New Reporting Requirements for Multinational Corporations

Date01 January 2017
AuthorCaroline D. Strobel
Published date01 January 2017
© 2017 Wiley Periodicals, Inc.
Published online in Wiley Online Library (
DOI 10.1002/jcaf.22251
New Reporting Requirements
for Multinational Corporations
Caroline D. Strobel
(FORM 8975; T.D.
The IRS issued
final regulations
implementing new
reporting require-
ments for multina-
tional enterprise
(MNE) groups with
revenue of $850
million or more
in the preceding
annual accounting
period. These busi-
nesses must file a new Form
8975. Thenew regulations are
designed to prevent multina-
tional companies from shifting
profits to low- or no-tax juris-
dictions. All OECD and G-20
countries have committed to
the adoption of country-by-
country reporting.
In the regulations, an
“ultimate parent entity” of a
U.S. MNE group is defined
as a U.S. business entity that
controls a group of business
entities (constituent entities),
at least one of which is orga-
nized or a tax resident outside
of the United States, that are
required to consolidate their
accounts for financial report-
ing purposes under U.S. gen-
erally accepted accounting
principles (GAAP), or that
would be required to consoli-
date their accounts if equity
interests in the U.S. business
entity were publicly traded on
a U.S. securities exchange. The
regulations require an MNE
group to report on a country-
by-country basis income and
taxes paid, together with cer-
tain indicators of the location
of economic activity within the
MNE group, for each
constituent entity.
Under the final rules,
grantor trusts, dece-
dents’ estates, and
bankruptcy estates
are not subject to the
reporting rules.
Foreign insur-
ance companies
that elect under Sec.
953(d) to be treated
as domestic corpora-
tions will be treated
as U.S. business
entities that have
their tax jurisdiction
of residence in the
United States. The new regula-
tions also state how partner-
ships and “stateless entities” are
to be treated. Employees of a
constituent entity are included
in the tax jurisdiction of resi-
dence of that entity because
determining where employees’
work is burdensome for U.S.
MNE groups and would be
especially difficult for traveling
The filing rules for Form
8975 apply for tax years begin-
ning after June 30, 2016, even
through the OECD rules apply
beginning January 1, 2016.
This column has covered the study commissioned
by the Organization for Economic Cooperation
and Development (OECD) to look at changes that
needed to be made in transfer pricing to better
determine the taxable income that multinational
businesses should be required to report in each
country in which they do business. This column
reported the recommendations (base erosion and
profit shifting [BEPS]) that were made after the
study was completed. The OECD adopted the
recommendations that were made and the United
States is now working to bring U.S. reporting
requirements into alignment with new OECD rec-
ommendations. © 2017 Wiley Periodicals, Inc.

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