Heather Ripley and Edward Tanenbaum of Alston & Bird have made available for download their advisory paper, “Through the Looking Glass: Reporting by Foreign-Owned Disregarded Entities.” It begins,
Generally, a disregarded entity is not subject to U.S. tax or information reporting, so the IRS is limited to gleaning information from tax lings by an entity’s owner. But foreign owners of disregarded entities often do not have U.S. tax reporting obligations themselves, meaning information about such entities and their owners may never cross the IRS’s radar screen.
In the wake of the massive “Panama Papers” leak, the IRS and Treasury are understandably concerned that the lack of information about foreign-owned disregarded entities“hinders law enforcement e orts and compliance with international standards of transparency and cooperation in the area of tax information exchange.”
On May 6, the IRS and Treasury announced proposed regulations that would treat a U.S. disregarded entity wholly owned by a foreign person as a separate corporation for certain reporting and recordkeeping purposes. Speci cally, Code Section 6038A, which requires U.S. corporations to report information about 25% foreign owners and the corporation’s transactions with such owners (and other related parties), would apply to foreign-owned domestic disregarded entities.
Click here to access the full paper: Through the Looking Glass: Reporting by Foreign-Owned Disregarded Entities
Posted by Allison Trupp, Associate Editor, Wealth Strategies Journal