New Categories of Filers on the 2020 Form 5471

Updated: Jun 16

US persons who fall within one of five categories of filers must file a Form 5471, 'Information Return of U.S. Persons With Respect to Certain Foreign Corporations'. The sections completed on Form 5471 will depend on the Category of filer. This annual return is filed with the individual’s or business entities’ income tax return.


New on the 2020 Form 5471, there are now 9 Categories of filers


The TCJA repealed §958(b)(4) which stated that the ‘downward attribution’ rule of 318(a)(3) was not to be applied so as to consider a US person as owning stock owned by a person who is not a US person, i.e., a foreign person. This had the impact of turning US persons into US shareholders and a foreign corporation into a CFC.


The Treasury Department and the IRS are aware that, in certain circumstances, taxpayers are required to include in gross income amounts under sections 951 (“subpart F inclusion amounts”) and 951A (“GILTI inclusion amounts”) attributable to, and report amounts with respect to, foreign corporations that are CFCs solely because of the repeal of section 958(b)(4), even though those taxpayers may have limited ability to determine whether such foreign corporations are CFCs and to obtain the information necessary to accurately determine these amounts.


As a result, the Treasury Department released Rev. Proc. 2019-40 which provides guidance related to the repeal of §958(b)(4). To lighten the reporting and documentation requirements, new categories of filers were added with different filing requirements.


Definitions from Rev. Proc. 2019-40


A foreign controlled CFC is a foreign corporation that is a CFC but that would not be a CFC, if the determination were made without applying subparagraphs (A), (B), and (C) of section 318(a)(3) so as to consider a U.S. person as owning stock which is owned by a foreign person.


A ‘related constructive US Shareholder’ is a U.S. shareholder with respect to a foreign-controlled corporation who:

1. Does not own, within the meaning of § 958(a) ‘Direct and indirect ownership’, stock of the foreign-controlled corporation; and

2. Is related (using principles of § 954(d)(3) ’Related person defined’) to the foreign-controlled corporation.


An ‘unrelated § 958(a) U.S. Shareholder’ is a U.S. shareholder with respect to a foreign-controlled corporation (defined below) who:

1. Owns, within the meaning of § 958(a), stock of a foreign-controlled corporation; and

2. Is not related (using principles of § 954(d)(3)) to the foreign-controlled corporation.


The New Categories


Category 1a filer is a US shareholder on the last day of the year of a foreign corporation that is a specified foreign corporation at any time during the year.


Category 1b filer is a US shareholder who is a Category 1a filer and who is an ‘unrelated § 958(a) U.S. shareholder’ with respect to a foreign-controlled corporation.


Category 1c filer is a US shareholder who is a Category 1a filer and who is a ‘related constructive U.S. shareholder’ with a foreign corporation.


Category 5a filer is U.S. shareholder who owns stock in a foreign corporation that is a CFC at any time during any tax year of the foreign corporation, and who owned that stock on the last day in that year on which it was a CFC.


Category 5b filer is a US shareholder who is a Category 5a filer and who is an ‘unrelated § 958(a) U.S. shareholder’ with respect to a foreign-controlled corporation.


Category 5c is a U.S. shareholder who is a Category 5a filer and who is a ‘related constructive U.S. shareholder’ with a foreign corporation.

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