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.”
Tax Expatriation: The Numbers Affected Are Far Greater for Lawful Permanent Residents vs. Citizens
See for instance –
Timing Issues for Lawful Permanent Residents (“LPR”) Who Never “Formally Abandoned” Their Green Card
Also, in 2014, I wrote an article on the specific issues that later became part of case law in the federal district court nearly a decade after this original post – Aroeste v. United States, Case No. 22-cv-00682-AJB-KSC (2023), appealed to the 9th Circuit and dismissed by the DOJ with prejudice in 2024.
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. These Treasury Regulations, 26 CFR § 1.6038A-1(c) require these foreign-owned SM LLCs to be treated as if they are a separate domestic “C” corporation specifically for reporting purposes.
Treasury Regulations, 26 CFR § 1.6038A-1(c) require foreign-owned SM LLCs to be treated as if they are a domestic “C” corporation for reporting purposes (Form 5472)
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). See, IRS Form 5472 directly here –
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.
