1. The Legal Basis for the Requirement
IRC § 6038A requires a "reporting corporation," a U.S. corporation that is at least 25% foreign-owned, to report transactions with related parties and to maintain supporting records. The report is made on Form 5472. On its own, the statute does not reach a single-member LLC that is disregarded as separate from its owner, because a disregarded entity is not a corporation.
Final regulations issued in December 2016 (T.D. 9796) closed that gap for tax years beginning on or after January 1, 2017:
- Treas. Reg. § 301.7701-2(c)(2)(vi) treats a domestic disregarded entity wholly owned by one foreign person as a corporation separate from its owner, solely for purposes of the reporting, record-maintenance, and associated compliance requirements of § 6038A. For all other federal tax purposes, the entity remains disregarded.
- Treas. Reg. § 1.6038A-1 accordingly treats such an entity as a reporting corporation required to file Form 5472.
- Treas. Reg. § 1.6038A-2 governs the return requirement and expanded the transactions these entities must report, so that contributions, distributions, and similar transfers between the entity and its owner are reportable even though they would not be for an ordinary corporation.
Because the entity has no income tax return to which Form 5472 can be attached, the Form 5472 instructions require it to file a pro forma Form 1120 solely as the vehicle for Form 5472. The entity also needs its own EIN to file.
2. Who Must File
The requirement applies to a U.S. entity that is (1) disregarded as separate from its owner for income tax purposes, and (2) wholly owned, directly or indirectly, by one foreign person: a nonresident alien individual, a foreign corporation, a foreign partnership, or another foreign person.
Typically covered
- A Delaware, Wyoming, New Mexico, or other state LLC formed by a non-U.S. founder, with no election to be taxed as a corporation
- A U.S. LLC wholly owned by a foreign parent company
- An LLC held for U.S. banking, payment processing, or marketplace sales by a foreign owner
Different rules apply
- An LLC with two or more members (generally a partnership filing Form 1065)
- An LLC that has elected to be taxed as a corporation (a regular Form 1120 filer, which may still file Form 5472 as an ordinary reporting corporation)
- A single-member LLC owned by a U.S. person
The entity uses its owner's U.S. tax year if the owner has one; otherwise it uses the calendar year.
3. What Counts as a Reportable Transaction
A reporting corporation files Form 5472 for a tax year in which it had a reportable transaction with a foreign or domestic related party. For a foreign-owned disregarded entity, the category is unusually broad under Treas. Reg. § 1.6038A-2(a)(2) & (b)(3)(vii). In addition to the monetary and nonmonetary transactions every reporting corporation reports (Parts IV and VI of the form), these entities report in Part V "any other transaction" as defined in Treas. Reg. § 1.482-1(i)(7). The instructions identify, among others:
- Contributions to the entity by its owner
- Distributions from the entity to its owner
- Amounts paid or received in connection with the formation, dissolution, acquisition, and disposition of the entity
- Sales, purchases, rents, royalties, services, loans, and interest between the entity and its owner or other related parties (Part IV)
In practice, this means the year an LLC is formed is almost always a filing year, as is any year in which money moves between the LLC and its owner in either direction. Practitioners commonly treat an owner's personal payment of the LLC's expenses, such as state annual fees or registered agent charges, as a contribution to the entity, although the instructions do not list that example specifically.
A separate Form 5472 is required for each related party with which the entity had reportable transactions. Part V transactions are described on an attached statement.
4. The No-Transaction Exception and Exceptions That Do Not Apply
Available: no reportable transactions
The instructions' first exception relieves a filer that had no reportable transactions of the types listed in Parts IV and VI under Treas. Reg. § 1.6038A-2. For a foreign-owned disregarded entity, there must also have been no Part V transactions. A truly dormant year, in which nothing moves between the entity and its owner or other related parties, may therefore require no filing.
Because the definition is broad and the penalty is large, many practitioners document the conclusion carefully for the file, and some file protectively.
Expressly not available to these entities
- The exception for transactions reported on Form 5471, Schedule M
- The exception for Form 1120-FSC filers
- The exception for transactions between two non-U.S. parties with no U.S.-source or effectively connected income
Under Treas. Reg. § 1.6038A-1(h)–(i) and the form instructions, the small corporation and de minimis value exceptions also do not apply to a foreign-owned U.S. DE.
5. How and Where to File
- Pro forma Form 1120. Only the entity's name and address and items B and E on page 1 of Form 1120 are completed. Form 5472 (one per related party) and any Part V statement are attached.
- Labeling. Write "Foreign-owned U.S. DE" across the top of Form 1120.
- No e-filing. The instructions state that these entities cannot file Form 5472 electronically.
- Fax: 855-887-7737 (the instructions specify 300 DPI or higher).
- Mail: Internal Revenue Service, 1973 Rulon White Blvd., M/S 6112, Attn: PIN Unit, Ogden, UT 84201.
- Not the regular Form 1120 mailing addresses in the Form 1120 instructions.
Fax numbers and addresses can change. Verify them against the current Form 5472 instructions before each filing, and retain fax transmission confirmations or proof of mailing.
6. Due Date and Extensions
The pro forma return is due on the due date of Form 1120, including extensions: generally the 15th day of the 4th month after the end of the tax year, or April 15 for a calendar-year entity.
Extending with Form 7004
- File Form 7004 by the regular due date, using the Form 1120 code on Part I, line 1.
- Write "Foreign-owned U.S. DE" across the top of Form 7004.
- Fax or mail Form 7004 to the same fax number or address used for the pro forma return, not the regular Form 7004 filing address.
For general background on Form 7004 and extension timing, see our due-date reference for information returns.
7. Penalties
- Initial penalty: $25,000 for each failure to file Form 5472 when due and in the manner prescribed, or to maintain required records (IRC § 6038A(d)). The amount was increased from $10,000 by the Tax Cuts and Jobs Act for tax years beginning after December 31, 2017.
- Continuation penalty: if the failure continues more than 90 days after the IRS mails notice, an additional $25,000 for each 30-day period, or part of a period, that it continues.
- Incomplete returns: filing a substantially incomplete Form 5472 is treated as a failure to file.
- Per related party: because a separate form is required for each related party, multiple failures can arise in one year.
Relief generally depends on establishing reasonable cause. For the general framework applied to international information return penalties, see Penalty Relief & Reasonable Cause.
8. Missed Years and the Statute of Limitations
Many foreign owners learn of the requirement years after forming the entity. Two rules shape a catch-up filing:
Years potentially affected
The requirement applies to tax years beginning on or after January 1, 2017. An entity formed in 2018 that never filed may have a filing requirement for each year since formation in which it had a reportable transaction.
The limitations period stays open
Under IRC § 6501(c)(8), when required information under § 6038A is not furnished, the time for assessment with respect to the related return generally does not begin to run until the information is provided. Unfiled years therefore do not age out on their own.
A catch-up engagement typically involves reconstructing each year's transactions with the owner, determining for each year whether a reportable transaction occurred, preparing a separate pro forma Form 1120 and Form 5472 for each filing year using the correct form for that year, and assembling the filings with any explanation the practitioner considers appropriate. Years with no reportable transactions should be documented rather than ignored.
9. Related Obligations Worth Checking
- Record maintenance. § 6038A and Treas. Reg. § 1.6038A-3 require the entity to maintain records sufficient to establish the correctness of the information reported.
- Income tax filings of the owner. Because the entity is otherwise disregarded, any U.S. income tax filing obligation (for example, for effectively connected income) belongs to the foreign owner, typically on Form 1040-NR or Form 1120-F. Form 5472 does not satisfy those obligations.
- State requirements. State annual reports, franchise taxes, and registered agent requirements are separate from the federal filing.
10. Primary Regulatory Authority Repository
Access the official Treasury Regulations governing Form 5472 filing requirements for foreign-owned single-member LLCs directly from our reference repository:
- Treas. Reg. § 301.7701-2 (Classification / Disregarded Entities) View PDF ↗
- Treas. Reg. § 1.6038A-1 (Reporting Corporations & Foreign-Owned Entities) View PDF ↗
- Treas. Reg. § 1.6038A-2 (Requirement of Return & Reportable Transactions) View PDF ↗
11. Frequently Asked Questions (FAQ)
Does every foreign-owned single-member LLC have to file Form 5472?
A foreign-owned U.S. disregarded entity must file Form 5472 with a pro forma Form 1120 for any tax year in which it had a reportable transaction with a related party. Reportable transactions for these entities are broad and include contributions, distributions, and amounts paid or received in connection with forming or dissolving the entity, so most active LLCs file every year. If the entity had no reportable transactions at all during the year, the Form 5472 instructions provide an exception from filing.
Can Form 5472 for a foreign-owned LLC be e-filed?
No. The Form 5472 instructions state that a foreign-owned U.S. disregarded entity cannot file Form 5472 electronically. The pro forma Form 1120 with Form 5472 attached must be faxed to the IRS at 855-887-7737 or mailed to the address specified in the instructions, with "Foreign-owned U.S. DE" written across the top of Form 1120.
What is the penalty for not filing Form 5472?
Under IRC section 6038A(d), the penalty is $25,000 for each failure to file a complete Form 5472 when due. If the failure continues for more than 90 days after the IRS mails notice, an additional $25,000 penalty applies for each 30-day period, or part of a period, that the failure continues. Filing a substantially incomplete Form 5472 is treated as a failure to file.
When is the pro forma Form 1120 with Form 5472 due?
It is due on the due date of Form 1120, including extensions. For a calendar-year entity, that is generally April 15. The entity uses its owner's U.S. tax year if the owner has one, and otherwise the calendar year.
How does a foreign-owned LLC extend the Form 5472 deadline?
By filing Form 7004 by the regular due date of the return, using the Form 1120 code. The instructions require writing "Foreign-owned U.S. DE" across the top of Form 7004 and faxing or mailing it to the same fax number or address used for the pro forma return, not the regular Form 7004 address.
How far back do missed Form 5472 filings go?
The filing requirement for foreign-owned disregarded entities applies to tax years beginning on or after January 1, 2017. Under IRC section 6501(c)(8), the statute of limitations for assessment generally does not begin to run for a return until required Form 5472 information is furnished, so unfiled years can remain open indefinitely.
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