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4.1.9.1
(10-24-2006)
Overview-International Returns
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This chapter discusses features unique to returns with international
issues.
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The Chief, Classification Section is responsible for ensuring all returns
with international characteristics are classified at the campus before sending
them to the Areas.
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An international examiner will classify all returns with international
characteristics except for those under the jurisdiction of SBSE International
which will be classified by SBSE International examination personnel.
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The jurisdiction for the field examination of entities filing Form 1120F is determined by the assets of the corporation.
Entities with assets < $ 10 million are under the jurisdiction of SBSE
International. Entities with assets > $10 million are the jurisdiction of
LMSB.
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Form 1040NR,
Form 1040PRForm 1040SS and Form 1040 returns with Form
2555 or Form 2555EZ attached
are under the jurisdiction of SBSE International.
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Foreign Sales Corporation (FSC).
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A FSC is a taxable foreign corporation that files
Form 1120F-FSC (U.S. Income
Tax Return of a Foreign Sales Corporation) at the Philadelphia Campus.
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The FSC Repeal and Extraterritorial Income Exclusion Act of 2000 repealed
the FSC provisions of IRC §921 through
IRC §9217 effective October 1, 2000.
The Act also provides qualifying taxpayers with an Extraterritorial Income
Exclusion, which is figured on Form 8873 and
provides transition rules for existing FSCs.
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No corporation may elect to be a FSC after September 30, 2000. In general,
a FSC that was in existence on September 30, 2000 and at all times thereafter,
will continue to use the FSC rules for qualifying transactions in the ordinary
course of business before January 1, 2002. These FSCs will continue to use
the FSC rules after December 31, 2001 for transactions pursuant to a binding
contract between a FSC and a person, if that binding contract was in effect
on September 30, 2000 and has remained in effect.
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Taxpayers may elect to apply the extraterritorial income exclusion rules
instead of the FSC rules for transactions occurring during the transition
period.
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The Philadelphia Campus will transfer Form 1120F-FSC returns to the appropriate campus for
screening and/or classification by an international classifier.
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A small DISC may still exist as an Interest Charge-Domestic
International Sales Corporation (IC-DISC). Generally, this domestic corporation
will be non-taxable and file Form 1120F-IC-DISC.
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