In December 2018, IRS issued revised instructions to form 8858 which expanded the requirements to file this form to include the reporting of foreign branch operations of the US persons, CFC, and controlled foreign partnerships.
Previously, form 8858 only applied with respect to foreign disregarded entities.
The penalty for any missed form reporting is $10,000 per form per tax year and can go as up as losing foreign tax credits.
US persons that operate a foreign branch or that own certain interests in foreign tax owners of foreign branches must now file 8885 and schedule M.
A controlled foreign corporation (CFC) is a foreign corporation in which US shareholders own by vote or value more than 50% of the stock directly or indirectly or constructively on any date during the foreign corporation’s tax year as per section 957(a).
US persons are citizens of US or permanent residents or domestic corporation or domestic partnership.
A foreign branch is defined as an integral business operation carried on by a US person outside the US.
One way to determine if US person has a foreign branch or not can be determined by if the particular entity has a separate books and records and that is one of the biggest evidence to find out.
Activities carried out in a foreign country would constitute a foreign branch if the activities constitute a permanent establishment as per the provisions between the foreign country and the US.