A foreign corporation is required to file Form 1120-F if it is:

In general, if the foreign corporation fails to file Form 1120-F before the earlier of the date of notification by the IRS that a return is due or 18 months after the due date under IRC 6072, it is not entitled to the deductions and credits specified under IRC 882(c)(2) and the regulations thereunder, and will instead be subject to tax under IRC 11 on its gross income at the rate provided for the applicable tax year.

26 CFR 1.882-4(a)(3)(ii) permits the Commissioner to waive the filing deadline, and thus allow the foreign corporation to claim such deductions and credits, if the foreign corporation can establish, based on the facts and circumstances, that it acted reasonably and in good faith in failing to timely file a return.

Compliance employees should not accept delinquent returns, except as provided in this IRM. In addition, compliance employees should not discuss with taxpayers prior to the filing of a delinquent return whether a waiver will be granted.

The guidelines in this IRM apply once a return is filed and selected for examination.

Unless otherwise noted, any reference to a Form 1120-F in this IRM includes a protective Form 1120-F as described in 26 CFR 1.882-4(a)(3)(vi).

These guidelines have been established for handling delinquent Forms 1120-F (including Forms 1120-F described in 26 CFR 1.882-4(a)(3)(vi)) (protective returns) and requests for waiver pursuant to 26 CFR 1.882-4(a)(3)(ii).

All waiver requests are granted or denied by the authority of the Deputy Commissioner, LB&I under 26 CFR 1.882-4(a)(3)(ii) pursuant to LB&I DO 1-23-12 (Rev 1).

Without prejudice to prior determinations, the Deputy Commissioner has delegated this authority to the Directors of Field Operations (DFO), CBA.

Accordingly, the procedures below set forth the way waiver requests will be elevated to the DFO for a final determination.

Examination teams assisting taxpayers or working delinquent Form 1120-F cases have several responsibilities outlined in this subsection.

Examination team members should not accept delinquent Form 1120-F filings from their taxpayer, nor should they discuss with the taxpayer whether a waiver of the filing deadline is being granted. Instead, the examination team should inform the taxpayer that the delinquent Form 1120-F must be filed in accordance with the form's filing instructions. See also 26 CFR 1.882-4(a)(3)(i).

Once a return is filed, and selected for examination, the examination team will develop any requests for waiver in accordance with the waiver request guidelines.

If the taxpayer did not submit a request for waiver for the tax return selected for examination, the examination team should make the taxpayer aware in writing of the option to request a waiver under 26 CFR 1.882-4(3)(ii), but shall not advise, instruct, or otherwise signal the taxpayer to take any particular action. See Exhibit 4.61.14-4, Wording to Use with Waiver Procedure Information Letter.

The Waiver Committee provides recommendations on waiver request packages (see IRM 4.61.14.1.5 below).

CBA Practice Area will conduct ad hoc Waiver Procedures program reviews as necessary to verify compliance with IRM requirements, address Treasury Inspector General for Tax Administration (TIGTA) or Government Accountability Office (GAO) findings, and provide support for any trends.

Territory and team managers conduct case reviews to ensure compliance with this IRM.

The CBA DFO determines whether to grant or deny a waiver request based only on a review of the waiver request package and from recommendations made by the Waiver Committee.

An independent Waiver Committee will be selected to ensure that all recommendations for denial of waivers will be evaluated and handled consistently.

The Waiver Committee will be comprised of a CBA Practice Area program manager, a CBA territory manager, a CBA team manager, and a member of the Treaty Assistance and Interpretation Team (TAIT) (if the foreign corporation is a resident of a treaty jurisdiction).

The CBA DFO will designate a CBA territory manager and a CBA team manager to participate in the Waiver Committee. The DFO will ensure the committee members are not the same as those that reviewed the waiver request package.

The following table contains commonly used acronyms.

See the following IRM resources:

The IRS adopted the Taxpayer Bill of Rights (TBOR) in June 2014. Employees are responsible for being familiar with and acting in accordance with taxpayer rights. See IRC 7803(a)(3), Execution of Duties in Accord with Taxpayer Rights. For additional information about the TBOR, see Taxpayer Bill of Rights.

IRC 6072 provides the due dates for foreign corporations required to file an income tax return (Form 1120-F). The due date depends on whether the foreign corporation has an office or place of business in the United States. If it does have such an office or place of business, the return is due at the same time as a return of a domestic corporation. If it does not have such an office or place of business, the return is due on or before the 15th day of the 6th month after the close of its calendar or fiscal year.

Under 26 CFR 1.6012-2(g)(1), a foreign corporation is required to file a tax return if it is engaged in a U.S. trade or business, even if it has no ECI or its income is exempt from tax under a tax treaty. However, if the foreign corporation has no gross income for the taxable year, it is not required to complete the return schedules, but must attach a statement indicating the nature of any exclusions claimed and the amount of the exclusions, to the extent such amounts are readily determinable. If the income is exempt from tax under a tax treaty, a foreign corporation must attach Form 8833 to the tax return.

The table below provides an illustrative example of the filing deadlines as described above (under IRC 6072 and 26 CFR 1.882-4(a)) based on whether the foreign corporation maintains an office or fixed place of business in the United States and its tax year end.

26 CFR 1.882-4(a)(3)(i) prevents a foreign corporation from receiving the benefit of deductions and credits otherwise allowable (with the exceptions for deductions and credits noted in the statute) if it fails to meet the following special filing dates, as applicable, set forth in the regulations:

Under 26 CFR 1.882-4(a)(3)(vi), a foreign corporation that conducts limited activities in the United States that it determines do not give rise to ECI may nonetheless file a return for the taxable year on a timely basis under 26 CFR 1.882-4(a)(3)(i) to protect its right to receive the benefit of deductions and credits if it is later determined, after the return is filed, that the determination is incorrect. The return does not need to report any gross income as ECI or any deductions or credits but should include a statement that the return is being filed to protect the foreign corporation’s right to deductions and credits. A foreign corporation may follow the same procedure if it determines initially that it has no U.S. tax liability under the provisions of an applicable income tax treaty. If it is claiming it does not have a permanent establishment in the United States, it must also generally disclose that position on Form 8833. Failure to attach a Form 8833 to a Form 1120-F results in a penalty annually of $10,000. See IRC 6712(a).

Under 26 CFR 1.882-4(a)(3)(ii), the filing deadlines set forth in 26 CFR 1.882-4(a)(3)(i) may be waived if the foreign corporation establishes to the satisfaction of the Commissioner or their delegate that the corporation, based on the facts and circumstances, acted reasonably and in good faith in failing to file a U.S. income tax return, including a protective return (as described in 26 CFR 1.882-4(a)(3)(vi)).

For this purpose, a foreign corporation shall not be considered to have acted reasonably and in good faith if it knew that it was required to file the return and chose not to file. The regulations provide six factors to be considered in this analysis (see 26 CFR 1.882-4(a)(3)(ii)(A)-(F) for a list of these factors).

26 CFR 1.882-4(a)(3)(ii) requires cooperation from a foreign corporation in the process of determining its income tax liability for a waiver to be granted.

If the examination team, with the concurrence of the territory manager, recommends that a request for a waiver be granted, the territory manager will forward the waiver request package to the appropriate Staff Assistant.

Once the Staff Assistant confirms that the waiver request package is complete, they will forward the waiver request package to the CBA DFO for their determination to grant or deny the request for waiver. Follow paragraph (3) below if the CBA DFO agrees with the examination team’s assessment. Otherwise, follow paragraphs (4) and (5) below.

If the CBA DFO agrees with the examination team’s recommendation and determines that the waiver should be granted, the Staff Assistant will communicate the determination to the territory manager and the team manager. The examination team will subsequently notify the taxpayer in writing of the determination.

If the CBA DFO does not agree with the recommendation to grant the waiver, the CBA DFO has the option to request additional information, and consult with the Waiver Committee to reach a final decision.

The Staff Assistant will communicate the CBA DFO’s final determination (to grant or deny the waiver) to the territory manager, the team manager, and Waiver Committee (if consulted). The examination team will subsequently notify the taxpayer in writing of the determination.

If the examination team, with the concurrence of the territory manager, recommends that a request for waiver be denied, the territory manager will forward the waiver request package to the Staff Assistant.

Once the Staff Assistant confirms that the waiver request package is complete, they will forward the waiver request package to the Waiver Committee as described in IRM 4.61.14.1.5 for its consideration (with a copy to the CBA DFO).

The Waiver Committee will ensure that all recommendations for denial of waivers will be independently evaluated and handled consistently.

The Staff Assistant will schedule a conference call with the Waiver Committee, the examination team, and the territory manager to discuss the case.

The team manager on the Waiver Committee will forward the waiver recommendation(s) and the waiver request package to the Staff Assistant.

The Staff Assistant will submit the recommendation(s) to the CBA DFO. The CBA DFO may request additional information or clarification from the Waiver Committee and/or examination team prior to making their determination.

The Staff Assistant will communicate the CBA DFO’s final determination to the territory manager, team manager and the Waiver Committee. The examination team will subsequently notify the taxpayer in writing of the determination.

Exhibit 4.61.14-3 contains scenarios to illustrate these procedures.