Due dates for returns of foreign corporations

Editor: Annette B. Smith, CPA

Under Sec. 6072(c), a calendar-year foreign corporation that does not have an office or place of business in the United States has a federal income tax return due date of June 15. The return of a fiscal-year foreign corporation is due on the 15th day of the sixth month following the close of its fiscal year. The later-than-normal unextended due date provided by Sec. 6072(c) also is significant insofar as, in conjunction with Sec. 6151(a), it establishes the due date for payment of the tax for the tax year at issue.

The return due date prescribed by Sec. 6072(c) is an original, or unextended, due date. The foreign corporation can obtain an extension of time to file for the full five or six months provided in Sec. 6081 by filing Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns.

Read in conformance with the changes to the return due dates of C corporations made by the Surface Transportation and Veterans Health Care Choice Improvement Act, P.L. 114-41, Regs. Sec. 1.6072-2(a) provides that the original or unextended return due date of a foreign corporation that maintains an office or place of business in the United States is the 15th day of the fourth month after the end of the tax year. This is the same deadline as for a domestic corporation (unless its tax year end is June 30, in which case the return is due on the 15th day of the third month after the end of the tax year, also the same as for a domestic corporation).

However, Regs. Sec. 1.6081-5(a)(3) provides a foreign corporation that maintains an office or place of business in the United States with an automatic extension to the 15th day of the sixth month following the close of the tax year (i.e., June 15 for a calendar-year taxpayer) to file its tax return and pay its tax due.

The availability of this automatic extension does not appear to be well-known, and having Regs. Sec. 1.6072-2(a) establish a return due date and Regs. Sec. 1.6081-5(a)(3) automatically extend that due date by two or three months seems confusing. However, that two-step approach appears necessary because the later-than-normal due date provided in Sec. 6072(c) is limited to foreign corporations without an office or place of business in the United States, thus leaving foreign corporations that have such a presence otherwise subject to the normal due-date rules of Sec. 6072(a). In other words, providing an unextended due date of June 15 for a calendar-year foreign corporation with an office or place of business in the United States would be inconsistent with Sec. 6072(a), thus requiring the automatic extension in Regs. Sec. 1.6081-5(a)(3).

Under Regs. Sec. 1.6081-5(b)(1), to qualify for the automatic extension, the taxpayer must attach a statement to its return showing that it is a foreign corporation that maintains an office or place of business in the United States.

To request an additional extension of time to file its return, the foreign corporation must file Form 7004 on or before the due date provided by the automatic extension. If an eligible foreign corporation relies on the automatic extension and waits until the 15th day of the sixth month following the close of its tax year to file Form 7004, it has only an additional three or four months to file its return because extensions under Sec. 6081 are limited to a total of six months. The taxpayer also must check the appropriate box on Form 7004 (line 4 of Part V of the current (2016) form) to indicate that it is a corporation that qualifies under Regs. Sec. 1.6081-5. This informs the IRS that the extension was not required to be filed on or before the normal Sec. 6072(a) unextended due date (the 15th day of the fourth month following the close of the tax year for most C corporations).

It would not be surprising if many foreign corporations with an office or place of business in the United States simply file Form 7004 on or before the unextended due date of their respective returns to obtain five- or six-month extensions. However, if that “deadline” is missed, the automatic three-month extension to pay the tax provided by Regs. Sec. 1.6081-5 would be both available and valuable. The extension of time to pay would be relevant for purposes of a late-payment penalty under Sec. 6651(a)(2) but, under Sec. 6601(b)(1), would be disregarded in determining the start date for underpayment interest.

EditorNotes

Annette Smith is a partner with PricewaterhouseCoopers LLP, Washington National Tax Services, in Washington.

For additional information about these items, contact Ms. Smith at 202-414-1048 or annette.smith@pwc.com.

Unless otherwise noted, contributors are members of or associated with PricewaterhouseCoopers LLP.