IRS Issues Guidance on Early Filing of Country-by-Country Reports
Author: Elizabeth Hazzard
On June 29, 2016, the U.S. Department of the Treasury finalized regulations mandating U.S. multinational enterprises (MNE) with consolidated revenues of $850 million or greater file a report disclosing country-by-country (CbC) data. The CbC report is to be filed with a U.S. MNE’s tax return using Form 8975, Country-by-Country Report. The filing requirement is effective for tax years beginning on or after July 1, 2016. However, many countries, including major U.S. trading partners, have issued CbC reporting requirements for tax years beginning January 1, 2016. This leaves many U.S. MNEs that have year-ends beginning January 1, 2016, through June 30, 2016, with differing filing requirements by country, i.e., foreign subsidiaries of U.S. MNEs need to complete a CbC report, while the U.S. parent company can wait another tax year before completing Form 8975 with its U.S. tax return.
On January 19, 2017, the IRS issued Revenue Procedure 2017-23, confirming it will accept the voluntary early filing of Form 8975. Beginning September 1, 2017, a U.S. MNE may file its tax return and include Form 8975. If the U.S. tax return is filed prior to September 1, 2017, an MNE may file an amended tax return to include Form 8975. The tax return statute of limitations will not be extended for taxpayers that file an amended tax return and only attach Form 8975. Revenue Procedure 2017-23 allows U.S. MNEs with CbC reporting requirements only in foreign jurisdictions for the 2016 tax year to meet early filing requirements, while not disclosing critical data included on a Form 8975 to the foreign jurisdiction.
MNEs should file Form 8975 through their Modernized e-File system and in Extensible Markup Language, not as an attachment. More instruction on this will be issued in the coming months. A paper version of Form 8975 will be made available prior to September 1, 2017.
An MNE’s CbC report has important information about all of its operations. This includes the profitability, revenues, employees and other important information for each legal entity of the MNE. When a U.S. MNE files Form 8975 early, the data is in the care of the IRS as opposed to a foreign tax jurisdiction and can be shared in countries where the U.S. has information-sharing agreements. If a U.S. MNE has a CbC reporting requirement for a foreign tax authority, BKD, LLP encourages early filing with the IRS using Form 8975.
Contact your BKD advisor with questions or to discuss early filing considerations of Form 8975 for your 2016 tax year.