FOR IMMEDIATE RELEASE
AICPA Requests Guidance on International Information Reporting for Domestic Grantor Trusts
Washington, D.C. (February 8, 2024) The American Institute of CPAs (AICPA) submitted a letter to the U.S. Department of the Treasury and Internal Revenue Service (IRS) requesting guidance regarding international information reporting for domestic grantor trusts. AICPA’s recommendations focus on simplifying filing for taxpayers and practitioners and reducing the administrative burden on the IRS.
AICPA highlights the need for Treasury and IRS to issue a Notice or Revenue Procedure to resolve uncertainty regarding the obligation of domestic grantor trusts to file Form 5471, Form 8858, Form 8865 and Form 8992. Issuing a Notice or Revenue Procedure would help resolve uncertainty and clarify that domestic grantor trusts are disregarded for the purpose of filing these forms or establish certain exemptions for domestic grantor trusts from filing these information returns.
Although grantor trusts are disregarded for federal income tax purposes, domestic grantor trusts have been interpreted by the United States Tax Court to be U.S. persons. The Tax Court’s treatment of domestic grantor trusts as U.S. persons is inconsistent with IRS form instructions and guidance and has created uncertainty as to the obligation of domestic grantor trusts to file certain international information returns.
In light of this uncertainty, a number of taxpayers have conservatively filed international information returns with their grantor letters. The approach of having both domestic grantor trusts and the U.S. owners of such trusts file these information returns creates redundancy in reporting requirements rather than providing additional information that may be of use to the government.
Treating domestic grantor trusts as entities for the purpose of filing these information returns is also inconsistent with the global intangible low-taxed income (GILTI) in which computations are aggregated at the U.S. shareholder level rather than at the level of domestic pass-through entities which own shares of controlled foreign corporations (CFCs).
“We are hopeful that the IRS will provide the needed guidance to clarify that domestic grantor trusts are exempt from filing these international information reporting forms,” says Eileen Sherr, Director, AICPA Tax Policy & Advocacy. “AICPA believes this further guidance will reduce redundancy and streamline filing.”
About the American Institute of CPAs
The American Institute of CPAs® (AICPA®) is the world’s largest member association representing the CPA profession, with more than 415,000 members in the United States and worldwide, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting. AICPA sets ethical standards for its members and U.S. auditing standards for private companies, not-for-profit organizations, and federal, state and local governments. It develops and grades the Uniform CPA Examination, offers specialized credentials, builds the pipeline of future talent and drives continuing education to advance the vitality, relevance and quality of the profession.
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Contact: Veronica L. Vera
202-434-9215
Veronica.Vera@aicpa-cima.com