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Persons who must disclose the financial information of Controlled Foreign Company or the constructively controlled foreign company with respect to Certain Foreign Corporations.
Form 5471 & Filing test
一、 Form 5471 filing test
Under section 14103 of “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018,” P.L 115-97 (“the Act”), the taxpayer must furnish the information by filing Form 5471 as the attachment of form 1040.
Any person who must file Form 5471 should pass categories of Filers test, US. Shareholder test and US person test. The controlled foreign company should be a Section 965 Specified Foreign Corporation (SFC)
1. Who Must File
Generally, all U.S. persons fall in the following 5 Categories of Filers,must complete Form 5471, including the schedules, statements, and/or other information requested. (from “i5471”)
2. Categories of Filers test
(1) Category 1 Filers
As indicated in i5471, Category 1 Filers include 3 types, Category 1a filers, Category 1b filers, and Category 1c filers.
Category 1 filer is a person who was a U.S. shareholder of a foreign corporation that was a section 965 specified foreign corporation (SFC) at any time during the foreign corporation’s tax year ending with or within the U.S. shareholder’s tax year, and who owned that stock on the last day in that year in which the foreign corporation was a section 965 SFC, taking into account the regulations under section 965.
1) Category 1a Filer
A Category 1a filer is a Category 1 filer that is not a Category 1b or 1c filer.
2) Category 1b Filer
A Category 1b filer is a person who is an unrelated section 958(a) U.S. shareholder (defined below) of a foreign-controlled section 965 SFC.
3) Category 1c Filer
A Category 1c filer is a person who is a Related constructive U.S. shareholder.
(2) Category 2 Filers
Category 2 Filer includes a U.S. citizen or resident who is an officer or director of a foreign corporation in which a U.S. person has acquired (in one or more transactions):
1). Stock that meets the 10% stock ownership requirement with respect to the foreign corporation; or
2). An additional 10% or more (in value or voting power) of the outstanding stock of the foreign corporation.
(3) Category 3 Filers
This category includes:
1). A U.S. person who acquires stock in a foreign corporation which, when added to any stock owned on the date of acquisition, meets the 10% stock ownership requirement with respect to the foreign corporation.
2). A U.S. person who acquires stock which, without regard to stock already owned on the date of acquisition, meets the 10% stock ownership requirement with respect to the foreign corporation.
3). A person who is treated as a U.S. shareholder under section 953(c) with respect to the foreign corporation.
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26 U.S. Code § 953 - Insurance income (C)
The pro rata share referred to section 951(a)(1)(A) shall be determined under paragraph (5) of this subsection.
(4) Category 4 Filers
This category includes a U.S. person who had control (defined below) of a foreign corporation during the annual accounting period of the foreign corporation.
(5) Category 5 Filers
In general, a Category 5 filer is a person who was a U.S. shareholder that owned stock in a foreign corporation that was a CFC at any time during the foreign corporation’s tax year ending with or within the U.S. shareholder’s tax year, and who owned that stock on the last day in that year in which the foreign corporation was a CFC.
There are three different types of Category 5 filers. Category 5a filers, Category 5b filers, and Category 5c filers.
1) Category 5a Filer
A Category 5a filer is a Category 5 filer that is not a Category 5b or 5c filer.
2) Category 5b Filer
A person is a Category 5b filer if they are an unrelated section 958(a) U.S. shareholder of a foreign-controlled CFC.
3) Category 5c Filer
A person is a Category 5c filer if they are a related constructive U.S. shareholder of a foreign-controlled CFC.
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United States resident(26 USC § 865(g)(1))
(1) In general Except as otherwise provided in this subsection—
(A) United States resident
The term “United States resident” means—
(i) any individual who— (I) is a United States citizen or a resident alien and does not have a tax home (as defined in section 911(d)(3) ) in a foreign country, or (II) is a nonresident alien and has a tax home (as so defined) in the United States, and
(ii) any corporation, trust, or estate which is a United States person (as defined in section 7701(a)(30) ).
(B) Nonresident
The term “nonresident” means any person other than a United States resident.
Reference from IRS Webpage are as follows:1. Questions and Answers about Reporting Related to Section 965 on 2017 Tax Returns. 2. Form 5471, 3. i5471(https://www.irs.gov)
二、 Section 965 specified foreign corporation
Section 965 specified foreign corporation means 1）either a controlled foreign corporation, as defined under section 957 of the Code (“CFC”), or 2）a foreign corporation (other than a passive foreign investment company, as defined under section 1297 of the Code, that is not also a CFC) that has a United States shareholder that is a domestic corporation.
3. U.S. shareholder. test
For purposes of Category 1, a U.S. shareholder is a U.S. person who owns (directly, indirectly, or constructively, within the meaning of section 958(a) and (b)) 10% or more of the total combined voting power or value of shares of all classes of stock of a section 965 SFC. See section 951(b).
4. U.S. person. test
For purposes of Category 1, a U.S. person is:
(1)A citizen or resident of the United States;
(2)A domestic partnership;
(3)A domestic corporation; or
(4)An estate or trust that is not a foreign estate or trust, as defined in section 7701(a)(31). See section 957(c) for exceptions.
5. Section 965 SFC test
For purposes of Category 1, a section 965 SFC is:
1) A CFC (see Category 5 Filers, later, for definition); or
2) Any foreign corporation with respect to which one or more domestic corporations is a U.S. shareholder.
Why didn't my Tesla get Tax Credit?
Could I get recapture of credit ?
If there was no Tax Credit for your Tesla bought in 2022 , the reasons may be as follows:
1. Tesla Y 2022 bought by my client on April 2022 was phaseout neither on the allowed model list nor 200,000 EVs in the US.
To qualify, a vehicle must (Revenue Code Section 30D：Credits for New Electric Vehicles Purchased in) :
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Have an external charging source
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Have a gross vehicle weight rating of less than 14,000 pounds
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Be made by a manufacturer that hasn't sold more than 200,000 EVs in the U.S.
2. If my client could get the credit , the seller would have issued a certificate to him.
"The seller of new clean vehicles (including fuel cell vehicles) will provide a report to the purchaser providing information needed to claim the credit including the following.
· The purchaser's name and taxpayer identification number.
· The vehicle's VIN.
· Verification that the original use of the vehicle begins with the purchaser.
· The maximum new clean vehicle credit allowable for the vehicle." as indicated in i8936.
3. Recapture of Credit is allowed by Section30D(f)(5).
1) · Recapture of Credit( from i8936)
If the vehicle no longer qualifies for the credit, you may have to recapture part or all of the credit. For details, see section 30D(f)(5).
2) Section 30D(f)(5).(P.L. 117-169; 8/16/22, Updated for new IRS guidance issued 4/17/23)
Quote: "(5) RECAPTURE The Secretary shall, by regulations, provide for recapturing the benefit of any credit allowable under subsection (a) with respect to any property which ceases to be property eligible for such credit."
Annual Report Information & Franchise Tax Fees in Delaware
Annual Report Filing Fees
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Exempt Domestic Corporations – $25.00.
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Non-Exempt Domestic Corporations – $50.00.
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Foreign Corporations
Foreign Corporations must file an Annual Report with the Delaware Secretary of State on or before June 30 each year.
A $125.00 filing fee is required to be paid.
If the Annual Report and remittance is not received by the due date, a $125.00 penalty will be added to filing fee.
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LLC/Partnership
All Domestic and Foreign Limited Liability Companies, Limited Partnerships, and General Partnerships formed or registered in Delaware are required to pay an annual tax of $300.00. There is no requirement to file an Annual Report.
The annual taxes for the prior year are due on or before June 1st. Failure to pay the required annual taxes will result in a penalty of $200.00 plus 1.5% interest per month on tax and penalty. There is no proration on alternative entity taxes. Annual taxes are assessed if the entity is active in the records of the Division of Corporations anytime during January 1st through December 31st of the current tax year.
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Corporate Annual Report
All active Domestic Corporation Annual Reports and Franchise Taxes for the prior year are due annually on or before March 1st and are required to be filed online. Failure to file the report and pay the required franchise taxes will result in a penalty of $200.00 plus 1.5% interest per month on tax and penalty.