Foreign Reporting—Passive Foreign Investment Company (PFIC) Ownership Rules

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Foreign Reporting—Passive Foreign Investment Company (PFIC) Ownership Rules

Posted by Kim Chen on February 8th, 2017

Final regulations (TD 9806) were issued that provide guidance on who is an owner of a PFIC, the annual filing requirements for shareholders of PFICs, and statements required to be filed with the IRS by those excepted from certain foreign corporation return rules. Under IRC Sec. 1297(a) , a PFIC is any foreign corporation if at least (1) 75% of its gross income for its tax year is passive, or (2) 50% of the assets it held during the year produce passive income or are held for the production of passive income. The new final regulations make obsolete Notices 2014-28 and 2014-51. The regulations apply to shareholders’ tax years ending on or after 1/31/13, except for the Form 5471 (Information Return of U.S. Persons With Respect to Certain Foreign Corporations) reporting rules, which apply to returns filed on or after 12/31/13. Regs. 1291-1 and-9; 1.6038-2; and 1.6046-1.