Regulations leave unchanged the filing requirements for tax-exempt shareholders of PFICs 

January 2: The Treasury Department and IRS issued regulations (T.D. 9650) and, by cross-reference, proposed regulations (REG-140974-11) at the end of 2013 as guidance on determining ownership of a passive foreign investment company (PFIC) and on the annual filing requirements for shareholders of PFICs. 

Although the regulations contain numerous provisions, they generally leave unchanged the current filing obligations of tax-exempt PFIC shareholders.

The temporary regulations [PDF 239 KB] and the proposed regulations [PDF 225 KB] are effective December 31, 2013 (i.e., the date when they were published in the Federal Register).


A provision of the Hiring Incentives to Restore Employment Act of 2010 (the “HIRE Act of 2010”) added section 1298(f) to the Code to require a “United States person” that is a shareholder of a PFIC to file an annual report containing information as may be required by the Secretary.

It was unclear whether this new requirement would also impose a new filing requirement on tax-exempt shareholders of PFICs.

A new Part I, Summary of Annual Information, was added to the Form 8621, Information Return by a Shareholder of a Passive Investment Company or Qualified Electing Fund, to reflect the requirement imposed by section 1298(f) but was not required to be completed until the implementing regulations were published. Two IRS notices (Notice 2010-34 and Notice 2011-55) effectively suspended filing requirements for certain PFIC shareholders not otherwise required to file Form 8621.


The temporary regulations generally provide for the same exception from filing Form 8621 that applied to tax-exempt organizations prior to the HIRE Act of 2010.

Specifically, the regulations state that a shareholder that is an organization exempt under section 501(a) because it is described in section 501(c), 501(d), or 401(a), a state college or university described in section 511(a)(2)(B), a plan described in section 403(b) or 457(b), an individual retirement plan or annuity as defined in section 7701(a)(37), or a qualified tuition program described in section 529 or 530 is not required under section 1298(f) to file Form 8621 with respect to a PFIC unless the income derived with respect to the PFIC stock would be taxable to the organization under subchapter F of Subtitle A of the Code (e.g., as unrelated business taxable income).

Read an initial summary of the temporary and proposed regulations: TaxNewsFlash-United States (December 30, 2013).

For more information, contact:

Rick Speizman, Partner-in-Charge of KPMG's Washington National Tax Exempt Organizations Tax group

+1 (202) 533-3084

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