The IRS today released an advance version of Notice 2018-31 that provides guidance concerning country-by-country (CbC) reporting requirements of certain U.S. multinational enterprise (MNE) groups that are identified as “specified national security contractors.”
Notice 2018-31 [PDF 21 KB] addresses concerns expressed in comments made in response to Treasury regulations for the need for a national security exception to the CbC information reporting requirements.
Final regulations require annual CbC reporting on Form 8975, Country-by-Country Report, by certain U.S. persons that are ultimate parent entities of U.S. MNE groups that have annual revenue for the preceding reporting period of $850 million or more. The final regulations do not provide a general exception for information that may relate to national security, but the preamble to the final regulations stated that the Defense Department would continue to consider the national security implications of CbC reports in particular fact patterns. Read TaxNewsFlash
Today’s notice states that the IRS and Treasury Department have determined that national security interests require modifications to the reporting requirements for U.S. MNE groups that are specified national security contractors.
A U.S. MNE group is a “specified national security contractor” if more than 50% of the U.S. MNE group’s annual revenue (determined in accordance with U.S. generally accepted accounting principles) in the preceding reporting period is attributable to contracts with the Defense Department or other U.S. government intelligence or security agencies.
Notice 2018-31 states that the IRS and Treasury intend to modify the regulations to reflect this guidance. The future regulations will set forth the manner how U.S. MNE groups that have a Form 8975 filing obligation and are specified national security contractors may provide Form 8975 and Schedules A (Form 8975), as follows:
The IRS stated that no other Schedule A (Form 8975) or additional information is required.
Guidance for amended returns
Today’s notice also addresses situations when a specified national security contractor that has already filed Form 8975 and Schedules A (Form 8975) for prior reporting periods may file an amended federal income tax return and attach an amended Form 8975 and Schedules A (Form 8975) with the amended report checkbox on Form 8975 marked. Specified national security contractors that do not electronically file their amended federal income tax returns are directed to file an amended federal income tax return with an amended Form 8975 and Schedules A (Form 8975), and mail a copy of page one of their amended Form 8975 to the IRS Service Center in Ogden, Utah.
Notice 2018-31 states that specified national security contractors that are filing amended Form 8975 and Schedules A (Form 8975) in order to supersede an already-filed Form 8975 and Schedules A (Form 8975) need to take this action by April 20, 2018, if filing an amended federal income tax return on paper, or by May 25, 2018, if filing electronically to avoid the automatic exchange of the CbC reports with other tax administrations.
<p>© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.</p> <p>KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.</p>
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.