Rev. Proc. 2020-30 Provides Certain Relief for DCL and Form 8858 Filing Purposes

May 2020

Summary

Recently, the Department of the Treasury and the Internal Revenue Service (collectively, Treasury) issued Rev. Proc. 2020-30 (the Rev. Proc.), which provides that certain activities are not taken into account for purposes of the dual consolidated loss (DCL) rules under Section 1503(d) or an obligation to file Form 8858 (Information Return of U.S. Persons With Respect to Foreign Disregarded Entities (FDEs) and Foreign Branches (FBs)).
 

Details

As a result of travel restrictions and disruptions resulting from the global outbreak of novel coronavirus (COVID-19), individuals may temporarily conduct activities in a country other than the United States or in a territory of the United States (any such country or territory, a foreign country) that would not otherwise have been conducted there. 
 
The Rev. Proc. provides that “temporary activities,” as defined below, will not be considered for purposes of determining whether a domestic corporation has a foreign branch separate unit for DCL purposes, or whether a U.S. person is required to file a Form 8858.  As a result, temporary activities will not give rise to a foreign branch separate unit under Section 1503(d).  In addition, for purposes of Form 8858, temporary activities will not give rise to a foreign branch (that is, either a foreign branch as defined in §1.367(a)-6T(g)(1) or a qualified business unit as defined in §1.989(a)-1(b)(2)(ii)).  Thus, temporary activities will not give rise to an obligation of a U.S. person to file a Form 8858, including an obligation to file a Form 8858 by attaching the Form 8858 to a Form 5471 with respect to a controlled foreign corporation or to a Form 8865 with respect to a controlled foreign partnership.
 
The term temporary activities means activities of a taxpayer conducted by one or more individuals in a foreign country during any single consecutive period of up to 60 calendar days selected by the taxpayer within calendar year 2020, to the extent that the individual or individuals were temporarily present in the foreign country during the period and the activities would not have been conducted in the foreign country but for COVID-19 emergency travel disruptions (e.g., transportation disruptions, shelter-in-place orders, quarantines, border closures, and recommendations to implement social distancing and limit exposure to public spaces) with respect to the individual or individuals.
 
A domestic corporation that for purposes of Section 1503(d), or a U.S. person that for purposes of Form 8858, treats activities as temporary activities should retain contemporaneous documentation to establish that the activities are temporary activities (including to establish the up-to-60-day period described above during which the activities occur), and should be prepared to provide the documentation to the IRS upon request.
 
The Rev. Proc. also provides that no inference should be drawn as to whether activities of a taxpayer that are conducted by one or more individuals in a foreign country during calendar year 2020 and that would be temporary activities without regard to the 60-day limit described above give rise to a foreign branch as defined in §1.367(a)-6T(g)(1) or a qualified business unit as defined in §1.989(a)-1(b)(2)(ii). 
 


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