New Treasury Regulations Can Effect Some Long-Term Residents (“Green Card” Holders)

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There have been numerous posts about how Lawful Permanent Residents (“LPRs”) who have not formally abandoned their green card might have adverse U.S. tax consequences as part of the U.S. “expatriation tax.”

See for instance –

Tax Expatriation: The Numbers Affected Are Far Greater for Lawful Permanent Residents vs. Citizens

 

Timing Issues for Lawful Permanent Residents (“LPR”) Who Never “Formally Abandoned” Their Green Card

 

See, Oops…Did I “Expatriate” and Never Know It: Lawful Permanent Residents Beware! International Tax Journal, CCH Wolters Kluwer, Jan.-Feb. 2014, Vol. 40 Issue 1, p9.

 

The U.S. Treasury issued new Regulations that can impact LPRs who have previously filed U.S. 1040NR tax returns under an applicable income tax treaty.   On December 13, 2016, the these final regulations require foreign-owned, single-member U.S. limited liability companies (“SM-LLCs”) that are treated as disregarded entities for U.S. tax purposes to file an information return to report certain transactions.

An individual who is a LPR can fall into this category in certain circumstances; namely where they cease to be a “U.S. person” under IRC Section 7701(b)(6).

Accordingly, the regulations treat such SM-LLCs as domestic corporations and require them to file IRS Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business. The regulations also require these SM-LLCs to maintain records with respect to the reported information.

 

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