Supplemental comments on Form 5471.

Since the Internal Revenue Service is in the process of developing the forms package for the 1992 filing season, Tax Executives Institute believes it is appropriate to comment on certain issues of continuing concern with respect to the Form 5471 (Information Return of U.S. Persons with Respect to Certain Foreign Corporations).

The Institute appreciates the general responsiveness of the Forms Division to the concerns set out in our November 16, 1990, and December 21, 1990, letters concerning the revisions to Form 5471. Although we disagree with some of the conclusions set forth in your February 12, 1991, letter, we commend the Forms Division for providing a timely and detailed response to our comments. We particularly applaud the IRS for providing a de minimis rule for reporting amounts on Schedules C and F. In addition, we believe that permitting taxpayers to attach financial statements in lieu of filling out Schedules C, D, F, and G will help ease the burden of filing the revised form for the 1990 tax year. We remain concerned, however, that some of the requirements embodied on the Form 5471 exceed the IRS's authority to require reporting of certain information.

Ability to Attach GAAP

Financial Statements

In the attachment to the IRS's February 12, 1991, response to the Institute's November 16 and December 21 letters, there is a statement that "$(t$)he regulations do not specifically allow filers to attach their financial statements to their Forms 5471." We respectfully disagree. Indeed, Treas. Reg. $S 1.6038-2(g) explicitly states that financial statements are to "be attached to and filed as part of the return [Form 5471] required by this section" (emphasis added).

While we appreciate the IRS's desire to efficiently "code and edit" information to establish a data base for audit purposes, we suggest the IRS may not -- for administrative convenience -- expand the scope of the information required by regulation. In this regard, Treas. Reg. $S 1.6038-2(f) provides that a taxpayer shall provide "so much of the following information, and in such form or manner, as the form [5471] shall prescribe with respect to each foreign corporation." The regulation details 11 categories of information that must be provided in the prescribed format:

1. Name, address, and identifying number of the foreign corporation.

2. Principal place of business.

3. Date and country of incorporation.

4. Statutory agent in country of incorporation.

5. Name and address of any...