The global outbreak of the COVID-19 virus (the COVID-19 Emergency) has significantly limited the ability of many individuals to enter the U.S. Regardless of whether they are infected with the COVID-19 virus, individuals may have become severely restricted in their movements, including by order of government authorities. (COVID-19 Emergency Travel Disruptions).
Form 8858, Information Return of U.S. Persons With Respect to Foreign Disregarded Entities and Foreign Branches (FBs), is filed by certain U.S. persons that directly or indirectly operate a “foreign branch.” (Form 8858, Instructions)
Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, must be filed by certain U.S. shareholders of controlled foreign corporations (CFCs), or certain other interests in foreign corporations that are not CFCs. (Form 5471, Instructions)
Generally, a foreign branch separate unit (FBSU) is a business operation outside the U.S. that, if carried on by a U.S. person, constitutes a foreign branch as defined in Reg §1.367(a)-6T(g)(1). (Reg §1.1503(d)-1(b)(4)(i)(A))
Form 8865, Information Return of U.S. Persons With Respect To Certain Foreign Partnerships, must be filed by a U.S. person that controls a foreign partnership (controlled foreign partnership). (Reg § 1.6038-3(a)(2))
Reg §1.989(a)-1(b)(2)(ii) generally provides that the foreign activities of a U.S. person are a qualified business unit (QBU) if those activities constitute a trade or business and a separate set of books and records is maintained with respect to those activities. QBUs are required to file Form 8858. (Form 8858, Instructions)
The IRS has provided relief to U.S. persons that temporarily did business in foreign countries due to COVID-19 Emergency Travel Disruptions. When determining whether a FBSU or a QBU has an obligation to file Form 8858, the IRS will not consider “temporary activities” in foreign countries that would not have been conducted there but for COVID-19 travel restrictions.
Accordingly, temporary activities will not give rise to a U.S. person’s obligation to file (1) Form 8858, including an obligation to file a Form 8858 by attaching the Form 8858 to a Form 5471, with respect to a controlled foreign corporation, or (2) Form 8865 with respect to a controlled foreign partnership. (Rev Proc 2020-30, Sec. 3.01)
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