Foreign-owned, US, disregarded entities, US LLC’s, annual obligation, Form 5472.

Foreign-owned US disregarded entities now have an annual obligation to file Form 5472.

The disregarded entity should file as if it were a standalone US Corporation, completing a pro-forma Form 1120. Of course, this is assuming the non-US owner otherwise has no US reporting obligation in order to attach Form 5472. Which provide identifying information and disclosure of any related party transactions.

There are no de-minimus filing thresholds. Therefore, even foreign-owned disregarded entities with no related party transactions may have to file Form 5472 annually.

In our practice, disregarded entities are most commonplace in real estate investments, whereby the property is held via a US LLC.  Most acquisitions of US real estate include a US LLC.  However, the tax neutral nature of a Delaware incorporated LLC means that the holding of non-US assets is also commonplace.

Even if the US disregarded entity holds exclusively non-US assets, the Form 5472 filing requirement still exists.

DEADLINES

Importantly, due date for 2019 Form 5472s, originally April 15, 2020, is now July 15, 2020. You can request an extension on form 7004.

PENALTIES

Note that, failure to file Form 5742 in a timely manner can give rise to a penalty of $25,000 per failure. The IRS imposes this penalty. IRS may also impose additional penalties and interest.

In conclusion, if you believe you have entities that may be subject to the above and/or have potentially missed filings, we would be very happy to discuss the options available.