Proposed Regulations on Foreign-Owned U.S. Disregarded Entities

On May 10, 2016 the Internal Revenue Service (the “IRS”) published proposed regulations that, if finalized, will treat a domestic disregarded entity wholly owned (directly or indirectly) by a foreign person as a corporation for the limited purposes of the reporting, record maintenance and associated compliance requirements imposed on certain domestic corporations with foreign owners under Section 6038A of the Internal Revenue Code of 1986, as amended (the “Code”). The IRS explained that the collection of information under the proposed regulations “is required in order to provide the IRS with improved access to information that it needs to satisfy its obligations under U.S. tax treaties, tax information exchange agreements, and similar international agreements, as well as to strengthen the enforcement of U.S. tax laws.” The following provides a general summary of the proposed regulations.