n-18-31.pdf

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National Security Considerations with Respect to Country-by-Country Reporting

Notice 2018-31

SECTION 1. OVERVIEW

This notice provides additional guidance concerning country-by-country (CbC)
reporting requirements under section 6038 and §1.6038-4. In consideration of the
national security interests of the United States, this notice addresses modifications to
the reporting requirement under §1.6038-4 with respect to certain U.S. multinational
enterprise (MNE) groups. The Department of the Treasury (Treasury Department) and
the Internal Revenue Service (IRS) intend to amend §1.6038-4 to incorporate the
guidance described in this notice. Prior to the issuance of these amendments, U.S.
MNE groups may rely on the provisions of section 3 of this notice.
SECTION 2. BACKGROUND
On December 23, 2015, a notice of proposed rulemaking (REG-109822-15)
relating to the furnishing of CbC reports by certain United States persons under section
6038 was published in the Federal Register (80 FR 79795). The preamble to the
proposed regulations requested comments concerning the need for a national security
exception to the CbC information reporting requirement. On June 30, 2016, the
Treasury Department and the IRS published final regulations (TD 9773) requiring
annual CbC reporting on Form 8975, Country-by-Country Report (CbC report), by
certain United States persons that are ultimate parent entities of U.S. MNE groups that
have annual revenue for the preceding reporting period of $850,000,000 or more. The

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final regulations do not provide a general exception for information that may relate to
national security, but the preamble to the final regulations stated that the Department of
Defense would continue to consider the national security implications of CbC reports in
particular fact patterns. Based on subsequent consultations with the Department of
Defense, the Treasury Department and the IRS have determined that national security
interests require modifications to the reporting requirements for U.S. MNE groups that
are specified national security contractors as defined in section 3.01 of this notice and
that have a reporting requirement under §1.6038-4.
SECTION 3. MODIFICATIONS TO CBC REPORTING FOR SPECIFIED NATIONAL
SECURITY CONTRACTORS

.01 Specified National Security Contractor
For purposes of this notice, a U.S. MNE group is a “specified national security
contractor” if more than 50 percent of the U.S. MNE group’s annual revenue, as
determined in accordance with U.S. generally accepted accounting principles, in the
preceding reporting period is attributable to contracts with the Department of Defense or
other U.S. government intelligence or security agencies.
.02 Modifications to Manner of Reporting on Form 8975
The Treasury Department and the IRS intend to amend §1.6038-4 to provide the
definition of specified national security contractor and modifications to the manner of
reporting on Form 8975 for such U.S. MNE groups. The amended regulations will
provide that U.S. MNE groups that have a Form 8975 filing obligation under §1.6038-4
and are specified national security contractors may provide Form 8975 and Schedules

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A (Form 8975) in the following manner:
• Complete Form 8975 with a statement at the beginning of Part II, Additional
Information, that the U.S. MNE group is a specified national security contractor
as defined in this notice;
• Complete one Schedule A (Form 8975) for the Tax Jurisdiction of the United
States with aggregated financial and employee information for the entire U.S.
MNE group in Part I, Tax Jurisdiction Information, and only the ultimate parent
entity’s information in Part II, Constituent Entity Information; and
• Complete one Schedule A (Form 8975) for the Tax Jurisdiction “Stateless” with
zeroes in Part I, Tax Jurisdiction Information, and only the ultimate parent entity’s
information in Part II, Constituent Entity Information.
No other Schedule A (Form 8975) or additional information is required.
.03 Amended Form 8975 and Schedules A (Form 8975)
A specified national security contractor that has already filed Form 8975 and
Schedules A (Form 8975) for prior reporting periods may file an amended Federal
income tax return (following the instructions for filing of amended Federal income tax
returns) and attach an amended Form 8975 and Schedules A (Form 8975) in the
manner provided in section 3.02 with the amended report checkbox on Form 8975
marked. Specified national security contractors that do not electronically file their
amended Federal income tax returns should, in addition to filing an amended Federal
income tax return with an amended Form 8975 and Schedules A (Form 8975), mail a

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copy of page 1 of their amended Form 8975 to Ogden as provided in the Instructions for
Form 8975 and Schedule A (Form 8975) under the heading “Where to File.” In order to
ensure originally-filed CbC reports are not automatically exchanged, specified national
security contractors that are filing amended Form 8975 and Schedules A (Form 8975) to
supersede an already-filed Form 8975 and Schedules A (Form 8975) should do so by
April 20, 2018, if filing an amended Federal income tax return on paper, or by May 25,
2018, if filing electronically.
SECTION 4. EFFECTIVE DATE
The amendments to the regulations described in this notice shall apply to CbC
reports and amended CbC reports filed after March 30, 2018.
SECTION 5. DRAFTING INFORMATION
The principal author of this notice is Melinda E. Harvey of the Office of Associate Chief
Counsel (International). For further information regarding this notice contact Melinda E.
Harvey (202) 317-6934 (not a toll-free call).