California information reporting for 25% foreign-owned corporations.

• Author: Josephs, Stuart R.
• Position: Brief Article

For income years beginning after 1989, "reporting" corporations subject to Sec. 6038A that file a California franchise or income tax return also must file a copy of federal Form 5472, Information Return of a Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business (Under Sections 6038A and 6038C of the Internal Revenue Code), with their timely filed (including extensions) California returns. A California "income" year corresponds to a federal "tax" year.

A reporting corporation is a 25% foreign-owned corporation that is either a domestic corporation or a foreign corporation engaged in a trade or business within the United States (Regs. Sec. 1.6038A-1(c)(1)). A separate Form 5472 must be filed each year for each related party with which the reporting corporation has a "reportable transaction" (described in Regs. Sec. 1.6038A-2(b)(3) and (4)). There is a $10,000 penalty for each nontimely filing, with the possibility of an additional $10,000 penalty for each 30-day period (or fractional portion) if this filing failure continues for 90 days after notice from the Service. (See the Tax Clinic item, "Information Reporting for Foreign-Owned U.S. Corporations or Branch Operations," TTA, Oct. 1991, at 653.)

Example: X, a calendar-year reporting corporation, filed its 1990 federal income and California franchise tax returns on Mar. 15, 1991. Pursuant to Regs. Sec...