New Rules Governing Disregarded Entities Owned by Nonresidents Impose Significant New Reporting and Compliance Requirements
By Anthony Diosdi There is a perception by many countries that the United States is the world’s largest tax shelter. This is because unlike many countries, the United States does not require public disclosure of ownership of its entities, (in particular Limited Liability Companies (LLCs)), or publishing of year-end financial statements for public viewing. The lack of transparency has allowed nonresidents of the United States to form domestic shell to avoid paying foreign income taxes, hide money or commit other acts of wrongdoing. Historically, nonresidents established shell companies in the United States as a domestic disregarded entities.The Treasury Department and the Internal Revenue Service (“IRS”) recently published regulations to combat perceived misuse of U.S. shell companies. On December 13, 2016, the Treasury Department and the IRS issued final regulations regarding…