Treasury announces forthcoming regs requiring U.S. LLCs to disclose foreign beneficial owners
The U.S. Treasury Department has indicated that it will be issuing proposed regs that will required foreign-owned, single-member U.S. limited liability companies (LLCs) to disclose to IRS their beneficial owners under Code Sec. 6038A. Penalties for non-compliance may be significant.
The U.S. Treasury Department has indicated that it will be issuing proposed regs that will required foreign-owned, single-member U.S. limited liability companies (LLCs) to disclose to IRS their beneficial owners under Code Sec. 6038A. Penalties for non-compliance may be significant.
Background on Section 6038A. Code Sec. 6038A requires certain foreign-owned U.S. corporations to file a Form 5472 (Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in U.S. Trade or Business). The filing requirement generally applies where more than 25% of the voting power or value of all classes of stock of a U.S. corporation are owned by a single foreign owner.
New proposed regs. According to the announcement, the Form 5472 filing requirement will be extended to foreign-owned, single-member U.S. LLCs, by treating such LLCs as corporations solely for the purposes of Code Sec. 6038A. As such, such LLCs will be required to obtain U.S. taxpayer identification numbers and report the identity of their foreign owners to the IRS.
Failing to file the Form 5472 when due in the manner prescribed may result in a $10,000 penalty, with additional incremental penalties of $10,000 if the failure continues for more than 90 days after notification by IRS. There is no cap on the total penalty.
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