I.R.C. § 6038A(a) Requirement —
If, at any time during a taxable year, a corporation
(hereinafter in this section referred to as the “reporting corporation”)—
I.R.C. § 6038A(a)(1) —
is a domestic corporation, and
I.R.C. § 6038A(a)(2) —
is 25-five percent foreign-owned,
such corporation shall furnish, at such time and in such manner as the Secretary
shall by regulations prescribe, the information described in subsection (b) and
such corporation shall maintain (in the location, in the manner, and to the extent
prescribed in regulations) such records as may be appropriate to determine the correct
treatment of transactions with related parties as the Secretary shall by regulations
prescribe (or shall cause another
person to so maintain such records).
I.R.C. § 6038A(b) Required Information —
For purposes of subsection (a), the information described in this subsection is
such information as the Secretary may prescribe by regulations relating to—
I.R.C. § 6038A(b)(1) In General —
For purposes of subsection (a), the information described in this subsection is such
information as the Secretary prescribes by regulations relating to—
I.R.C. § 6038A(b)(1)(A) —
the name, principal place of business, nature of business, and country or countries
in which organized or resident, of each person which—
I.R.C. § 6038A(b)(1)(A)(i) —
is a related party to the reporting corporation, and
I.R.C. § 6038A(b)(1)(A)(ii) —
had any transaction with the reporting corporation during its taxable year,
I.R.C. § 6038A(b)(1)(B) —
the manner in which the reporting corporation is related to each person referred to
in subparagraph (A), and
I.R.C. § 6038A(b)(1)(C) —
transactions between the reporting corporation and each foreign person which is a
related party to the reporting corporation.
I.R.C. § 6038A(b)(2) Additional Information Regarding Base Erosion Payments —
For purposes of subsection (a) and section 6038C, if the reporting corporation or the foreign corporation to whom section 6038C applies is an applicable taxpayer, the information described in this subsection shall
include—
I.R.C. § 6038A(b)(2)(A) —
such information as the Secretary determines necessary to determine the base erosion
minimum tax amount, base erosion payments, and base erosion tax benefits of the taxpayer
for purposes of section 59A for the taxable year, and
I.R.C. § 6038A(b)(2)(B) —
such other information as the Secretary determines necessary to carry out such section.
For purposes of this paragraph, any term used in this paragraph which is also used
in section 59A shall have the same meaning as when used in such section.
I.R.C. § 6038A(c) Definitions —
For purposes of this section—
I.R.C. § 6038A(c)(1) 25-Percent Foreign-Owned —
A corporation is 25-percent foreign-owned if at least 25 percent of—
I.R.C. § 6038A(c)(1)(A) —
the total voting power of all classes of stock of such corporation entitled to vote,
or
I.R.C. § 6038A(c)(1)(B) —
the total value of all classes of stock of such corporation,
is owned at any time during the taxable year by 1 foreign person (hereinafter in
this section referred to as a “25-percent foreign shareholder”).
I.R.C. § 6038A(c)(2) Related Party —
The term “related party” means—
I.R.C. § 6038A(c)(2)(A) —
any 25-percent foreign shareholder of the reporting corporation,
I.R.C. § 6038A(c)(2)(B) —
any person who is related (within the meaning of section 267(b) or 707(b)(1)) to the reporting corporation or to a 25-percent foreign shareholder of the reporting
corporation, and
I.R.C. § 6038A(c)(2)(C) —
any other person who is related
(within the meaning of section 482)
to the reporting corporation.
I.R.C. § 6038A(c)(3) Foreign Person —
The term “foreign person” means any person who is not a United States person. For
purposes of the preceding sentence, the term “United States person” has the meaning
given to such term by section 7701(a)(30), except that any individual who is a citizen of any possession of the United States
(but not otherwise a citizen of the United States)
and who is not a resident of the United States shall not be treated as a United States
person.
I.R.C. § 6038A(c)(5) Section 318 To Apply —
Section 318 shall apply for purposes of paragraphs
(1) and (2), except that—
I.R.C. § 6038A(c)(5)(A) —
“10 percent” shall be substituted for “50 percent” in section 318(a)(2)(C), and
I.R.C. § 6038A(c)(5)(B) —
subparagraphs (A), (B), and (C)
of section 318(a)(3)
shall not be applied so as to consider a United States person as owning stock which
is owned by a person who is not a United States person.
I.R.C. § 6038A(d) Penalty For Failure To Furnish Information Or Maintain Records
I.R.C. § 6038A(d)(1) In General —
If a reporting corporation—
I.R.C. § 6038A(d)(1)(A) —
fails to furnish (within the time prescribed by regulations) any information described
in subsection (b), or
I.R.C. § 6038A(d)(1)(B) —
fails to maintain (or cause another to maintain) records as required by subsection
(a),
such corporation shall pay a penalty of $25,000 for each taxable year with respect
to which such failure occurs.
I.R.C. § 6038A(d)(2) Increase In Penalty Where Failure Continues After Notification —
If any failure described in paragraph (1) continues for more than 90 days after
the day on which the Secretary mails notice of such failure to the reporting corporation,
such corporation shall pay a penalty (in addition to the amount required under paragraph
(1)) of $25,000 for each 30-day period (or fraction thereof) during which such failure
continues after the expiration of such 90-day period.
I.R.C. § 6038A(d)(3) Reasonable Cause —
For purposes of this subsection, the time prescribed by regulations to furnish information
or maintain records (and the beginning of the 90-day period after notice by the Secretary)
shall be treated as not earlier than the last day on which (as shown to the satisfaction
of the Secretary) reasonable cause existed for failure to furnish the information
or maintain the records.
I.R.C. § 6038A(e) Enforcement Of Requests For Certain Records
I.R.C. § 6038A(e)(1) Agreement To Treat Corporation As Agent —
The rules of paragraph (3) shall apply to any transaction between the reporting
corporation and any related party who is a foreign person unless such related party
agrees (in such manner and at such time as the Secretary shall prescribe) to authorize
the reporting corporation to act as such related party's limited agent solely for
purposes of applying sections 7602, 7603, and 7604 with respect to any request by the Secretary to examine records or produce testimony
related to any such transaction or with respect to any summons by the Secretary for
such records or testimony. The appearance of persons or production of records by
reason of the reporting corporation being such an agent shall not subject such persons
or records to legal process for any purpose other than determining the correct treatment
under this title of any transaction between the reporting corporation and such related
party.
I.R.C. § 6038A(e)(2) Rules Where Information Not Furnished —
If—
I.R.C. § 6038A(e)(2)(A) —
for purposes of determining the correct treatment under this title of any transaction
between the reporting corporation and a related party who is a foreign person, the
Secretary issues a summons to such corporation to produce (either directly or as
agent for such related party) any records or testimony,
I.R.C. § 6038A(e)(2)(B) —
such summons is not quashed in a proceeding begun under paragraph (4) and is not
determined to be invalid in a proceeding begun under section 7604(b) to enforce such summons, and
I.R.C. § 6038A(e)(2)(C) —
the reporting corporation does not substantially comply in a timely manner with such
summons and the
Secretary has sent by certified or registered mail a notice to such reporting corporation
that such reporting corporation has not so substantially complied,
the Secretary may apply the rules of paragraph (3) with respect to such transaction
(whether or not the Secretary begins a proceeding to enforce such summons). If the
reporting corporation fails to maintain (or cause another to maintain)
records as required by subsection (a), and by reason of that failure, the summons
is quashed in a proceeding described in subparagraph
(B) or the reporting corporation is not able to provide the records requested in
the summons, the Secretary may apply the rules of paragraph
(3) with respect to any transaction to which the records relate.
I.R.C. § 6038A(e)(3) Applicable Rules In Cases Of Noncompliance —
If the rules of this paragraph apply to any transaction—
I.R.C. § 6038A(e)(3)(A) —
the amount of the deduction allowed under subtitle A for any amount paid or incurred
by the reporting
corporation to the related party in connection with such transaction,
and
I.R.C. § 6038A(e)(3)(B) —
the cost to the reporting corporation of any property acquired in such transaction
from the related party
(or transferred by such corporation in such transaction to the related party),
shall be the amount determined by the Secretary in the Secretary's sole discretion
from the Secretary's own knowledge or from such information as the Secretary may
obtain through testimony or otherwise.
I.R.C. § 6038A(e)(4) Judicial Proceedings
I.R.C. § 6038A(e)(4)(A) Proceedings To Quash —
Notwithstanding any law or rule of law, any reporting corporation to which the Secretary
issues a summons referred to in paragraph (2)(A) shall have the right to begin a proceeding
to quash such summons not later than the 90th day after such summons was issued.
In any such proceeding, the Secretary may seek to compel compliance with such summons.
I.R.C. § 6038A(e)(4)(B) Review Of Secretarial Determination Of Noncompliance —
Notwithstanding any law or rule of law, any reporting corporation which has been
notified by the Secretary that the Secretary has determined that such corporation
has not substantially complied with a summons referred to in paragraph (2) shall
have the right to begin a proceeding to review such determination not later than
the 90th day after the day on which the notice referred to in paragraph
(2)(C) was mailed. If such a proceeding is not begun on or before such 90th day,
such determination by the Secretary shall be binding and shall not be reviewed by
any court.
I.R.C. § 6038A(e)(4)(C) Jurisdiction —
The United States district court for the district in which the person (to whom the
summons is issued) resides or is found shall have jurisdiction to hear any proceeding
brought under subparagraph
(A) or (B). Any order or other determination in such a proceeding shall be treated
as a final order which may be appealed.
I.R.C. § 6038A(e)(4)(D) Suspension Of Statute Of Limitations —
If the reporting corporation brings an action under subparagraph (A) or (B), the
running of any period of limitations under section 6501 (relating to assessment and collection of tax) or under section 6531 (relating to criminal prosecutions)
with respect to any affected taxable year shall be suspended for the period during
which such proceeding, and appeals therein, are pending. In no event shall any such
period expire before the 90th day after the day on which there is a final determination
in such
proceeding. For purposes of this subparagraph, the term “affected taxable year” means
any taxable year if the determination of the amount of tax imposed for such taxable
year is affected by the treatment of the transaction to which the summons relates.
I.R.C. § 6038A(f) Cross Reference —
For provisions relating to criminal penalties for violation of this section, see
section 7203.
(Added Pub. L. 97-248, title III, Sec. 339(a), Sept. 3, 1982, 96 Stat. 632, and amended Pub. L. 97-448, title III, Sec. 306(b)(4),
Jan. 12, 1983, 96 Stat. 2406; Pub. L. 98-369, div. A, title VII, Sec. 714(l), July 18, 1984, 98 Stat. 963; Pub. L. 99-514, title XII, Sec. 1245(a),
(b)(1)-(4), Oct. 22, 1986, 100 Stat. 2581; Pub. L. 101-239, title VII, Sec. 7403(a)-(d), Dec. 19, 1989, 103 Stat. 2358, 2359; Pub. L. 101-508, title XI, Sec. 11315(b)(1), 11704(a)(23), Nov. 5, 1990, 104 Stat.
1388-457, 1388-519; Pub. L. 104-188, 1702, 1704, Aug. 20, 1996, 110 Stat. 1755; Pub. L. 115-97, title I, Sec. 14401(b), Dec. 22, 2017, 131 Stat. 2054.)
BACKGROUND NOTES
AMENDMENTS
2017 —
Subsec. (b). Pub. L. 115-97, Sec. 14401(b)(1), amended subsec. (b). Before amendment, it read as follows:
“(b) Required Information.—For purposes of subsection (a), the information described
in this subsection is such information as the Secretary may prescribe by regulations
relating to—
“(1) the name, principal place of business, nature of business, and country or countries
in which organized or resident, of each person which—
“(A) is a related party to the reporting corporation, and
“(B) had any transaction with the reporting corporation during its taxable year,
“(2) the manner in which the reporting corporation is related to each person referred
to in paragraph (1), and
“(3) transactions between the reporting corporation and each foreign person which
is a related party to the reporting corporation.”
Subsec. (d)(1). Pub. L. 115-97, Sec. 14401(b)(2), amended par. (1) by substituting “$25,000”
for “$10,000”.
Subsec. (d)(2). Pub. L. 115-97, Sec. 14401(b)(2), amended par. (2) by substituting “$25,000” for “$10,000”.
1996 - Subsec. (b). Pub. L. 104-188, Sec. 1704(f)(5)(B) added “and”
to the end of par. (2), struck “, and” at the end of par.
(3), and struck par. (4), which prior to being struck read as follows: “(4)
such information as the Secretary may require for purposes of carrying out the provisions
of section 453C.” Subsec. (e)(4)(D). Pub. L. 104-188, Sec. 1702(c)(5) substituted “any affected taxable year” for “any transaction to which the summons
relates”, and added a new sentence at the end of subpar.
(D).
1990 - Subsec. (a)(1). Pub. L. 101-508, Sec. 11315(b)(1), struck out “or is a foreign corporation engaged in trade or business within the
United States” after “corporation”.
Subsec. (c)(3) to (6). Pub. L. 101-508, Sec. 11704(a)(23), redesignated pars. (4) to (6) as (3) to (5), respectively.
1989 - Subsec. (a). Pub. L. 101-239, Sec. 7403(b), inserted before period at end “and such corporation shall maintain
(in the location, in the manner, and to the extent prescribed in regulations)
such records as may be appropriate to determine the correct treatment of transactions
with related parties as the Secretary shall by regulations prescribe (or shall cause
another person to so maintain such records)”.
Subsec. (a)(2). Pub. L. 101-239, Sec. 7403(a)(1), amended par. (2) generally, substituting “is 25-percent foreign-owned,” for “is
controlled by a foreign person,”.
Subsec. (c). Pub. L. 101-239, Sec. 7403(a)(2), amended subsec. (c) generally, substituting pars. (1) to (6) for former pars. (1)
to (3) defining “control”, “related party”, and “foreign person”.
Subsec. (d). Pub. L. 101-239, Sec. 7403(c), inserted “or maintain records”
after “information” in heading and amended text generally, making changes in substance
and structure of pars. (1) to (3).
Subsecs. (e), (f). Pub. L. 101-239, Sec. 7403(d), added subsec. (e) and redesignated former subsec. (e) as (f).
1986 - Subsec. (b)(1). Pub. L. 99-514, Sec. 1245(a), substituted “each person” for “each corporation” in introductory provisions and
amended subpar. (A) generally, substituting “related party to the reporting corporation”
for “member of the same controlled group as the reporting corporation”.
Subsec. (b)(2). Pub. L. 99-514, Sec. 1245(b)(1), substituted “each person”
for “each corporation”.
Subsec. (b)(3). Pub. L. 99-514, Sec. 1245(b)(2), (3), amended par. (3) generally, substituting “foreign person which is a related
party to the reporting corporation, and” for “foreign corporation which is a member
of the same controlled group as the reporting corporation.”
Subsec. (b)(4). Pub. L. 99-514, Sec. 1245(b)(3), added par. (4).
Subsec. (c)(2). Pub. L. 99-514, Sec. 1245(b)(4), amended par. (2) generally. Prior to amendment, par. (2), controlled group, read
as follows: “The term “controlled group” means any controlled group of corporations
within the meaning of section 1563(a); except that -
“(A) “at least 50 percent” shall be substituted -
“(i) for “at least 80 percent” each place it appears in section 1563(a)(1), and
“(ii) for “more than 50 percent” each place it appears in section 1563(a)(2)(B), and
“(B) the determination shall be made without regard to subsections (a)(4), (b)(2)(C),
and
(e)(3)(C) of section 1563.”
1984 - Subsec. (c)(1). Pub. L. 98-369 substituted section “6038(e)(1)”
for “6038(d)(1)”.
1983 - Subsec. (c)(2)(B). Pub. L. 97-448 inserted “, (b)(2)(C),”
after “(a)(4)”.
EFFECTIVE DATE OF 2017 AMENDMENTS
Amendments by Sec. 14401(b) of Pub. L. 115-97 effective for base erosion payments, (as defined in Section 59A(d)
of the Internal Revenue Codeof 1986, as added by this section)
paid or accrued in taxable years beginning after December 31, 2017.
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by Sec. 1702(c)(5) of Pub. L. 104-188 effective as if included in the related provision of the Revenue Reconciliation Act
of 1990.
EFFECTIVE DATE OF 1990 AMENDMENT
Section 11315(c) of Pub. L. 101-508 provided that: “The amendments made by this section (enacting section 6038C of this
title and amending this section) shall apply to—-
“(1) any requirement to furnish information under section 6038C(a) of the Internal Revenue Code of 1986 (as added by this section) if the time for furnishing such information under
such section is after the date of the enactment of this Act (Nov. 5, 1990),
“(2) any requirement under such section 6038C(a) to maintain records which were in
existence on or after March 20, 1990,
“(3) any requirement to authorize a corporation to act as a limited agent under section
6038C(d)(1)
of such Code (as so added) if the time for authorizing such action is after the date
of the enactment of this Act, and
“(4) any summons issued after such date of enactment, without regard to when the taxable
year (to which the information, records, authorization, or summons relates) began.”
EFFECTIVE DATE OF 1989 AMENDMENT
Section 7403(e) of Pub. L. 101-239 provided that: “The amendments made by this section (amending this section) shall
apply to taxable years beginning after July 10, 1989.”
EFFECTIVE DATE OF 1986 AMENDMENT
Section 1245(c) of Pub. L. 99-514 provided that: “The amendments made by this section (amending this section and section
6038 of this title) shall apply to taxable years beginning after December 31, 1986.”
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-369 effective as if included in the provision of the Tax Equity and Fiscal Responsibility
Act of 1982, Pub. L. 97-248, to which such amendment relates, see section 715 of Pub. L. 98-369, set out as a note under section 31 of this title.
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by Pub. L. 97-448 effective as if included in the provisions of the Tax Equity and Fiscal Responsibility
Act of 1982, Pub. L. 97-248, to which such amendment relates, see section 311(d) of Pub. L. 97-448, set out as a note under section 31 of this title.
EFFECTIVE DATE
Section 339(c) of Pub. L. 97-248 provided that: “The amendments made by this section (enacting this section) shall
apply to taxable years beginning after December 31, 1982.”
APPLICABILITY OF 1989 AMENDMENT
Section 11314 of Pub. L. 101-508 provided that:
“(a) General Rule. - The amendments made by section 7403 of the Revenue Reconciliation
Act of 1989 (Pub. L. 101-239, amending this section)
shall apply to -
“(1) any requirement to furnish information under section 6038A(a) of the Internal Revenue Code of 1986 (as amended by such section 7403) if the time for furnishing such information
under such section is after the date of the enactment of this Act
(Nov. 5, 1990),
“(2) any requirement under such section 6038A(a) to maintain records which were in
existence on or after March 20, 1990,
“(3) any requirement to authorize a corporation to act as a limited agent under section
6038A(e)(1)
of such Code (as so amended) if the time for authorizing such action is after the
date of the enactment of this Act, and
“(4) any summons issued after such date of enactment, without regard to when the taxable
year (to which the information, records, authorization, or summons relates) began.
Such amendments shall also apply in any case to which they would apply without regard
to this section.
“(b) Continuation of Old Failures. - In the case of any failure with respect to a
taxable year beginning on or before July 10, 1989, which first occurs on or before
the date of the enactment of this Act (Nov. 5, 1990) but which continues after such
date of enactment, section 6038A(d)(2) of the Internal Revenue Code of 1986 (as amended by subsection (c) of such section 7403) shall apply for purposes
of determining the amount of the penalty imposed for 30-day periods referred to in
such section 6038A(d)(2) which begin after the date of the enactment of this Act.”
