sherayzen Law Office for Help With Form 5471
If you own foreign corporations, you may need to comply with Form 5471 requirements. This is why you need to contact Sherayzen Law Office to schedule a consultation. Our international tax firm is highly experienced in dealing with Forms 5471 and we can help you comply with its requirements. If you are delinquent in your 5471 compliance, we can also advise you with respect to your voluntary disclosure options.