TEI comments on Form 5471: October 18, 2002.

On October 18, 2002, TEI submitted the following comments to Carol Dunahoo, Director of International Tax Programs for the Internal Revenue Service on the proposed revision of Form 5471, Information Return of U.S. Persons with respect to Certain Foreign Corporations. The comments were prepared under the aegis of the Institute's IRS Administrative Affairs Committee, whose chair is David L. Bernard of the Kimberly-Clark Corporation, and International Tax Committee, whose chair is Bruce R. Maggin of IBM Corporation.

Tax Executives Institute appreciates the opportunity to provide comments on the proposed revision of Form 5471, Information Return of U.S. Persons with respect to Certain Foreign Corporations. TEI's 5,200 members are uniquely qualified to comment on this form since they are accountants, attorneys, and other business professionals who work for 2,800 of the largest companies in the United States, Canada, and Europe. Our members deal with compliance issues on a daily basis. We would be pleased to meet with you to discuss our recommendations.

TEI commends the IRS for undertaking a review of the information required on this form, which imposes considerable administrative burdens for taxpayers. Regrettably, despite previous efforts by the IRS to streamline it, the form requires the reporting of extraneous information that is unnecessary for the determination of a taxpayer's tax liability. Much of the information requested (such as on Schedules M and O) is redundant and can be found on other parts of the tax return. In addition, where particular information will not be used to select returns for audit (or where the taxpayer's return will be audited in any event), we believe the information required to be filed should be limited. Especially for companies that are continually audited, TEI recommends eliminating individual filings for each controlled foreign corporation (CFC) and substituting a schedule of CFCs containing key information, including the balance in the earnings and profits (E&P) and tax pools.

The schedules are not uniform in the manner in which the information is to be presented. Several schedules require reporting in functional currency and conversion to U.S. dollar amounts (Schedules C and H). Others require the use of either U.S. dollar (Schedules F and M) or functional currency (Schedule J). TEI recommends that taxpayers be permitted to report the information solely in functional currency.

We also suggest eliminating the...