Source: https://www.irs.gov/irb/2016-14_IRB
Timestamp: 2019-05-23 17:17:34
Document Index: 568943717

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Internal Revenue Bulletin: 2016-14 | Internal Revenue Service
Internal Revenue Bulletin: 2016-14
T.D. 9746
Rev. Rul. 201606
Rev. Rul. 201609
Notice 201626
Rev. Proc. 201621
Announcement 201614
REG10982215
Notice 2016–26 Notice 2016–26
The Department of Treasury and Internal Revenue Service invite public comment on recommendations for items that should be included on the 2016–2017 Priority Guidance Plan.
REG–109822–15 REG–109822–15
These proposed regulations provide guidance on the information required to be reported for country-by-country (CbC) reporting. The proposed regulations generally require United States persons (other than individuals) that are the ultimate parent of a U.S. multinational enterprise (MNE) group earning annual revenues of $850,000,000 or more to report certain financial information on a tax jurisdiction-by-tax jurisdiction basis. The regulations require the U.S. ultimate parent to list the U.S. MNE group’s business entities indicating each entity’s tax jurisdiction (if any), country of organization, tax identification number (if any), and main business activity, as well as CbC financial information for each tax jurisdiction in which the U.S. MNE does business. The CbC financial information includes income, profits, income taxes, stated capital, accumulated earnings, number of employees, and tangible assets other than cash.
Rev. Rul. 2016–06 Rev. Rul. 2016–06
Interest rates: underpayment and overpayments. The rates for interest determined under section 6621 of the code for the calendar quarter beginning April 1, 2016, will be 4 percent for overpayments (3 percent in the case of a corporation), 4 percent for the underpayments, and 6 percent for large corporation underpayments. The rate of interest paid on the portion of a corporation overpayment exceeding $10,000 will be 1.5 percent.
Rev. Rul. 2016–09 Rev. Rul. 2016–09
Federal rates; adjusted federal rates; adjusted federal long-term rate and the long-term exempt rate. For purposes of sections 382, 642, 1274, 1288, and other sections of the Code, tables set forth the rates for April 2016.
Rev. Proc. 2016–21 Rev. Proc. 2016–21
Guidance is provided to individuals who fail to meet the eligibility requirements of section 911(d)(1) of the Internal Revenue Code because adverse conditions in a foreign country preclude the individual from meeting those requirements. Revenue Procedure 2016–21 provides a country for tax year 2015 and the date that country is subject to the section 911(d)(4) waiver.
T.D. 9746 T.D. 9746
Announcement 2016–14 Announcement 2016–14
Announcement 2016–14 informs taxpayers and practitioners that the IRS has revised Form 3115, Application for Change in Accounting Method, and its instructions. The Form 3115 (Rev. December 2015) replaces the December 2009 version. The announcement also provides a transition period and transition guidance.
Each of the described tests is a necessary requirement for an organization to establish that it qualifies as a supporting organization. These final regulations, however, focus primarily on the relationship test for supporting organizations that are “operated in connection with” their supporting organization(s), otherwise known as “Type III” supporting organizations. Specifically, the final regulations reflect statutory changes enacted by the Pension Protection Act of 2006, P.L. 109–280 (120 Stat. 780 (2006) (PPA)). Section 1241(d)(1) of the PPA directed the Secretary of the Treasury to promulgate regulations under section 509 that establish a new distribution requirement for Type III supporting organizations that are not “functionally integrated” to ensure that a “significant amount” is paid to supported organizations. For this purpose, the term “functionally integrated” means a Type III supporting organization that is not required under Treasury regulations to make payments to supported organizations because the supporting organization engages in activities that relate to performing the functions of, or carrying out the purposes of, its supported organization(s). These final regulations address the amount that a Type III supporting organization that is not functionally integrated (a non-functionally integrated (NFI) Type III supporting organization) must annually distribute to its supported organization(s).
On August 2, 2007, the Treasury Department and the IRS published in the Federal Register (72 FR 42335) an advance notice of proposed rulemaking (ANPRM) (REG–155929–06) in response to the PPA. The ANPRM described proposed rules to implement the changes made by the PPA to the Type III supporting organization requirements and solicited comments regarding those proposed rules.
On September 24, 2009, the Treasury Department and the IRS published in the Federal Register (74 FR 48672) a notice of proposed rulemaking (the 2009 NPRM) (REG–155929–06). The 2009 NPRM contained proposed regulations (the 2009 proposed regulations) setting forth the requirements to qualify as a Type III supporting organization under the PPA.
On December 28, 2012, the Treasury Department and the IRS published in the Federal Register (77 FR 76382) a Treasury decision (TD 9605) containing final and temporary regulations (the 2012 TD) regarding the requirements to qualify as a Type III supporting organization. Based on the comments received, the 2012 TD made certain changes to the rules proposed in the 2009 NPRM, included in the temporary regulations significant changes to the distribution requirement, and reserved certain topics for further consideration. The 2012 TD was effective and applicable on December 28, 2012. The applicability of the temporary regulations expires on or before December 21, 2015. On December 28, 2012, the Treasury Department and the IRS also published in the Federal Register (77 FR 76426) a notice of proposed rulemaking (the 2012 NPRM) (REG–155929–06) that incorporated the text of the temporary regulations in the 2012 TD by cross-reference. The IRS received five comments on the 2012 NPRM. The comments were considered in developing these final regulations and are available for public inspection at www.regulations.gov or upon request. No public hearing was requested.
Under the 2012 TD, an NFI Type III supporting organization must annually distribute to or for the use of one or more supported organizations an amount equaling or exceeding the supporting organization’s “distributable amount” for the taxable year. See § 1.509(a)–4(i)(5)(ii). The temporary regulations contained in the 2012 TD defined an NFI Type III supporting organization’s “distributable amount” as equal to the greater of (1) 85 percent of the supporting organization’s adjusted net income or (2) its “minimum asset amount,” in each case for the immediately preceding taxable year. The temporary regulations defined “minimum asset amount” as 3.5 percent of the excess of the aggregate fair market value of the supporting organization’s non-exempt-use assets over the acquisition indebtedness with respect to such nonexempt use assets. Additionally, the temporary regulations provided that the determination of the aggregate fair market value of an NFI Type III supporting organization’s non-exempt-use assets would be made using the valuation methods generally applicable to private foundations under § 53.4942(a)–2(c). The temporary regulations also provided that, consistent with the private foundation rules, the “non-exempt use” assets of a supporting organization do not include certain investment assets described in § 53.4942(a)–2(c)(2) or assets used (or held for use) to carry out the exempt purposes of the supported organization(s) (as determined by applying the principles described in § 53.4942(a)–2(c)(3)).
After consideration of all the comments received in response to the 2012 NPRM, this Treasury decision adopts the 2012 NPRM without change, except to (1) conform the provision regarding the valuation of non-exempt-use assets to the section 4942 regulation provision that it cross-references (§ 53.4942(a)–2(c)(2)), and (2) replace references in § 1.509(a)–4 to the temporary regulations with references to these final regulations. Thus, other than the change conforming the provision in the final regulations regarding the valuation of non-exempt-use assets to the provision in the section 4942 regulations, these final regulations are the same as the temporary regulations that have been applicable to Type III supporting organizations since December 28, 2012. Additionally, this Treasury decision removes the temporary regulations.
The Treasury Department and the IRS intend to publish a notice of proposed rulemaking for Type III supporting organizations in the near future. Among other proposals, the new proposed regulations would make one change to these final regulations. Specifically, the new proposed regulations will propose removal of the provision in these final regulations that reduces the distributable amount by the amount of taxes subtitle A of the Code imposes on a supporting organization during the immediately preceding taxable year. In addition, the new proposed regulations will propose specific rules regarding the requirements for Type III supporting organizations that support governmental supported organizations to be treated as functionally integrated Type III supporting organizations. In addition, the new proposed regulations would provide transition relief beyond the period provided in Notice 2014–4, 2014–2 IRB 274. Supporting organizations may continue to rely on the transitional rule described in Section 3.01 of Notice 2014–4 until the date that the notice of proposed rulemaking prescribing the new proposed regulations under § 1.509(a)–4(i)(4)(iv) is published in the Federal Register. In the notice of proposed rulemaking publishing the new proposed regulations, the Treasury Department and the IRS will request comments on all proposed changes.
The PPA directed the promulgation of Treasury regulations requiring NFI Type III supporting organizations to make distributions of a percentage of either income or assets to their supported organizations to ensure that a significant amount is paid to those supported organizations. Under the Treasury regulations in effect when PPA was enacted, certain Type III supporting organizations were required to distribute “substantially all” of their income to one or more publicly supported organizations. For this purpose, “substantially all” had the same meaning of 85 percent or more that it had in § 53.4942(b)–1(c) (defining “substantially all” for purposes of the income test for private operating foundations). See Rev. Rul. 76–208, 1976–1 C.B. 161.
The 2009 NPRM had proposed to replace the income-based distribution requirement with an asset-based distribution requirement of 5 percent of the fair market value of an organization’s non-exempt-use assets. In response to comments, the 2012 NPRM instead proposed to keep the historic income-based distribution requirement, and proposed to combine it with a reduced percentage-of-assets distribution requirement. Therefore, the temporary and proposed distributable amount for NFI Type III supporting organizations was the greater of 85 percent of adjusted net income or 3.5 percent of the net fair market value of non-exempt-use assets, in each case as determined for the immediately preceding taxable year.
The Treasury Department and the IRS believe that a distribution requirement equal to the greater of 85 percent of adjusted net income or 3.5 percent of the net fair market value of an organization’s non-exempt-use assets strikes an appropriate balance. It ensures that NFI Type III supporting organizations distribute significant amounts to their supported organizations, as Congress directed in the PPA. Further, the 85 percent of income test will make it more likely that supported organizations will timely benefit from higher returns received by their supporting organizations. Conversely, in years with lower returns or for organizations that invest in assets that produce largely appreciation rather than income, a 3.5-percent of assets distribution requirement will apply, which is less than the 5-percent of assets distribution requirement that applies to private non-operating foundations. With respect to the suggestion that certain organizations be permitted to comply only with the income-based distribution requirement, the Treasury Department and the IRS believe it would be inequitable and administratively difficult to apply one requirement to some NFI Type III supporting organizations but another requirement to others.
The 2012 NPRM provided that, for purposes of the calculation of the annual distributable amount, a supporting organization’s adjusted net income would be determined using the principles of section 4942(f) and § 53.4942(a)–2(d). These provisions apply the principles of subtitle A of the Code.
The 2012 NPRM provided that for purposes of determining the distributable amount for a taxable year, non-exempt-use assets would be valued using the principles generally applicable to private foundations under § 53.4942(a)–2(c). One commenter suggested allowing the use of state property tax valuations for purposes of valuing real property under § 53.4942(a)–2(c).
Section 53.4942(a)–2(c) applies the principles of regulations under section 2031, which generally apply for estate tax purposes, to the valuation of real property. Section 20.2031–1(b) provides that the value at which property is assessed for local tax purposes may be considered only if that value represents the fair market value as of the valuation date. Section 20.2031–3 further provides that if real property is leased or otherwise used in a business, special valuation rules may apply. The Treasury Department and the IRS continue to believe that the same valuation principles that apply to private foundations should apply to NFI Type III supporting organizations. Therefore, the final regulations do not adopt this comment.
The IRS Notice 2014–4 cited in this preamble is published in the Internal Revenue Bulletin and is available from the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402, or by visiting the IRS Web site at http://www.irs.gov.
Par. 2. Section 1.509(a)–4 is amended by:
1. Amending the second sentence of paragraph (i)(4)(ii)(C) to remove the language “§ 1.509(a)–4T(i)(8)(ii)” and adding “paragraph (i)(8)(ii) of this section” in its place.
2. Amending paragraph (i)(5)(ii)(A) to remove the language “§ 1.509(a)–4T(i)(5)(ii)(B)” and adding “paragraph (i)(5)(ii)(B) of this section” in its place.
5. Amending the last sentence of paragraph (i)(5)(ii)(D) to remove the language “§ 1.509(a)–4T(i)(5)(ii)(B)” and adding “paragraph (i)(5)(ii)(B) of this section” in its place.
6. Amending the first sentence of Example 1 of paragraph (i)(5)(iii)(D) to remove the language “§ 1.509(a)–4T(i)(5)(ii)(B)” and adding “paragraph (i)(5)(ii)(B) of this section” in its place.
7. Amending the first sentence of Example 2 of paragraph (i)(5)(iii)(D) to remove the language “§ 1.509(a)–4T(i)(5)(ii)(B)” and adding “paragraph (i)(5)(ii)(B) of this section” in its place.
8. Amending the third sentence of Example 3 of paragraph (i)(5)(iii)(D) to remove the language “§ 1.509(a)–4T(i)(5)(ii)(B)” and adding “paragraph (i)(5)(ii)(B) of this section” in its place.
9. Amending the fourth sentence of Example 4 of paragraph (i)(5)(iii)(D) to remove the language “§ 1.509(a)–4T(i)(5)(ii)(B)” and adding “paragraph (i)(5)(ii)(B) of this section” in its place.
10. Amending paragraph (i)(6)(iv) to remove the language “§ 1.509(a)–4T(i)(8)(ii)” and adding “paragraph (i)(8)(ii) of this section” in its place.
11. Amending paragraph (i)(7)(ii) to remove the language “§ 1.509(a)–4T(i)(5)(ii)(B)” and adding “paragraph (i)(5)(ii)(B) of this section” in its place.
§ 1.509(a)–4 Supporting organizations.
(B) Distributable amount. Except as provided in paragraphs (i)(5)(ii)(D) and (E) of this section, the distributable amount for a taxable year is an amount equal to the greater of 85 percent of the supporting organization’s adjusted net income (as determined by applying the principles of section 4942(f) and § 53.4942(a)–2(d) of this chapter) for the taxable year immediately preceding the taxable year of the required distribution (immediately preceding taxable year) or its minimum asset amount (as defined in paragraph (i)(5)(ii)(C) of this section) for the immediately preceding taxable year, reduced by the amount of taxes imposed on the supporting organization under subtitle A of the Internal Revenue Code during the immediately preceding taxable year.
(C) Minimum asset amount. For purposes of this paragraph (i)(5), a supporting organization’s minimum asset amount for the immediately preceding taxable year is 3.5 percent of the excess of the aggregate fair market value of all of the supporting organization’s non-exempt-use assets (determined under paragraph (i)(8) of this section) in that immediately preceding taxable year over the acquisition indebtedness with respect to such non-exempt-use assets (determined under section 514(c)(1) without regard to the taxable year in which the indebtedness was incurred), increased by—
(8) Valuation of non-exempt-use assets. For purposes of determining its distributable amount for a taxable year, a supporting organization determines its minimum asset amount, as defined in paragraph (i)(5)(ii)(C) of this section, by determining the aggregate fair market value of all of its non-exempt-use assets in the immediately preceding taxable year. For these purposes, the determination of the aggregate fair market value of all non-exempt-use assets shall be made using the valuation methods described in § 53.4942(a)–2(c) of this chapter. The aggregate fair market value of the supporting organization’s non-exempt-use assets shall not be reduced by any amount that is set aside under paragraph (i)(6)(v) of this section. For these purposes, the non-exempt use assets of the supporting organization are all assets of the supporting organization other than—
(i) Assets described in § 53.4942(a)–2(c)(2)(i) through (iv) of this chapter (with the term “supporting organization” being substituted for “foundation” or “private foundation” and the date “August 17, 2006” being substituted for “December 31, 1969”); and
(ii) Exempt-use assets, which are assets that are used (or held for use) directly in carrying out the exempt purposes of the supporting organization’s supported organization(s) (determined by applying the principles described in § 53.4942(a)–2(c)(3) of this chapter) by either—
(l) Effective/applicability dates. Paragraphs (a)(6), (f)(5), (i)(1) through (i)(4)(ii)(B), (i)(4)(ii)(D) through (i)(5)(i), (i)(5)(ii)(E) through (i)(5)(iii)(C), (i)(6)(i) through (iii), (i)(6)(v) through (i)(7)(i), and (i)(9) through (11) of this section are applicable on December 28, 2012. Paragraphs (i)(4)(ii)(C), (i)(5)(ii)(A) through (i)(5)(ii)(D), (i)(5)(iii)(D), (i)(6)(iv), (i)(7)(ii) and (i)(8) of this section are applicable on December 21, 2015. See paragraphs (i)(5)(ii)(B), (i)(5)(ii)(C), and (i)(8) of § 1.509(a)–4T contained in 26 CFR part 1, revised as of April 1, 2015, for certain rules regarding non-functionally integrated Type III supporting organizations effective before December 21, 2015.
Section 1.509(a)–4T [Removed].
Par. 3. Section 1.509(a)–4T is removed.
(Filed by the Office of the Federal Register on December 21, 2015, 4:15 p.m., and published in the issue of the Federal Register for December 23, 2015, 80 F.R. 79684)
Rev. Rul. 2016–06
Section 6621(b)(1) provides that the Secretary will determine the federal short-term rate for the first month in each calendar quarter. Section 6621(b)(2)(A) provides that the federal short-term rate determined under section 6621(b)(1) for any month applies during the first calendar quarter beginning after that month. Section 6621(b)(2)(B) provides that in determining the addition to tax under section 6654 for failure to pay estimated tax for any taxable year, the federal short-term rate that applies during the third month following the taxable year also applies during the first 15 days of the 4th month following the taxable year. Section 6621(b)(3) provides that the federal short-term rate for any month is the federal short-term rate determined during that month by the Secretary in accordance with section 1274(d), rounded to the nearest full percent (or, if a multiple of 1/2 of 1 percent, the rate is increased to the next highest full percent).
The federal short-term rate determined in accordance with section 1274(d) during January 2016 is the rate published in Revenue Ruling 2016–4, 2016–6 IRB 299 to take effect beginning February 1, 2016. The federal short-term rate, rounded to the nearest full percent, based on daily compounding determined during the month of April 2016 is 1 percent. Accordingly, an overpayment rate of 4 percent (3 percent in the case of a corporation) and an underpayment rate of 4 percent are established for the calendar quarter beginning April 1, 2016. The overpayment rate for the portion of a corporate overpayment exceeding $10,000 for the calendar quarter beginning April 1, 2016 is 1.5 percent. The underpayment rate for large corporate underpayments for the calendar quarter beginning April 1, 2016, is 6 percent. These rates apply to amounts bearing interest during that calendar quarter.
Under section 6621(b)(2)(B), the 3 percent rate that applies to estimated tax underpayments for the first calendar quarter in 2016, as provided in Rev. Rul. 2015–23, 2015–52 I.R.B., dated Dec. 28, 2015, also applies to such underpayments for the first 15 days in April 2016.
Interest factors for daily compound interest for annual rates of 1.5 percent, 3 percent, 4 percent and 6 percent are published in Tables 56, 59, 61, and 65 of Rev. Proc. 95–17, 1995–1 C.B. 610, 613, 615, and 619.
FROM JAN. 1, 1987—Dec. 31, 1998
Oct. 1, 2015—Dec. 31, 2015 3% 11 565
Jul. 1, 2015—Sep. 30, 2015 2% 9 563 3% 11 565
Apr. 1, 2016—Jun. 30, 2016 1.5%
* The asterisk reflects the interest factors for daily compound interest for annual rates of 0.5 percent, which are published in Appendix A of Rev. Rul. 2015–23, 2015–52 I.R.B., dated Dec. 28, 2015.
Rev. Rul. 2016–09
This revenue ruling provides various prescribed rates for federal income tax purposes for April 2016 (the current month). Table 1 contains the short-term, mid-term, and long-term applicable federal rates (AFR) for the current month for purposes of section 1274(d) of the Internal Revenue Code. Table 2 contains the short-term, mid-term, and long-term adjusted applicable federal rates (adjusted AFR) for the current month for purposes of section 1288(b). Table 3 sets forth the adjusted federal long-term rate and the long-term tax-exempt rate described in section 382(f). Table 4 contains the appropriate percentages for determining the low-income housing credit described in section 42(b)(1) for buildings placed in service during the current month. However, under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, shall not be less than 9%. Finally, Table 5 contains the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest for purposes of section 7520.
REV. RUL. 2016–09 TABLE 1
Applicable Federal Rates (AFR) for April 2016
AFR .70% .70% .70% .70%
110% AFR .77% .77% .77% .77%
120% AFR .84% .84% .84% .84%
130% AFR .91% .91% .91% .91%
AFR 1.45% 1.44% 1.44% 1.44%
110% AFR 1.59% 1.58% 1.58% 1.57%
120% AFR 1.74% 1.73% 1.73% 1.72%
130% AFR 1.88% 1.87% 1.87% 1.86%
150% AFR 2.17% 2.16% 2.15% 2.15%
175% AFR 2.54% 2.52% 2.51% 2.51%
REV. RUL. 2016–09 TABLE 2
Adjusted AFR for April 2016
Mid-term adjusted AFR 1.12% 1.12% 1.12% 1.12%
Long-term adjusted AFR 2.25% 2.24% 2.23% 2.23%
REV. RUL. 2016–09 TABLE 3
Rates Under Section 382 for April 2016
Adjusted federal long-term rate for the current month 2.25%
Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal long-term rates for the current month and the prior two months.) 2.53%
REV. RUL. 2016–09 TABLE 4
Appropriate Percentages Under Section 42(b)(1) for April 2016
REV. RUL. 2016–09 TABLE 5
Rate Under Section 7520 for April 2016
Notice 2016–26
Public Comment Invited on Recommendations for 2016–2017 Priority Guidance Plan
The Department of Treasury and Internal Revenue Service (Service) invite public comment on recommendations for items that should be included on the 2016–2017 Priority Guidance Plan.
The Treasury Department’s Office of Tax Policy and the Service use the Priority Guidance Plan each year to identify and prioritize the tax issues that should be addressed through regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance. The 2016–2017 Priority Guidance Plan will identify guidance projects that the Treasury Department and the Service intend to work on as priorities during the period from July 1, 2016, through June 30, 2017. The Treasury Department and the Service recognize the importance of public input in formulating a Priority Guidance Plan that focuses resources on guidance items that are most important to taxpayers and tax administration. Published guidance plays an important role in increasing voluntary compliance by helping to clarify ambiguous areas of the tax law. The published guidance process is most successful if the Treasury Department and the Service have the benefit of the experience and knowledge of taxpayers and practitioners who must apply the rules implementing the internal revenue laws.
As is the case whenever significant legislation is enacted, the Treasury Department and the Service have continued to dedicate substantial resources during the current plan year to published guidance projects necessary to implement the provisions of various tax legislative acts that have been enacted over the past several years. The Treasury Department and the Service will continue to evaluate the priority of each guidance project taking into account this tax legislation, as well as other developments occurring during the 2016–2017 plan year.
In reviewing recommendations and selecting projects for inclusion on the 2016–2017 Priority Guidance Plan, the Treasury Department and the Service will consider the following:
Please submit recommendations by May 16, 2016, for possible inclusion on the original 2016–2017 Priority Guidance Plan. Taxpayers may, however, submit recommendations for guidance at any time during the year. The Treasury Department and the Service may update the 2016–2017 Priority Guidance Plan periodically to reflect additional guidance that the Treasury Department and the Service intend to publish during the plan year. The periodic updates allow the Treasury Department and the Service to respond to the need for additional guidance that may arise during the plan year.
Taxpayers are not required to submit recommendations for guidance in any particular format. Taxpayers should, however, briefly describe the recommended guidance and explain the need for the guidance. In addition, taxpayers may include an analysis of how the issue should be resolved. It would be helpful if taxpayers suggesting more than one guidance project prioritize the projects by order of importance. If a large number of projects are being suggested, it would be helpful if the projects were grouped in terms of high, medium, or low priority. Requests for guidance in the form of petitions for rulemaking will be considered with other recommendations for guidance in accordance with the considerations described in this notice.
Attn: CC:PA:LPD:PR (Notice 2016–26)
Alternatively, taxpayers may submit comments electronically via the Federal eRulemaking Portal at www.regulations.gov (type IRS–2016–0012 in the search field on the regulations.gov homepage to find this notice and submit comments). All recommendations for guidance submitted by the public in response to this notice will be available for public inspection and copying in their entirety.
For further information regarding this notice, contact Charles A. Hall of the Office of Associate Chief Counsel (Procedure and Administration) at (202) 317-3400 (not a toll-free number).
Rev. Proc. 2016–21
.01 This revenue procedure provides information to any individual who failed to meet the eligibility requirements of section 911(d)(1) of the Internal Revenue Code because adverse conditions in a foreign country precluded the individual from meeting those requirements for taxable year 2015.
.02 This revenue procedure lists the countries for which the eligibility requirements of section 911(d)(1) are waived for taxable year 2015.
.03 Section 911(d)(4) of the Code provides an exception to the eligibility requirements of section 911(d)(1). An individual will be treated as a qualified individual with respect to a period in which the individual was a bona fide resident of, or was present in, a foreign country if the individual left the country during a period for which the Secretary of the Treasury, after consultation with the Secretary of State, determines that individuals were required to leave because of war, civil unrest, or similar adverse conditions that precluded the normal conduct of business. An individual must establish that but for those conditions the individual could reasonably have been expected to meet the eligibility requirements
.01 For 2015, the Secretary of the Treasury, in consultation with the Secretary of State, has determined that war, civil unrest, or similar adverse conditions precluded the normal conduct of business in the following country beginning on the specified date:
Accordingly, for purposes of section 911 of the Code, an individual who left the Burundi on or after May 14, 2015, will be treated as a qualified individual with respect to the period during which that individual was present in, or was a bona fide resident of, Burundi if the individual establishes a reasonable expectation of meeting the requirements of section 911(d) but for those conditions.
.02 To qualify for relief under section 911(d)(4) of the Code, an individual must have established residency, or have been physically present, in the foreign country on or prior to the date that the Secretary of the Treasury determines that individuals were required to leave the foreign country. Individuals who establish residency, or are first physically present, in the foreign country after the date that the Secretary prescribes will not be treated as qualified individuals under section 911(d)(4) of the Code. For example, individuals who were first physically present or established residency in Burundi after May 14, 2015, are not eligible to qualify for the exception provided in section 911(d)(4) of the Code for taxable year 2015.
The principal author of this revenue procedure is Kate Y. Hwa of the Office of Associate Chief Counsel (International). For further information regarding this revenue procedure contact Kate Y. Hwa on (202) 317-5001 (not a toll-free number).
Announcement 2016–14
December 2015 Revision of Form 3115
The Internal Revenue Service (IRS) has revised Form 3115, Application for Change in Accounting Method, and its instructions. The Form 3115 (Rev. December 2015) is the current Form 3115 and replaces the December 2009 version of the Form 3115. Ordinarily, a taxpayer applies for consent to change a method of accounting for federal income tax purposes by completing and filing a current Form 3115. Treas. Reg. § 1.446–1(e)(3)(i).
To allow a reasonable transition to the December 2015 Form 3115, the IRS will accept either the December 2015 Form 3115 or the December 2009 Form 3115 filed on or before April 19, 2016, except where the use of the December 2015 Form 3115 is specifically required in guidance published in the Internal Revenue Bulletin. Taxpayers filing Forms 3115 after April 19, 2016, must use the December 2015 Form 3115. The IRS encourages taxpayers to use the December 2015 Form 3115 prior to April 20, 2016. Regardless of the form used, taxpayers must provide all the information required by Rev. Proc. 2015–13 (or Rev. Proc. 2011–14, 2011–4 I.R.B. 330, if the taxpayer is making a change under the transition rule in section 15.02(1)(a)(ii) of Rev. Proc. 2015–13, 2015–5 I.R.B. 419, as modified by Rev. Proc. 2015–33, 2015–24 I.R.B. 1067). See sections 6.02 and 14 of Rev. Proc. 2015–13 or sections 6 and 11 of Rev. Proc. 2011–14.
Section 6.03(1)(a)(i) of Rev. Proc. 2015–13 requires a taxpayer filing a request for an automatic change to file its original Form 3115 with its return and a duplicate of that Form 3115 with the IRS in Ogden, Utah. Beginning in January 2016, the duplicate copy of Form 3115 for an automatic change request is filed with the IRS in Covington, Kentucky. See Rev. Proc. 2016–1, 2016–1 I.R.B. 1, section 9.05(2). The address of the IRS office in Covington, Kentucky, is:
If prior to April 20, 2016, a taxpayer filed its duplicate copy of Form 3115 with the IRS in either Ogden, Utah, or Covington, Kentucky, using the December 2009 Form 3115, the taxpayer may file its original Form 3115 with its return on either the December 2009 Form 3115 or the December 2015 Form 3115.
Taxpayers may download the December 2015 Form 3115 and its instructions from the IRS website, www.irs.gov/formspubs, or order them from the IRS website www.irs.gov/orderforms.
The principal author of this announcement is Charles Magee of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this announcement contact Mr. Magee at (202) 317-7005 (not a toll-free number).
REG–109822–15
Notice of Proposed Rulemaking Country-by-Country Reporting
Written or electronic comments and requests for a public hearing must be received by March 22, 2015.
Send submissions to: CC:PA:LPD:PR (REG–109822–15), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG–109822–15), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC, or sent electronically via the Federal eRulemaking Portal at http://www.regulations.gov (indicate IRS REG–109822–15).
Pursuant to the authority granted under sections 6001, 6011, 6012, 6031, 6038, and 7805, these proposed regulations describe a new requirement for certain U.S. persons that are the ultimate parent entity of an MNE group (U.S. MNE group) earning substantial annual revenue to file an annual report (U.S. CbC report) containing information on a country-by-country basis related to the MNE group’s income and taxes paid, together with certain indicators of the location of economic activity within the MNE group. Because the reporting form is currently under development by the IRS and yet to be officially numbered, it is referred to in this preamble and the proposed regulations as Form XXXX, Country-by-Country Report. The categories of information required to be reported on the U.S. CbC report were developed in coordination with other member countries of the Group of Twenty (G20) and the Organisation for Economic Co-operation and Development (OECD). As discussed later in this preamble, the Treasury Department and the IRS have determined that the information required under these proposed regulations will assist in better enforcement of U.S. tax laws.
The G20 and OECD members, in coordination with other countries, developed a model template for the collection of country-by-country information from large MNE groups. The model template is intended to promote consistent and effective implementation of country-by-country reporting across tax jurisdictions (including countries and jurisdictions that are not countries but that have fiscal autonomy). The Treasury Department and the IRS anticipate that other tax jurisdictions will adopt information reporting requirements based on the model template that will mandate the filing of a country-by-country report (foreign CbC report) by MNE groups with an ultimate parent entity that is not a U.S. person (foreign MNE groups) that have substantial revenues. In developing these proposed regulations, the Treasury Department and the IRS determined that it is appropriate to use the model template as a guide because the model template was developed taking into account extensive consultations with stakeholders, including in particular U.S. MNE groups, in order to appropriately balance the benefits to tax administrations of collecting the information about an MNE group’s global operations against the compliance costs and burdens imposed on MNE groups. These consultations significantly affected both the scope of the information included in the model template as well as the flexibility afforded to MNE groups in determining how to compile that information in light of their different system capabilities. In addition, the model template reflects an agreed international standard for reporting by MNE groups that will promote consistency of reporting obligations across tax jurisdictions and reduce the risk that other countries will depart from the agreed standard by imposing inconsistent and overlapping reporting obligations on U.S. MNE groups. In this respect, the Treasury Department and the IRS note that clear and widely adopted documentation rules for MNE groups also help to reduce compliance costs. While the proposed regulations generally are consistent with the international standard, the proposed regulations also are tailored to be consistent with the preexisting information reporting requirements applicable to U.S. persons under sections 6001, 6011, 6012, 6031, and 6038.
In particular, it is expected that CbC reports filed by both U.S. MNE groups and foreign MNE groups (collectively CbC reports) will help the IRS perform high-level transfer pricing risk identification and assessment. The information in a CbC report will not itself constitute conclusive evidence that transfer pricing practices are or are not consistent with the arm’s length standard. Accordingly, the information in a CbC report will not be used as a substitute for an appropriate transfer pricing determination based on a best method analysis (including a full comparability analysis of factors such as functions performed, resources employed, and risks assumed) as required by the arm’s length standard set forth in the regulations under section 482, and transfer pricing adjustments will not be based solely on a CbC report. However, a CbC report may be used as the basis for making further inquiries into transfer pricing practices or other tax matters in the course of an examination of a member of an MNE group, and adjustments may be based on additional information developed through those inquiries in accordance with applicable law.
Consistent with established international standards, all of the information exchange agreements to which the United States is a party require the information exchanged to be treated as confidential by both parties, and disclosure and use of the information must be in accordance with the terms of the relevant information exchange agreement. Information exchange agreements generally prohibit the parties from using any information received for any purpose other than for the administration of taxes (e.g., assessment or collection of, or enforcement or prosecution in respect of, the taxes covered by the information exchange agreement). Accordingly, under the terms of information exchange agreements, neither tax jurisdiction is permitted to disclose the information received under the information exchange agreement or use such information for any non-tax purpose. Under the contemplated competent authority arrangements for the exchange of CbC reports, the competent authorities of the United States and other tax jurisdictions intend to further limit the permissible uses of exchanged CbC reports to assessing high-level transfer pricing and other tax risks and, where appropriate, for economic and statistical analysis.
Prior to entering into an information exchange agreement with another tax jurisdiction, the Treasury Department and the IRS closely review the tax jurisdiction’s legal framework for maintaining confidentiality of taxpayer information and its track record of complying with that legal framework. In order to conclude an information exchange agreement with another tax jurisdiction, the Treasury Department and the IRS must be satisfied that the tax jurisdiction has the necessary legal safeguards in place to protect exchanged information, such protections are enforced, and adequate penalties apply to any breach of that confidentiality. Moreover, even when these conditions have been met and an information exchange agreement is in effect, the U.S. competent authority will not enter into a reciprocal automatic exchange of information relationship with a tax jurisdiction unless it has reviewed the tax jurisdiction’s policies and procedures regarding confidentiality protections and has determined that such an exchange relationship is appropriate.
The proposed regulations generally require a U.S. business entity that is the ultimate parent entity of a U.S. MNE group to file Form XXXX, Country-by-Country Report. However, proposed § 1.6038–4(h) provides an exception from filing by a U.S. MNE group for an annual accounting period if the U.S. MNE group had revenues of less than $850,000,000 for the preceding annual accounting period. Generally, an ultimate parent entity of a U.S. MNE group is a U.S. business entity that controls a group of business entities, at least one of which is organized or tax resident outside of the United States, that are required to consolidate their accounts for financial reporting purposes under U.S. generally accepted accounting principles (GAAP), or that would be required to consolidate their accounts if equity interests in the U.S. business entity were publicly traded on a U.S. securities exchange. For purposes of the proposed regulations, the term business entity means a person as defined in section 7701(a) that is not an individual, as well as a permanent establishment that prepares financial statements separate from those of its owner for financial reporting, regulatory, tax reporting, or internal management control purposes.
Under proposed § 1.6038–4(b)(6), a business entity generally is considered resident in a tax jurisdiction if, under the laws of that tax jurisdiction, the business entity is liable to tax therein based on place of management, place of organization, or another similar criterion. However, a business entity will not be considered resident in a tax jurisdiction if it is liable to tax in such jurisdiction solely with respect to income from sources in such jurisdiction, or capital situated in such jurisdiction. The proposed regulations also provide rules for determining the tax jurisdiction of residence of a business entity that is resident in more than one tax jurisdiction or that is a permanent establishment.
Proposed § 1.6038–4(b)(4) defines a U.S. MNE group as a group of business entities, including the U.S. business entity that is the ultimate parent entity, that are required to consolidate their accounts under U.S. GAAP, or would be required to consolidate their accounts if equity interests in the ultimate parent entity were publicly traded on a U.S. securities exchange. Generally, under U.S. GAAP, if an entity owns a majority voting interest in another legal entity, the majority owner must combine the financial statements of the majority-owned entity with its own financial statements in consolidated financial statements. Financial Accounting Standards Board, Accounting Standards Codification 810–10–15, “Consolidation – Overall — Scope and Scope Exceptions.” A U.S. MNE group does not include business entities that are accounted for under the equity method (because those entities do not consolidate their accounts with the equity owner), notwithstanding that the equity owner’s proportionate share of the business income of such entities is included in the equity owner’s consolidated financial statements. The ultimate parent entity of a U.S. MNE group that is required to file Form XXXX, Country-by-Country Report, may be required to consolidate under U.S. GAAP one or more affiliated groups as defined in section 1504(a) that file a consolidated income tax return even though the ultimate parent entity is not an includible corporation as defined under section 1504(b) with respect to any of such consolidated groups. In such cases, the ultimate parent entity would report country-by-country information with respect to all such affiliated group entities (and any other business entities in the U.S. MNE group) on Form XXXX, Country-by-Country Report, and the parent corporations of the respective consolidated groups would not file a Form XXXX, Country-by-Country Report.
The Treasury Department and the IRS request comments on whether additional guidance is needed for determining which U.S. persons must file Form XXXX, Country-by-Country Report, or which entities are considered constituent entities of the filer. Specifically, the Treasury Department and the IRS request comments on whether additional guidance on the definition of U.S. MNE group is necessary to address situations where U.S. GAAP or regulations governing securities publicly traded on a U.S. securities exchange (U.S. securities regulations) permit or require consolidated financial accounting for reasons other than majority ownership and situations, if any, where U.S. GAAP or U.S. securities regulations permit separate financial accounting of majority-owned enterprises. Additionally, consideration has been given to the possible need for an exception to filing some or all of the information required on Form XXXX, Country-by-Country Report, for national security reasons. Requests by a U.S. person otherwise subject to the requirements to file Form XXXX, Country-by-Country Report, for an exception would require the Treasury Department and affected U.S. persons to coordinate with other federal agencies, such as the Department of Defense, to determine whether such an exception is warranted. The Treasury Department and the IRS request comments with respect to the procedures that a U.S. person should be required to follow in order to demonstrate a national security reason to receive an exception from filing some or all of the information otherwise required by Form XXXX, Country-by-Country Report.
Generally, a constituent entity will have a tax jurisdiction of residence as determined under proposed § 1.6038–4(b)(6). However, a business entity that is treated as a partnership in the tax jurisdiction in which it is organized and that does not own or create a permanent establishment in another tax jurisdiction generally will have no tax jurisdiction of residence under the definition in proposed § 1.6038–4(b)(6) (other than for purposes of determining the ultimate parent entity of a U.S. MNE group). In these cases, it is expected that the partners will report their share of the partnership’s items in the partners’ respective tax jurisdictions of residence in order to determine the aggregate amounts reported on Form XXXX, Country-by-Country Report, regardless of whether the partnership has elected to be treated as an association for U.S. federal tax purposes. The Treasury Department and the IRS continue to consider whether a different rule is needed in the case of entities that are not treated as fiscally transparent in the owner or owners’ tax jurisdiction(s) of residence but are treated as fiscally transparent in the entity’s country of organization. The Treasury Department and the IRS request comments on the treatment of such entities in the CbC Report. In the case of a permanent establishment owned or created by a business entity that is treated as a partnership in the tax jurisdiction in which it is organized, the tax jurisdiction of residence of the permanent establishment for purposes of Form XXXX, Country-by-Country Report, is the location of the permanent establishment regardless of whether the permanent establishment is treated as a permanent establishment of the partnership or of the partners of the partnership by the tax jurisdiction in which the permanent establishment is located.
A. Constituent entity information.
Proposed § 1.6038–4(d)(1) describes the information that Form XXXX, Country-by-Country Report, may require with respect to each constituent entity of the U.S. MNE group. Generally, each business entity of a U.S. MNE group is considered a separate constituent entity of that U.S. MNE group; however, the term constituent entity does not include a foreign corporation or foreign partnership for which the ultimate parent entity is not required to furnish information under section 6038(a), determined without regard to § 1.6038–2(j) and § 1.6038–3(c) (exceptions to information reporting for certain constructive owners and when more than one person otherwise would be required to submit the same information), or any permanent establishment of such foreign corporation or foreign partnership. For example, if none of the constituent entities owned by the ultimate parent entity directly, indirectly, or constructively owns enough stock in a foreign corporation to be considered a United States shareholder of a controlled foreign corporation, the foreign corporation is not a constituent entity. However, if the ultimate parent entity of a U.S. MNE group constructively owns more than 50 percent of the voting stock of a foreign corporation because a wholly-owned domestic subsidiary directly owns such stock and the domestic subsidiary reports information with respect to the foreign corporation pursuant to section 6038(a), the foreign corporation is a constituent entity of the U.S. MNE group notwithstanding that under § 1.6038–2(j)(2) the ultimate parent entity itself is not required to report information under section 6038(a). The IRS requests comments on whether additional guidance is needed regarding which business entities of a U.S. MNE group are considered constituent entities, particularly with respect to the exclusion of foreign corporations and partnerships for which an ultimate parent entity would not be required to furnish information under section 6038(a) without regard to §§ 1.6038–2(j) and 1.6038–3(c).
B. Financial and employee information.
Proposed § 1.6038–4(d)(2) requires certain information to be reported for each tax jurisdiction in which one or more constituent entities of the MNE group is resident. The information for each tax jurisdiction must be presented on Form XXXX, Country-by-Country Report, as an aggregate of the requested information from all of the constituent entities that are resident in the tax jurisdiction. In addition, proposed § 1.6038–4(d)(3)(i) provides that the information must be reported, in the aggregate, for any constituent entity or entities of a U.S. MNE group that have no tax jurisdiction of residence.
The Treasury Department and the IRS have sought to minimize deviations from the model template that was developed by G20 and OECD member countries based on extensive consultations with stakeholders. Nonetheless, the Treasury Department and the IRS understand that there may be areas where further clarification or refinement is warranted to take into account the purpose of these proposed regulations to collect relevant information for high-level risk assessment while minimizing the burdens imposed. For example, the report seeks information on the taxes paid or accrued by MNE groups and their constituent entities on taxable income earned in the relevant accounting period. The Treasury Department and the IRS specifically solicit comments on the manner in which the proposed regulations request that information. The Treasury Department and the IRS also request comments on whether any of the other items should be further refined or whether additional guidance is needed with respect to how to determine any of the items in proposed § 1.6038–4(d)(2)(i)–(ix).
Proposed § 1.6038–4(d)(3)(iii) provides that the number of employees on a full-time equivalent basis may be determined as of the end of the accounting period, on the basis of average employment levels for the annual accounting period, or on any other reasonable basis, and that independent contractors that participate in the ordinary operating activities of a constituent entity may be considered employees of such constituent entity for this purpose. The number of full-time equivalent employees in a tax jurisdiction of residence should be determined by reference to the employees that perform their activities for the U.S. MNE group within such tax jurisdiction of residence. U.S. MNE groups should use a reasonable basis to determine the tax jurisdiction of residence for which to report employees that perform activities for the U.S. MNE group in more than one tax jurisdiction or in a tax jurisdiction in which none of the constituent entities of the U.S. MNE group is resident. For example, a reasonable basis may be to report a travelling employee as part of the home office jurisdiction, as part of the tax jurisdiction in which the travelling employee spends the majority of his or her time, or as a fraction of one full-time equivalent employee in multiple tax jurisdictions based on the employee’s time spent working in those jurisdictions. The Treasury Department and the IRS request comments on whether guidance is needed regarding the treatment of other employment situations. The number of employees that a U.S. MNE group has in a particular tax jurisdiction should be determined on a consistent basis across entities, tax jurisdictions in which the U.S. MNE operates, and from year to year. It is not expected that the basis on which a U.S. MNE group determines the number of employees in a tax jurisdiction of residence will change from year to year. However, it is expected that Form XXXX, Country-by-Country Report, will provide a section for additional information that the ultimate parent entity of the U.S. MNE group will use to explain, among other things, any new approach adopted to determine the number of employees and why it was necessary or appropriate.
Proposed § 1.6038–4(e)(2) provides that the financial information reported on Form XXXX, Country-by-Country Report, may be based on certified financial statements, books and records maintained with respect to each constituent entity, or records used for tax reporting purposes. It is not necessary to reconcile the revenue, profit, and tax reported in the aggregate or with respect to a specific tax jurisdiction on Form XXXX, Country-by-Country Report, to the consolidated financial statements of the U.S. MNE group or to the tax returns filed in any particular tax jurisdiction. Additionally, there is no need to make adjustments for differences in accounting principles applied from tax jurisdiction to tax jurisdiction. It is expected that Form XXXX, Country-by-Country Report, will include a section to provide additional information, including a brief description of the sources of data used in preparing the form, and, if a change is made in the source of data used from year to year, an explanation of the reasons for the change and its consequences. Permission to change the accounting principles, to make new or different adjustments for differences in accounting principles, or to change the source of data used in preparing Form XXXX, Country-by-Country Report, is not required.
C. Template for Form XXXX, Country-by-Country Report.
Sales, Marketing, or Distribution
*Please specify the nature of the activity of the constituent entity in the “Additional Information” section.
Additional Information. Please include any further brief information or explanation you consider necessary or that would facilitate the understanding of the compulsory information provided in the Country-by-Country Report.
3. Manner of Filing and Maintenance of Records for Form XXXX, Country-by-Country Report.
Proposed § 1.6038–4(f) requires that Form XXXX, Country-by-Country Report, be filed with the ultimate parent entity’s timely-filed income tax return (with extensions). The proposed regulations do not require any U.S. business entity to provide notification that it is a constituent entity of a U.S. MNE group that is required to file a Form XXXX, Country-by-Country Report.
While a U.S. business entity is not required to reconcile information reported on Form XXXX, Country-by-Country Report, with its financial statements or income tax returns, proposed § 1.6038–4(g) provides that a U.S. person required to file as an ultimate parent entity of a U.S. MNE group must maintain records to support the information provided on Form XXXX, Country-by-Country Report.
These regulations are proposed to be applicable to taxable years of ultimate parent entities of US MNE groups that begin on or after the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register and that include annual accounting periods determined under section 6038(e)(4) of all foreign constituent entities and taxable years of all domestic constituent entities beginning on or after the date of publication of the Treasury decision adopting these rules as final regulations in the Federal Register.
The IRS intends that the information collection requirements in these proposed regulations will be satisfied by submitting a new reporting form with an income tax return. The new reporting form has not yet been numbered and is referred to as Form XXXX, Country-by-Country Report, in this Preamble and the proposed regulations. For purposes of the Paperwork Reduction Act, the reporting burden associated with the collection of information in these proposed regulations will be reflected in the OMB Form 83–1, Paperwork Reduction Act Submission, associated with Form XXXX, Country-by-Country Report.
Section 1.6038–4 also issued under 26 U.S.C. 6038.
Par. 2. Section 1.6038–4 is added to read as follows:
§ 1.6038–4 Information returns required of certain United States persons with respect to such person’s U.S. multinational enterprise group.
(a) Requirement of return. Except as provided in paragraph (h) of this section, every United States person (U.S. person) that is an ultimate parent entity of a U.S. multinational enterprise (MNE) group as defined in paragraph (b)(1) of this section must make an annual return on Form XXXX, Country-by-Country Report, setting forth the information described in this section and any other information required by Form XXXX, Country-by-Country Report, with respect to each annual accounting period described in paragraph (c) of this section.
(ii) Is not owned directly or indirectly by another business entity that consolidates the accounts of such U.S. business entity with its own accounts under generally accepted accounting principles in the other business entity’s tax jurisdiction of residence, or would be so required if equity interests in the other business entity were traded on a public securities exchange in its tax jurisdiction of residence.
(2) Business entity. For purposes of this section, a business entity is a person as defined in section 7701(a)(1) that is not an individual, and includes any entity that has a single owner and that is disregarded as a separate entity from its owner under § 301.7701–3 of this chapter. Also for purposes of this section, the term business entity includes a business establishment in a jurisdiction that is treated as a permanent establishment under an income tax convention to which that jurisdiction is a party or that would be treated as a permanent establishment under the Organisation for Economic Co-operation and Development (OECD) Model Tax Convention on Income and on Capital 2014 and that prepares financial statements separate from those of its owner for financial reporting, regulatory, tax reporting, or internal management control purposes.
(4) U.S. MNE group. A U.S. MNE group comprises the ultimate parent entity of a U.S. MNE group as defined in paragraph (b)(1) of this section and all of the business entities required to consolidate their accounts with the ultimate parent entity’s accounts under U.S. generally accepted accounting principles, or that would be so required if equity interests in the ultimate parent entity were publicly traded on a U.S. securities exchange, regardless of whether any such business entities could be excluded from consolidation solely on size or materiality grounds.
(5) Constituent entity. With respect to a U.S. MNE group, a constituent entity is any separate business entity of such U.S. MNE group, except that the term constituent entity does not include a foreign corporation or foreign partnership for which the ultimate parent entity is not required to furnish information under section 6038(a) (determined without regard to § 1.6038–2(j) and § 1.6038–3(c)) or any permanent establishment of such foreign corporation or foreign partnership.
(6) Tax jurisdiction of residence. For purposes of this section, a tax jurisdiction is a country or a jurisdiction that is not a country but that has fiscal autonomy. A business entity is considered a resident in a tax jurisdiction if, under the laws of that tax jurisdiction, the business entity is liable to tax therein based on place of management, place of organization, or another similar criterion. However, a business entity will not be considered a resident in a tax jurisdiction if such business entity is liable to tax in such tax jurisdiction solely with respect to income from sources in such tax jurisdiction, or capital situated in such tax jurisdiction. If a business entity is resident in more than one tax jurisdiction, then the applicable income tax convention rules, if any, should be applied to determine the business entity’s tax jurisdiction of residence. If a business entity is resident in more than one tax jurisdiction and no applicable income tax convention exists between those tax jurisdictions, or if the applicable income tax convention provides that the determination of residence is based on a determination by the competent authorities of the relevant tax jurisdictions and no such determination has been made, the business entity’s tax jurisdiction of residence is the tax jurisdiction of the business entity’s place of effective management determined in accordance with Article 4 of the OECD Model Tax Convention on Income and on Capital 2014. The tax jurisdiction of residence of a permanent establishment is the jurisdiction in which the permanent establishment is located. If a business entity does not have a tax jurisdiction of residence, then solely for purposes of paragraph (b)(1) of this section, the tax jurisdiction of residence is the business entity’s country of organization.
(c) Period covered by return. The information required under paragraph (d) of this section with respect to a U.S. MNE group must be furnished for the annual accounting period with respect to which the ultimate parent entity prepares its applicable financial statements ending with or within the ultimate parent entity’s taxable year for which the Form XXXX, Country-by-Country Report, is filed. However, if the ultimate parent entity does not prepare applicable financial statements that consolidate the accounts of all constituent entities, the ultimate parent entity may provide the information required under paragraph (d) of this section based on applicable financial statements of constituent entities for their accounting period or periods that end with or within the ultimate parent entity’s taxable year.
(iii) The tax identification number, if any, used for the constituent entity by the tax administration of the constituent entity’s tax jurisdiction of residence; and
(ii) Definition of revenue. For purposes of this section, the term revenue includes all amounts of revenue, including revenue from sales of inventory and property, services, royalties, interest, and premiums. The term revenue does not include payments received from other constituent entities that are treated as dividends in the payor’s tax jurisdiction of residence.
(iv) Income tax paid and accrued tax expense of permanent establishment. In the case of a constituent entity that is a permanent establishment, the amount of income tax paid and the amount of accrued tax expense referred to in paragraphs (d)(2)(iv) and (v) of this section should not include the income tax paid or tax expense accrued by the business entity of which the permanent establishment would be a part but for the second sentence of paragraph (b)(2) of this section in that business entity’s tax jurisdiction of residence on the income derived by the permanent establishment.
(f) Time and manner for filing. Returns on Form XXXX, Country-by-Country Report, required under paragraph (a) of this section for a taxable year will be filed with the ultimate parent entity’s income tax return for the taxable year on or before the due date (including extensions) for filing that person’s income tax return.
(Filed by the Office of the Federal Register on December 21, 2015, 4:15 p.m., and published in the issue of the Federal Register for December 23, 2015, 80 F.R. 79795)
Bulletins 2016–1 through 2016–14