One might think that the Internal Revenue Service (IRS) would be satiated by the millions of tax revenues generated by the recent and ongoing foreign reporting initiatives; however, it appears that they have implemented yet another mandatory element to certain reports which, if overlooked, may deem filings to be incomplete and subject the taxpayer to significant penalties.
The IRS recently released advance notice, as required by Code Section 6038(a)(3), that taxpayers filing Forms 5471, 8858 and 8865 are required to provide a Unique Reference Identification (URI) number for each foreign entity with which it possesses a disclosure requirement. The URI number is not required if the foreign corporation has reported an Employer Identification Number (EIN), though the taxpayer may report both.
The reporting of the URI number applies to tax years beginning in 2012 and thereafter. This requirement is critical as, pursuant to instructions and guidance, any form submitted omitting such information may be deemed incomplete and subject to the unforgiving failure to file penalties which begin at $10,000 and can reach as much as $60,000…per entity!
The URI number is created by or on behalf of the reporting U.S. entity and assigned to the foreign entity for which the disclosure is being prepared and is simply utilized to track the foreign entity. Therefore, no application or approval by the IRS is required in order to establish the URI number. The number must simply be alphanumeric, contain no special characters, and is limited to fifty characters.
The number must be used consistently from one tax year to the next and on any other foreign reporting requirements by the taxpayer with respect to the foreign entity. The URI number may only be assigned to one foreign entity and will cease to exist in the event the foreign entity is no longer in existence. There are circumstances, however, that require the combination of a new URI number with a previous number; such as in the event of a merger or acquisition, or with a change of entity classification.
There has been no additional guidance regarding other required foreign reports such as Form 5472, however, the Form does request the above reference URI number. Given the potential penalties associated with non-filing or incomplete filing of these foreign disclosure requirements, we recommend creating and reporting a URI number for your required filings. So go ahead, pick a number…any number.
Additional guidance and complete form instructions are available at www.irs.gov
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