IRS Statistical Bulletin Reveals Data On Foreign Corporations

by Mike Godfrey, Tax-News.com, Washington

20 August 2008

The United States Internal Revenue Service (IRS) has released its summer 2008 issue of the Statistics of Income Bulletin, which features tax year 2005 data on the growth in profits and tax liability reported by foreign-controlled domestic corporations.

According to 2005 data, there were 61,820 foreign-controlled domestic corporations (FCDCs), accounting for 1.1% of the total of all US corporations. However, FCDCs generated USD3.5tn of total receipts with USD9.2tn of total assets, accounting for 13.7% of receipts and 13.9% of assets reported on all US corporation income tax returns.

Profits, or net income less deficit, reported by FCDCs for tax purposes were USD165.2bn, an 81.9% increase from USD90.8bn reported in 2004. The US tax liability for FCDCs, total income tax after credits, was USD42.4bn for 2005, a 41.7% increase since 2004.

For tax year 2004, foreign corporations controlled by US multinational corporations held USD9.2 trillion in assets and reported USD3.8tn in receipts.

In 2004, corporations that claimed the foreign tax credit on their US tax returns claimed foreign tax credits worth USD56.6bn, representing an all-time high and a 13.2% increase over the previous high amount in 2003. Use of this credit reduced their US tax on worldwide income by 30.2%, from USD187.5bn to USD130.9bn.

While the number of partnership returns filed between 2002 and 2005 increased by 23%, the number of sole proprietorship returns increased by just 1.9%, the bulletin shows.

Americans reported USD38.5bn in cash and other asset transfers in 2005. Almost 3% of gift tax returns were taxable with USD1.7bn in reported tax liability.

Corporations claimed almost USD6.4bn in business credits for research activities for tax year 2005, and corporations in the manufacturing industries claimed more than 70% of this amount.

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