AICPA tells Treasury to bin ambiguous CFC dividend documentation rule [US]

The AICPA has urged Treasury and the IRS to eliminate or significantly simplify a documentation requirement in Notice 2025-75 that it calls 'ambiguous and potentially onerous.'

In a letter dated 4 February 2026, the AICPA challenged the notice's requirement that Section 951(a) shareholders 'determine and document that the dividend increased the taxable income of a United States person.' The problem: the guidance doesn't specify what level of analysis, substantiation, or third-party information is needed.

The requirement stems from H.R. 1's transition rule for controlled foreign corporation (CFC) dividends. It applies to dividends paid on or before 28 June 2025, where US shareholders reduce their Subpart F income as a result. Shareholders must attach a statement to Form 5471 proving the dividend bumped up US taxable income.

The AICPA's ask

The Institute proposed two fixes. First: eliminate the documentation requirement where dividends are already required by law to be included in US gross income, such as dividends to S corporations or individuals. Second: adopt a safe harbour rule exempting mandatory inclusions, with clarification that federal income tax principles apply to other situations.

The AICPA notes many transactions covered by the transition rule have already closed, some before the notice was even issued. 'Requiring taxpayers to obtain or reconstruct such information after the fact may be impracticable or impossible,' the letter said.

The rule adds steps where the tax outcome is already clear, creating administrative burden without a corresponding compliance benefit. Joe Calianno of Andersen echoed this view, noting the difficulty of retroactive compliance when buyer certifications weren't obtained at closing.

Background on Section 951

Section 951(a) requires certain US shareholders of CFCs to include their pro rata share of Subpart F income in gross income. H.R. 1 (the 'One Big Beautiful Bill Act') amended the rule to apply to shareholders who owned CFC stock on any day during the tax year, not just the last day. That change takes effect for foreign corporation tax years beginning after 31 December 2025.

The transition rule in Section 951(a)(2)(B) excludes certain dividends from this calculation, but only if documentation requirements are met. Treasury has yet to respond to the AICPA's recommendations.