Ellen JuramTaxpayers may have an additional filing requirement for 2013 related to investments in a Passive Foreign Investment Company (PFIC).

A PFIC  is any foreign corporation if: (1) at least 75% of its gross income for its tax year is passive, or (2) at least 50% of the assets it held during the year produce passive income or are held for the production of passive income.

Prior regulations only required U.S. shareholders that have a direct or indirect interest in a PFIC to file Form 8621 if certain reportable transactions occurred during the year.  The new regulations, effective for tax years ending on or after December 31, 2013, generally require a direct or indirect shareholder of a PFIC to complete and file Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund) regardless of the income earned during the year.

Exceptions to PFIC Filing Requirements

The new regulations provide an exception to the reporting requirements under certain circumstances if no income was received during the year.

  • The aggregate value of all PFIC stock owned by the shareholder at the end of its taxable year does not exceed $25,000 ($50,000 for shareholders filing a joint return), or
  • The PFIC stock is owned by the shareholder through another PFIC, and the value of the shareholder’s proportionate share of the upper-tier PFIC’s interest in the lower-tier does not exceed $5,000.

Form 8621 is required to be filed as part of the shareholders applicable tax return.  Failure to file Form 8621 may result in a suspension of the statute of limitations for the entire return until three years after the missing forms are filed.

Please contact a team member at Barnes Dennig for additional information or to learn how these new regulations could impact your filing obligations.