US: Domestic disregarded entities: New reporting rules in the US

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2026

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

US: Domestic disregarded entities: New reporting rules in the US

Fuller-James
Forst-David

Jim Fuller

David Forst

The US Treasury and the Internal Revenue Service (IRS) have proposed regulations that would treat a domestic disregarded entity (DRE) that is wholly-owned by a foreign person as a domestic corporation separate from its owner for the limited purposes of the reporting, record maintenance and associated compliance requirements that apply to 25% foreign-owned domestic corporations under § 6038A.

The preamble states that these changes intend to provide the IRS with improved access to information that it needs to satisfy its obligations under US tax treaties, tax information exchange agreements and similar international agreements, as well to strengthen the enforcement of US tax laws.

Because the proposed regulations would treat the affected domestic entities as foreign-owned domestic corporations for the specific purposes of § 6038A, they will be reporting corporations within the meaning of § 6038A. Consequently, they will need to obtain employer identification numbers and will be required to file Form 5472 with respect to reportable transactions between the entity and its foreign owner or other foreign related parties.

To ensure that these entities report all transactions with foreign related parties, the proposed regulations specify an additional category for reporting transactions for these purposes within the meaning of Treasury Regulation § 1.482-1(i)(7). This proposed change will mean these entities will be treated as separate taxpayers for the purpose of identifying transactions and being subject to requirements under § 6038A) to the extent not already covered by another reportable category. The term "transaction" is defined in Treas. Reg. § 1.482-1(i)(7) to include any sale, assignment, lease, license, loan, advance, contribution, or other transaction of any interest in or a right to use any property or money, as well as the performance of any services for the benefit of, or on behalf of, another taxpayer.

For example, under the proposed regulations, contributions and distributions would be considered reportable transactions with respect to these entities.

The penalty provisions associated with failure to file Form 5472 and failure to maintain records would also apply to these entities.

If the proposed regulations are approved, the provisions will apply for taxable years that end on or after the date that is 12 months after the date the regulations are published as final regulations.

Jim Fuller (jpfuller@fenwick.com) and David Forst (dforst@fenwick.com)

Fenwick & West

Website: www.fenwick.com

more across site & shared bottom lb ros

More from across our site

Brazil’s shift to a nationwide consumption tax is more than conceptual; it fundamentally transforms municipal revenue, enforcement, and administrative disputes
While some advisers praised the ruling’s definition of a ‘voucher’ for VAT purposes, a UK partner said the case left unanswered questions
While pillar two has been enacted on paper in Brazil, companies are encountering a range of practical compliance issues, ITR has heard
Moore, founding partner of the Chicago tax boutique which bears her name, shares her career wisdom for ITR’s new Women in Tax interview series
But partners at the firm admit that jumping ship to the US would not be as easy as some believe
Governments are rewriting tax policy for the AI era, deploying digital taxes, tailored incentives and algorithmic enforcement that redefine where value is created
Wingrove will succeed Bill Thomas, who has served in the role since 2017; in other news, Andersen unveiled a sharp increase in revenues for 2025
Partners are divided on Italy vs PDM D’s analytical depth, evidentiary standards, and what the judgment signals for future intra-group financing cases
As GCCs increasingly become strategic hubs, multinationals face heightened risks around permanent establishment and place of effective management
While all options presented ‘drawbacks’, European Commission tax leader Wopke Hoekstra said the controversial US carve-out deal has ‘many benefits’
Gift this article