The BNN Tax-Exempt Organizations Blog

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Foreign Tax Compliance a Growing Concern for Tax Exempt Organizations

In recent years, a growing number of our clients have taken advantage of international investment opportunities. From alternative investments that have holdings in foreign entities, to devoting part of a portfolio in a U.S. brokerage account to international equities, many of our clients find this type of diversification beneficial from an investment point of view. While we cannot comment on the benefits or drawbacks of holding these types of assets as investments from a financial perspective, there are an ever-increasing number of tax consequences of which our tax-exempt clients should be aware.

The IRS is becoming increasingly demanding in the type of disclosures required for organizations with these types of holdings. Over the past decade, the IRS has released several new forms and countless pages of guidance in an effort to gather information about the overseas activities of U.S. tax filers. Fortunately, at least for now, tax-exempt entities are not subject to nearly as many disclosure requirements as for-profit or individual taxpayers face. However, exempt organizations are not excused from all foreign disclosure filings. The most common forms that we run into with our tax-exempt clients are Forms 926, 8621, 8865, and FinCEN 114 (formerly TDF 90-22.1). Form 990 also contains a separate schedule, Schedule F, which tax-exempt entities that engage in foreign activities as part of their operations may have to file if certain thresholds are met.

Posted Under: Foreign tax, Form 8621, Form 926, PFIC