In Revenue Procedure 2019-40 (released October 1, 2019), the IRS provides some administrative relief to certain taxpayers affected by the repeal of IRC Section 958(b)(4).

The repeal of IRC Section 958(b)(4) by the Tax Cuts and Jobs Act caused many foreign corporations to become CFCs even though US shareholders do not directly or indirectly control the foreign corporation. It also created reporting challenges for minority US shareholders in obtaining information needed to accurately determine whether a foreign corporation is a CFC and compute the subpart F income inclusion or GILTI inclusion with respect to the CFC.

Accordingly, the revenue procedure:

• Creates a safe harbor for concluding that a foreign corporation is not a CFC when (i) the foreign corporation would only be a CFC due to the repeal of IRC Section 958(b)(4) (a foreign-controlled CFC), and (ii) CFC status is not known through actual knowledge, statements received, and/or reliable publicly available information
• Allows, in the absence of readily available information generally required under IRC Sections 952 and 964, a US shareholder's subpart F income inclusion or GILTI inclusion amount with respect to certain foreign-controlled CFCs to be based upon a hierarchy of alternative information, such as GAAP or IFRS financial statements (alternative information)
• Allows a US shareholder to rely on alternative information in the absence of readily available information for determining the IRC Section 965 inclusion amount with respect to certain specified foreign corporations
• Limits a foreign-controlled CFC's reporting on Form 5471
• Offers relief from penalties under IRC Sections 6038 and 6662 to the extent the penalties would be attributable to a US person relying on Revenue Procedure 2019-40's safe harbors

A more detailed Tax Alert on the revenue procedure is forthcoming.