On April 15, 2016 we posted US Pressured For Beneficial Ownership Rules where we discussed that in a speech by Treasury deputy assistant secretary Jennifer Fowler to a financial crime conference earlier in April noted that the Treasury is in the process of introducing a new rule forcing financial institutions to perform customer due diligence checks on new clients.

This rule, first published in August 2014, is still under consultation, though close to being finalized. We also discussed that the regulations are likely in response to the growing view of the United States as a tax haven for foreigners seeking to evade their foreign tax obligations or otherwise conceal their holdings.
The Treasury Department noted in its March 30th statement that one purpose of the new regulations will be to assist foreign countries in obtaining information regarding their own taxpayers under the United States' tax treaties and tax information exchange agreements. 

The new regulations where to be issued under section 6038A of the Internal Revenue Code, which requires certain foreign owned U.S. corporations to file a Form 5472 disclosing the identity of their foreign owners and reporting certain related-party transactions. The filing requirement generally applies where more than 25% of the voting power or value of all classes of stock are owned by a single foreign owner. 

The IRS has now issued these regulations as final on 12/12/2016a nd they treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner, but only for the reporting, record maintenance and associated compliance requirements that apply to 25% foreign-owned domestic corporations under Code Sec. 6038A.
 
These changes are intended to provide IRS with improved access to information that it needs to satisfy its obligations under U.S. tax treaties, tax information exchange agreements and similar international agreements, as well as to strengthen the enforcement of U.S. tax laws. TD 9796, 12/12/2016; Reg. § 1.6038A-1, Reg. § 1.6038A-2, Reg. § 301.7701-2. These regulations are effective December 13, 2016.