This article first appeared in the June 15, 2015 edition of Worldwide Tax Daily.
The IRS may require businesses to file their country-by-country (CbC) reports with their U.S. tax returns -- three months earlier than the OECD has recommended, a Treasury official suggested June 12.
At a transfer pricing conference in Washington sponsored by Bloomberg BNA and Baker & McKenzie, Brian Jenn, attorney-adviser in the Treasury Office of International Tax Counsel, said that while Treasury and the IRS are still discussing the timing and mechanism for filing CbC reports, "as a practical matter -- and this is probably a question for IRS administration -- I imagine they'll want to get the [CbC] template with the tax return in, I don't know, September ."
Such an early deadline would deviate from the OECD's recommendation, as set out in the CbC implementation guidance, that reporting be required for fiscal years beginning after December 31, 2015, with initial reports filed by December 31, 2017. Many taxpayers have assumed based on those dates that they'd have 12 months after the end of the year to prepare their CbC reports.
Peter Barnes of Caplin & Drysdale Chtd. pointed out that taxpayers inevitably identify errors after filing their returns and that those errors are reflected only in their qualified amended returns. By requiring CbC reports to be filed in September, taxpayers would have to figure out what to do with additional information that unfolds between September and the end of the year, he said.
Jenn acknowledged the issue but said the government will have to make a decision on when to "lock in" CbC information. "Of course, you're always going to develop information that might have related to the return," he said. "And this isn't a tax return in the sense that you're calculating tax liability and have to go back and correct it. This is the CbC template, so I think your first shot at it will be your only shot at it."
Jenn said the government hasn't yet decided whether the CbC template will form part of the U.S. tax return or if it will be considered a completely separate filing.
"We're obviously not at that stage of the process, and to some extent that's going to be a call for the IRS, or they will take the lead on that rather than [Treasury], because it really goes to a tax administration question," Jenn said. "I'll be interested to have their input on whether it makes sense for it to be part of the return filing or not. I assumed it would be, but that might not be a good assumption."