Revised form 5471.

• Author: Weiland, Ralph J.

Comments on Revised Form 5471

Tax Executives Institute is concerned about the recent revision of Form 5471 (Information Return of U.S. Persons with respect to Certain Foreign Corporations) and, in particular, about the requirement that the revised form be used by corporations in filing their 1990 tax returns.

Background

As you know, TEI has worked closely over the years with the IRS's Tax Forms and Publications Division in developing and refining Form 5471. Earlier this year, the Institute was provided with a draft revision of Form 5471 for review and on August 10 submitted detailed comments on the proposed revisions.

In our comments, the Institute stated that Treas. REg. [section] 1.6030-2(g) requires a foreign corporation to submit certain information concerning its income, balance sheet, and surplus "prepared in conformity with generally accepted accounting principles and in such form and detail as is customary for the corporation's accounting records." The instructions to the draft Form 5471 we reviewed essentially mirrored this regulatory requirement, stating generally that "in lieu of completing these schedules [C through G], the information requested in any of these schedules may be submitted in the form of statements that are in conformity" with GAAP principles. This statement, however, was deleted from the final Form 5471 released by the IRS on October 26, 1990. Our specific concerns are two-fold: (i) the revised form requires the submission of information that may be inconsistent with GAAP principles; and (ii) the revised form imposes substantial administrative burdens on taxpayers by requiring them the information be submitted on the actual Form 5471.

Ability to Attach U.S. GAAP

Financial Statements

The prior form permitted financial information for the various schedules of Form 5471 to be prepared in conformity with generally accepted accounting principlies (GAAP). The revised instructions have deleted all specific references to the submission of book financial records that are in conformity with GAAP, as well as specifically stating that the attachments may not be used in lieu of filing out the schedules. The requirements of the revised form conflict (or at least are not consistent) with Treas. Reg. [section] 1.6038-2(g), relating to the required elements of the financial satements of foreign corporations.

In 1986, the IRS signalled its desire to revise Form 5471, but relented when faced with the clear language of the...