26 U.S.C. § 6038A — Information with respect to certain foreign-owned corporations
submitted 44 years ago by Pub. L. 97-248 to r/title-26-INTERNAL-REVENUE-CODE · 1,710 words · no verdicts yet
This section requires a domestic corporation that is at least 25-percent foreign-owned to report related-party transactions and keep records. It sets penalties and rules for summonses and noncompliance.
(a) A domestic corporation* that is 25-percent foreign-owned at any time during a taxable year* must provide the information in (b), when and how regulations require, and keep or arrange for records needed to determine the proper treatment of related-party transactions. (b)(1) Regulations may require each related party that transacted with the corporation to be identified by name, principal business place, business nature, and organizing or residence countries; the relationship to the corporation; and the transactions with each foreign related party. (2) If the corporation or a section 6038C foreign corporation is an applicable taxpayer*, the information must include what the Secretary* needs to determine section 59A's base-erosion minimum tax amount, payments, and benefits and to carry out that section; its terms have section 59A meanings. (c)(1) “25-percent foreign-owned” means at least 25 percent of voting power or total stock* value is owned during the year by one foreign person. (2) “Related party” means that shareholder*, persons related under section 267(b) or 707(b)(1) to the corporation or shareholder, and persons related under section 482 to the corporation. (3) “Foreign person” means someone who is not a United States person; a citizen only of a United States possession who is not a United States resident is not a United States person for this definition. (4) “Records” includes books, papers, and other data. (5) Section 318 applies, substituting 10 percent for 50 percent in section 318(a)(2)(C) and not attributing to a United States person stock owned by a non-United States person under section 318(a)(3)(A)-(C). (d)(1) Failure to provide information or records costs $25,000 per taxable year. (2) After more than 90 days from notice, an additional $25,000 applies for each 30-day period or fraction. (3) The prescribed deadline and 90-day period cannot precede the last day reasonable cause existed. (e)(1) For a foreign related party, paragraph (3) applies unless the party authorizes the corporation as a limited agent for sections 7602-7604 requests and summonses; this does not subject people or records to other legal process. (2) If a summons for related-party records or testimony is not quashed or invalidated, the corporation fails to comply substantially and promptly after certified or registered notice, or missing records cause that result, the Secretary may apply (3), whether or not enforcement is pursued. (3) The Secretary determines the deduction for amounts paid or incurred to the related party and the cost of property acquired from or transferred to it. (4)(A) The corporation may seek to quash within 90 days after issuance, and the Secretary may seek enforcement. (B) It may seek review of a noncompliance determination within 90 days after notice; otherwise the determination binds and cannot be reviewed. (C) The appropriate United States district court has jurisdiction, and its order is appealable. (D) A proceeding and appeals suspend sections 6501 and 6531 limitation periods for affected taxable years, and none expires before 90 days after final determination. (f) Criminal penalties are cross-referenced to section 7203.
If, at any time during a taxable year*, a corporation* (hereinafter in this section referred to as the “reporting corporation”)—
is a domestic corporation, and
is 25-percent foreign-owned,
such corporation shall furnish, at such time and in such manner as the Secretary* shall by regulations prescribe, the information described in subsection (b) and such corporation shall maintain (in the location, in the manner, and to the extent prescribed in regulations) such records as may be appropriate to determine the correct treatment of transactions with related parties as the Secretary shall by regulations prescribe (or shall cause another person to so maintain such records).
For purposes of subsection (a), the information described in this subsection is such information as the Secretary prescribes by regulations relating to—
the name, principal place of business, nature of business, and country or countries in which organized or resident, of each person which—
is a related party to the reporting corporation, and
had any transaction with the reporting corporation during its taxable year,
the manner in which the reporting corporation is related to each person referred to in subparagraph (A), and
transactions between the reporting corporation and each foreign person which is a related party to the reporting corporation.
For purposes of subsection (a) and section 6038C, if the reporting corporation or the foreign corporation to whom section 6038C applies is an applicable taxpayer*, the information described in this subsection shall include—
such information as the Secretary determines necessary to determine the base erosion minimum tax amount, base erosion payments, and base erosion tax benefits of the taxpayer for purposes of section 59A for the taxable year, and
such other information as the Secretary determines necessary to carry out such section.
For purposes of this paragraph, any term used in this paragraph which is also used in section 59A shall have the same meaning as when used in such section.
For purposes of this section—
A corporation is 25-percent foreign-owned if at least 25 percent of—
the total voting power of all classes of stock* of such corporation entitled to vote, or
the total value of all classes of stock of such corporation,
is owned at any time during the taxable year by 1 foreign person (hereinafter in this section referred to as a “25-percent foreign shareholder*”).
The term “related party” means—
any 25-percent foreign shareholder of the reporting corporation,
any person who is related (within the meaning of section 267(b) or 707(b)(1)) to the reporting corporation or to a 25-percent foreign shareholder of the reporting corporation, and
any other person who is related (within the meaning of section 482) to the reporting corporation.
The term “foreign person” means any person who is not a United States person. For purposes of the preceding sentence, the term “United States person” has the meaning given to such term by section 7701(a)(30), except that any individual who is a citizen of any possession of the United States (but not otherwise a citizen of the United States) and who is not a resident of the United States shall not be treated as a United States person.
The term “records” includes any books, papers, or other data.
Section 318 shall apply for purposes of paragraphs (1) and (2), except that—
“10 percent” shall be substituted for “50 percent” in section 318(a)(2)(C), and
subparagraphs (A), (B), and (C) of section 318(a)(3) shall not be applied so as to consider a United States person as owning stock which is owned by a person who is not a United States person.
If a reporting corporation—
fails to furnish (within the time prescribed by regulations) any information described in subsection (b), or
fails to maintain (or cause another to maintain) records as required by subsection (a),
such corporation shall pay a penalty of $25,000 for each taxable year with respect to which such failure occurs.
If any failure described in paragraph (1) continues for more than 90 days after the day on which the Secretary mails notice of such failure to the reporting corporation, such corporation shall pay a penalty (in addition to the amount required under paragraph (1)) of $25,000 for each 30-day period (or fraction thereof) during which such failure continues after the expiration of such 90-day period.
For purposes of this subsection, the time prescribed by regulations to furnish information or maintain records (and the beginning of the 90-day period after notice by the Secretary) shall be treated as not earlier than the last day on which (as shown to the satisfaction of the Secretary) reasonable cause existed for failure to furnish the information or maintain the records.
The rules of paragraph (3) shall apply to any transaction between the reporting corporation and any related party who is a foreign person unless such related party agrees (in such manner and at such time as the Secretary shall prescribe) to authorize the reporting corporation to act as such related party’s limited agent solely for purposes of applying sections 7602, 7603, and 7604 with respect to any request by the Secretary to examine records or produce testimony related to any such transaction or with respect to any summons by the Secretary for such records or testimony. The appearance of persons or production of records by reason of the reporting corporation being such an agent shall not subject such persons or records to legal process for any purpose other than determining the correct treatment under this title of any transaction between the reporting corporation and such related party.
If—
for purposes of determining the correct treatment under this title of any transaction between the reporting corporation and a related party who is a foreign person, the Secretary issues a summons to such corporation to produce (either directly or as agent for such related party) any records or testimony,
such summons is not quashed in a proceeding begun under paragraph (4) and is not determined to be invalid in a proceeding begun under section 7604(b) to enforce such summons, and
the reporting corporation does not substantially comply in a timely manner with such summons and the Secretary has sent by certified or registered mail a notice to such reporting corporation that such reporting corporation has not so substantially complied,
the Secretary may apply the rules of paragraph (3) with respect to such transaction (whether or not the Secretary begins a proceeding to enforce such summons). If the reporting corporation fails to maintain (or cause another to maintain) records as required by subsection (a), and by reason of that failure, the summons is quashed in a proceeding described in subparagraph (B) or the reporting corporation is not able to provide the records requested in the summons, the Secretary may apply the rules of paragraph (3) with respect to any transaction to which the records relate.
If the rules of this paragraph apply to any transaction—
the amount of the deduction allowed under subtitle A for any amount paid or incurred by the reporting corporation to the related party in connection with such transaction, and
the cost to the reporting corporation of any property acquired in such transaction from the related party (or transferred by such corporation in such transaction to the related party),
shall be the amount determined by the Secretary in the Secretary’s sole discretion from the Secretary’s own knowledge or from such information as the Secretary may obtain through testimony or otherwise.
Notwithstanding any law or rule of law, any reporting corporation to which the Secretary issues a summons referred to in paragraph (2)(A) shall have the right to begin a proceeding to quash such summons not later than the 90th day after such summons was issued. In any such proceeding, the Secretary may seek to compel compliance with such summons.
Notwithstanding any law or rule of law, any reporting corporation which has been notified by the Secretary that the Secretary has determined that such corporation has not substantially complied with a summons referred to in paragraph (2) shall have the right to begin a proceeding to review such determination not later than the 90th day after the day on which the notice referred to in paragraph (2)(C) was mailed. If such a proceeding is not begun on or before such 90th day, such determination by the Secretary shall be binding and shall not be reviewed by any court.
The United States district court for the district in which the person (to whom the summons is issued) resides or is found shall have jurisdiction to hear any proceeding brought under subparagraph (A) or (B). Any order or other determination in such a proceeding shall be treated as a final order which may be appealed.
If the reporting corporation brings an action under subparagraph (A) or (B), the running of any period of limitations under section 6501 (relating to assessment and collection of tax) or under section 6531 (relating to criminal prosecutions) with respect to any affected taxable year shall be suspended for the period during which such proceeding, and appeals therein, are pending. In no event shall any such period expire before the 90th day after the day on which there is a final determination in such proceeding. For purposes of this subparagraph, the term “affected taxable year” means any taxable year if the determination of the amount of tax imposed for such taxable year is affected by the treatment of the transaction to which the summons relates.
For provisions relating to criminal penalties for violation of this section, see section 7203.
Source credit: (Added Pub. L. 97–248, title III, § 339(a), Sept. 3, 1982, 96 Stat. 632; amended Pub. L. 97–448, title III, § 306(b)(4), Jan. 12, 1983, 96 Stat. 2406; Pub. L. 98–369, div. A, title VII, § 714(l), July 18, 1984, 98 Stat. 963; Pub. L. 99–514, title XII, § 1245(a), (b)(1)–(4), Oct. 22, 1986, 100 Stat. 2581; Pub. L. 101–239, title VII, § 7403(a)–(d), Dec. 19, 1989, 103 Stat. 2358, 2359; Pub. L. 101–508, title XI, §§ 11315(b)(1), 11704(a)(23), Nov. 5, 1990, 104 Stat. 1388–457, 1388–519; Pub. L. 104–188, title I, §§ 1702(c)(5), 1704(f)(5)(B), Aug. 20, 1996, 110 Stat. 1869, 1880; Pub. L. 115–97, title I, § 14401(b), Dec. 22, 2017, 131 Stat. 2232.)
- 1982Enacted · Pub. L. 97-248 · 96 Stat. 632
- 1983Amended · Pub. L. 97-448 · 96 Stat. 2406
- 1984Amended · Pub. L. 98-369 · 98 Stat. 963
- 1986Amended · Pub. L. 99-514 · 100 Stat. 2581
- 1989Amended · Pub. L. 101-239 · 103 Stat. 2358, 2359
- 1990Amended · Pub. L. 101-508 · 104 Stat. 1388
- 1996Amended · Pub. L. 104-188 · 110 Stat. 1869, 1880
- 2017Amended · Pub. L. 115-97 · 131 Stat. 2232
A history note hasn’t been published yet. The record shows enactment by Pub. L. 97-248 on 1982-09-03.
all 0 arguments · sorted by: best
no arguments yet — make the first case