General Instructions

Purpose of Form

Use Form 5713 to report:

  • Operations in or related to boycotting countries (see list on page 2) and

  • The receipt of boycott requests and boycott agreements made.

Who Must File

You must file Form 5713 if you are a U.S. person (defined in section 7701(a)(30)) that has operations (defined on page 2) in or related to a boycotting country, or with the government, a company, or a national of a boycotting country.

The following U.S. persons also must file Form 5713:

  • A member of a controlled group (as defined in section 993(a)(3)), a member of which has operations;

  • A U.S. shareholder (within the meaning of section 951(b)) of a foreign corporation that has operations (but only if you own (within the meaning of section 958(a)) stock of that foreign corporation);

  • A partner in a partnership that has operations; or

  • A person treated (under section 671) as the owner of a trust that has operations.

Ban on importing or exporting.   Although you can comply with a ban on importing or exporting of products described in sections 999(b)(4)(B) and (C) without incurring the loss of tax benefits, you must report the boycott operations from such agreements on Form 5713.

Exceptions From Filing

Foreign person.   A foreign person is not required to file Form 5713 unless that person:
  1. Claims the benefits of the foreign tax credit,

  2. Owns stock in an interest charge domestic international sales corporation (IC-DISC),

  3. Is a foreign sales corporation (FSC) that has exempt foreign trade income, or

  4. Has extraterritorial income (defined in section 114(e), as in effect before its repeal) excluded from gross income.

Members of a controlled group.   A corporation that is a member of a controlled group (as defined in section 1563) is not required to file Form 5713 if all members of the controlled group joined in the filing of a consolidated income tax return and the common parent files Form 5713 on behalf of all members of the controlled group.

  If all members of a controlled group did not join in the filing of a consolidated income tax return, each member of the controlled group must file Form 5713 separately.

  A member of a controlled group (as defined in section 993(a)(3)) is not required to file Form 5713 if all of the following conditions apply:
  • The member has no operations in or related to a boycotting country (or with the government, a company, or a national of a boycotting country);

  • The member did not own stock, directly or indirectly, in any corporation having such operations;

  • The member did not receive any boycott requests;

  • The member did not own stock, directly or indirectly, of any corporation receiving a request;

  • The member is not entitled to (or forfeits) the benefits of the foreign tax credit, the deferral of earnings of a controlled foreign corporation (CFC), IC-DISC benefits, FSC benefits, or the extraterritorial income exclusion; and

  • The member attaches to its tax return a certificate stating that Form 5713 was filed on the member's behalf. This certificate must be signed by a person authorized to sign the income tax return of the common parent of the group.

Partners.   A partner is not required to file Form 5713 if:
  • That partner has no boycott operations that are independent of the partnership,

  • The partnership files Form 5713 with Form 1065, and

  • The partnership did not cooperate with or participate in an international boycott.

U.S. approved boycotts.   You can comply with an international boycott imposed by a foreign country if the boycott is approved by United States law, regulations, or an Executive order. Do not report U.S. approved boycotts on Form 5713.

Unsolicited invitation to bid.   If you receive an unsolicited invitation to bid for a contract that contains a request to participate in or cooperate with an international boycott, you are required to file Form 5713 only if you accept the invitation.

Foreign corporation with U.S. subsidiary or sister corporation.   A U.S. corporation that is a subsidiary or sister corporation of a foreign corporation can waive the requirement to report boycott operations of its foreign parent or sister corporation if the following conditions are met:
  • The foreign corporation is not required to file Form 5713 independent of its relationship with the U.S. subsidiary or sister corporation.

  • The U.S. subsidiary or sister corporation agrees to forfeit the benefits of the foreign tax credit, deferral of taxation of earnings of a CFC, IC-DISC benefits, FSC benefits, and the extraterritorial income exclusion.

Foreign corporation with U.S. branch.   A foreign corporation engaged in a U.S. trade or business through a U.S. branch generally is required to file Form 5713 to report the boycott activities of its controlled group, including the U.S. branch. When reporting for the U.S. branch, report all information related to the U.S. branch's boycott activities, including the boycott activities that do not relate to the U.S. trade or business.

   The foreign corporation can, however, waive the requirements to report information about its U.S. branch if it does not claim or forfeits the benefits of the foreign tax credit, deferral of taxation of earnings of a CFC, IC-DISC benefits, and FSC benefits. This waiver does not relieve the foreign corporation of reporting boycott activities of all U.S. corporations that are members of the same controlled group of which the foreign corporation is a member.

When and Where To File

Form 5713 is due when your income tax return is due, including extensions. Attach the original copy of the Form 5713 (and Schedules A, B, and C, if applicable) to your income tax return. Do not sign the copy that is attached to your income tax return. Paper filers must file a duplicate copy of the form and required schedules with the Internal Revenue Service Center, P. O. Box 409101, Ogden, UT 84409. However, see Electronic Filing of Form 5713 next.

Electronic Filing of Form 5713.   If you file your original Form 5713 electronically (as an attachment to your electronically filed income tax return), you are not required to file a duplicate Form 5713. See the instructions for your income tax return for general information about electronic filing.

Penalties

Willful failure to file Form 5713 may result in:

  • A $25,000 fine,

  • Imprisonment for no more than 1 year, or

  • Both.

Tax Benefits That May Be Lost

If you cooperate with or participate in an international boycott, you may lose a portion of the following:

  • The foreign tax credit (section 908(a)),

  • Deferral of taxation of earnings of a CFC (section 952(a)(3)),

  • Deferral of taxation of IC-DISC income (section 995(b)(1)(F)(ii)),

  • Exemption of foreign trade income of a FSC (section 927(e)(2), as in effect before its repeal), and

  • Exclusion of extraterritorial income from gross income (section 941(a)(5), as in effect before its repeal).

Schedules A, B, and C

Figure the loss of tax benefits on Schedules A and C or Schedules B and C (Form 5713). You must use the international boycott factor (Schedule A) to figure the reduction to foreign trade income qualifying for the extraterritorial income exclusion. To figure the loss of all other tax benefits, you can use either the international boycott factor (Schedule A) or determine taxes and income specifically attributable to boycott operations (Schedule B).

Compute the loss of tax benefits on Schedule C. See the instructions for these separate schedules for more details.

Complete Schedule C if you are a partner. Partnerships do not complete Schedule C. But partnerships must complete parts of both Schedules A and B. However, if all partners figure the loss of their tax benefits using the boycott factor exclusively, or specifically identifiable taxes and income attributable to boycott operations exclusively, then the partnership is only required to complete parts of Schedule A or parts of Schedule B.

Report the appropriate amounts from Schedule C on the following forms.

Form 1116,   Foreign Tax Credit (Individual, Estate, or Trust).

Form 1118,   Foreign Tax Credit—Corporations.

Form 5471,   Information Return of U.S. Persons With Respect To Certain Foreign Corporations.

Form 1120-IC-DISC,   Interest Charge Domestic International Sales Corporation Return.

Form 1120-FSC,   U.S. Income Tax Return of a Foreign Sales Corporation.

Form 8873,   Extraterritorial Income Exclusion.

Definitions

Boycotting Countries

A boycotting country is:

  • Any country that is on the list maintained by the Secretary of the Treasury under section 999(a)(3). As of the date these instructions were revised, the most recent list (dated November 2010) included Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, United Arab Emirates, and the Republic of Yemen.

  • Any other country in which you (or a member of the controlled group of which you are a member) have operations and of which you know (or have reason to know) requires any person to cooperate with or participate in an international boycott. However, see Exceptions From Filing on page 1.

Boycott Request

A boycott request is any request to enter into an agreement that would constitute cooperation with or participation in an international boycott.

Operations

The term “operations” means all forms of business or commercial activities and transactions (or parts of transactions), whether or not productive of income, including, but not limited to: selling; purchasing; leasing; licensing; banking, financing, and similar activities; extracting; processing; manufacturing; producing; constructing; transporting; performing activities related to the activities above (for example, contract negotiating, advertising, site selecting, etc.); and performing services, whether or not related to the activities above.

Operations in a boycotting country.   You are considered to have operations “in a boycotting country” if you have an operation that is carried out, in whole or in part, in a boycotting country, either for or with the government, a company, or a national of a boycotting country.

Operations with the government, a company, or a national of a boycotting country.   You are considered to have operations “with the government, a company, or a national of a boycotting country” if you have an operation that is carried on outside a boycotting country either for or with the government, a company, or a national of a boycotting country.

Operations related to a boycotting country.    You are considered to have operations “related to a boycotting country” if you have an operation that is carried on outside a boycotting country for the government, a company, or a national of a nonboycotting country if you know or have reason to know that specific goods or services produced by the operation are intended for use in a boycotting country, or for use by or for the benefit of the government, a company, or a national of a boycotting country, or for use in forwarding or transporting to a boycotting country.


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