2017 Instructions for Form 1120-F

1 Userid: CPMS chema: instrxLeadpct: 100%Pt. size: 9 Draft Ok to PrintAH XSL/XMLF ileid: .. ons/I1120F/2017/A/XML/Cycle15/source(Ini t. & Date) _____Page 1 of 37 19:15 - 13-Apr- 2018 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before forForm Income Tax Return of a Foreign CorporationDepartment of the TreasuryInternal Revenue ServiceSection references are to the Internal Revenue Code unless otherwise of Missing Taxpayer Advocate To Get Forms and of Must Returns for Certain for Refund or To Must Preparer Forms, Schedules, and Statements That May Be the Off to Whole of Tax Tax and Rules for Foreign Identification Number (EIN)..11 Computation of Tax Due or I Income From Sources Not Effectively Connected With the Conduct of a Trade or Business in the United II Income Effectively Connected With the Conduct of a Trade or Business in the United C Dividends and Special J Tax III Branch Profits Tax and Tax on Excess L Balance Sheets per M-1 and DevelopmentsFor the latest information about developments related to form 1120-F and its Instructions , such as legislation enacted after they were published, go 's NewNew question CC.

2 On page 2 of the form , new question CC inquires as to whether the corporation (including the home office or any branch) is a qualified derivatives dealer. If yes, the corporation is required to attach a statement, the required content of which is described in the Instructions for new question I, line 2. On page 3 of the form , old line 2 (dividends) was deleted and replaced with new line 2a (dividends (excluding payments received by QDDs in their equity derivatives dealer capacity)) and new line 2b (dividend equivalents (excluding payments received by QDDs in their equity derivatives dealer capacity)).Section 871(m) changes. In addition to the changes noted above, updates have been made throughout these Instructions to clarify how dividend equivalents and QDD tax liability should be rates for fiscal year filers. 115-97 replaced the graduated corporate tax structure with a flat 21% corporate tax rate and repealed the corporate alternative minimum tax (AMT), effective for tax years beginning after December 31, 2017.

3 However, under section 15, corporations with fiscal tax years beginning before January 1, 2018 , and ending after December 31, 2017, figure and apportion their taxes (including the AMT) by blending the rates in effect before January 1, 2018 , with the rate in effect after December 31, 2017. See Blended tax rate for fiscal year filers and AMT for fiscal year filers in the Instructions for Schedule J, of gain or loss from sale or exchange of interests in partnerships engaged in a trade or business. In general, if a foreign corporation owns, directly or indirectly, an interest in a partnership that is engaged in a trade or business, gain or loss on the sale or exchange of all (or any portion of) such interest is treated as effectively connected with the conduct of such trade or business to the extent effectively connected gain or loss would have flowed through the partnership to the foreign corporation had the partnership sold all of its assets at fair market value as of the date of the sale or exchange.

4 These rules apply to sales, exchanges, and dispositions on or after November 27, 2017. See section 864(c)(8) for more details. See Revenue Ruling 91-32, 1991-1 107, for the IRS s position with respect to sales, exchanges, or other dispositions of an interest in a partnership occurring before November 27, requirements. In general, if any portion of the gain (if any) on any disposition of an interest in a partnership would be treated under section 864(c)(8) as effectively connected with the conduct of a trade or business, the transferee is required to deduct and withhold a tax equal to 10% of the amount realized on the disposition. See section 1446(f) for details. See also Notice 2018 -29, which announces that the Treasury Department and the IRS intend to issue regulations under new section 1446(f) regarding withholding on a disposition by a foreign person of a partnership interest that is not publicly traded. This notice also provides interim guidance that taxpayers may rely on pending the issuance of regulations.

5 See also Notice 2018 -08, which temporarily suspends the application of section 1446(f) to the disposition of certain PTP interests until further guidance is issued. The withholding requirements apply to sales, exchanges, and dispositions occurring after December 31, domestic disregarded entities. For tax years beginning on or after January 1, 2017, and ending on or after December 13, 2017, if a foreign corporation wholly owns a domestic disregarded entity (DE), the domestic DE is treated as a domestic corporation separate from its owner (the foreign corporation) for the limited purposes of the Apr 13, 2018 Cat. No. 11475 LPage 2 of 37 Fileid: .. ons/I1120F/2017/A/XML/Cycle15/source19:1 5 - 13-Apr- 2018 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before that apply to 25 percent foreign-owned domestic corporations under section 6038A. See the Instructions for form 5472 for additional information and coordination with form 5472 reporting by the domestic The domestic DE is generally a transparent entity for federal tax purposes.

6 The foreign corporation will include (or continue to include) on form 1120-F any of the domestic DE's tax items that are subject to of accumulated post-1986 deferred foreign income upon transi-tion to participation exemption system of taxation. shareholders of specified foreign corporations (as defined under section 965(e), as amended by 115-97) may have an inclusion under section 965 based on the accumulated post-1986 deferred foreign income of the specified foreign corporations determined as of November 2, 2017, or December 31, 2017. The shareholders may elect to pay the liability under section 965 on the accumulated post-1986 deferred foreign income in eight installments. See section 965, as amended. Also, for further guidance, see Questions and Answers about Reporting Related to Section 965 on 2017 Tax in penalty for failure to file. For tax years beginning in 2017, the minimum penalty for failure to file a return that is over 60 days late has increased to the smaller of the tax due or $210.

7 See Late filing of return, , television, and live theatrical pro-ductions. A corporation can elect to deduct certain costs of qualified film, television, and live theatrical productions that begin before January 1, 2018 . However, certain film, television, or live theatrical productions acquired and placed in service after September 27, 2017 (for which a deduction would have been allowable under section 181 without regard to the dollar limitation), are qualified property eligible for the special depreciation allowance under section 168(k). See the Instructions for form relief. Disaster tax relief enacted for those impacted by Hurricane Harvey, Irma, or Maria includes a provision modifying the limit on the deduction for charitable contributions made after August 22, 2017, and before January 1, 2018 (after October 7, 2017, and before January 1, 2019, for relief efforts in the California wildfire disaster area). See Temporary suspension of 10% limitation for certain disaster-related contributions in the Instructions for line 19, later.

8 In addition, an employer who continued to pay or incur wages after the employer s business became inoperable because of damage from Hurricane Harvey, Irma, or Maria, or the California wildfires, may be eligible for an employee retention credit. See form 5884-A, Credits for Affected Disaster Area Employers, and its more information on these and other disaster relief provisions, see Pub. expenses, membership dues, and facilities. No deduction is allowed for certain entertainment expenses, membership dues, and facilities used in connection with these activities for amounts incurred or paid after December 31, 2017. See Travel, meals, and entertainment, operating loss. The general 2-year net operating loss (NOL) carryback rule does not apply to NOLs arising in tax years ending after December 31, 2017. Exceptions apply to certain farming losses and NOLs of property and casualty insurance companies. See Net operating loss (NOL), tax for corporations with qualified timber gains.

9 The alternative tax for corporations with qualified timber gain has been extended. Therefore, for tax years beginning in 2017, if a corporation has both a net capital gain and a qualified timber gain, a maximum alternative tax may apply. See the Instructions for Schedule J, line 2, Business Activity Codes. The Principal Business Activity Codes, located at the end of these Instructions , have been updated and revised to reflect updates to the North American Industry Classification System (NAICS).Photographs of Missing ChildrenThe Internal Revenue Service is a proud partner with the National Center for Missing & Exploited Children (NCMEC). Photographs of missing children selected by the Center may appear on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a Taxpayer Advocate ServiceThe Taxpayer Advocate Service (TAS) is an independent organization within the Internal Revenue Service that helps taxpayers and protects taxpayer rights.

10 TAS's job is to ensure that every taxpayer is treated fairly and knows and understands their rights under the Taxpayer Bill of a taxpayer, the corporation has rights that the IRS must abide by in its dealings with the corporation. TAS can help the corporation if:A problem is causing financial difficulty for the business is facing an immediate threat of adverse corporation has tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date TAS tax toolkit at can help the corporation understand these has offices in every state, the District of Columbia, and Puerto Rico. Local advocates' numbers are in their local directories and at The corporation can also call TAS at also works to resolve large-scale or systemic problems that affect many taxpayers. If the corporation knows of one of these broad issues, please report it to TAS through the Systemic Advocacy Management System at more information, go to To Get Forms and PublicationsInternet.