United States

Senate bill increases Form 5472 penalties


The recently passed U.S. Senate version of tax reform bill differed from the House version of the bill as it related to penalties for late filed or not filed international information Form 5472, Information Return of a 25% Foreign Corporation Engaged in a U.S. Trade or Business. The available text shows that the bill substantially increases the penalty under I.R.C. section 6038A. 

The current and in effect iteration of section 6038A of the Internal Revenue Code requires that a domestic corporation that is 25 percent or more foreign-owned shall, as required by regulations, provide certain information relating to “reportable” transactions with its related foreign owners. Failure to furnish the required information within the time provided by the regulations or failure to maintain records required to so report, results in a penalty of $10,000 for each taxable year in which such failure occurs. The penalty for a late filed Form 5472 is systemically assessed if the information return is attached to a late filed Form 1120.

The available text of the Senate bill increases the penalty to $25,000. If this provision in the Senate bill were to become law the increased penalty would apply to late filed Forms 5472 in the tax years beginning after Dec. 31, 2017. 


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