The US Treasury published a notice in the Federal Register regarding the current list of countries that may necessitate participation in or cooperation with an international boycott on 1 October 2024.
The countries identified include Iraq, Lebanon, Syria, Kuwait, Qatar, Saudi Arabia, and Yemen.
The notice mentions individuals or members of a controlled group involved with listed countries or their governments must file Form 5713 (International Boycott Report). The Form 5713 must be filed by anyone operating in a non-listed country that mandates participation in or cooperation with an international boycott to conduct business there.
The following US persons also must file Form 5713:
- A member of a controlled group, a member of which has operations;
- A US shareholder of a foreign corporation that has operations (but only if they own stock of that foreign corporation;
- A partner in a partnership that has operations;
- A person treated as the owner of a trust that has operations.
Tax benefits that may be lost
If one cooperates with or participates in an international boycott, they may lose a portion of the following:
- The foreign tax credit (section 908(a)).
- Deferral of taxation of earnings of a CFC (section 952(a)(3)).
- Deferral of taxation of IC-DISC income (section 995(b)(1)(F)(ii)).
- Exemption of foreign trade income of an FSC (section 927(e)(2), as in effect before its repeal).
- Exclusion of extraterritorial income from gross income (section 941(a)(5), as in effect before its repeal).
