How to Get a FOREIGN EIN as a Partnership Residing in a Constitutional State

1. Introduction

An Employer Identification Number (EIN) is a type of Taxpayer Identification Number (TIN) needed in order for a artificial business entity to open a bank account or get a loan. EINs for artificial entities are issued by the IRS under the authority of 26 C.F.R. §301.6109-1(g)(1)(ii). The IRS Form SS-4 is the application to apply for the EIN.

There are FOUR categories of EINs:

1. Domestic EINs issued to U.S. Persons. This is the default mode that EINs are issued under.
2. Foreign EINs originally issued as Foreign EINs. These are very hard to get because the IRS typically ignores SS-4 requests for such a number even though they provide options on the SS-4 to request such a number.
3. Foreign EINs originally issued as DOMESTIC EINs but later changed to Foreign. These entities resident in a state and made a DE-ELECTION as a partnership to revoke their default DOMESTIC election by filing a special Form 1065 prepared pursuant to 26 C.F.R §1.6031(a)-1(b)(5).
4. Foreign INTERNATIONAL EINs in the 98 series. These entities are subject to Beneficial Interest reporting and Schedules K-2 and K-3 reporting. See:
   How to: Getting a Foreign EIN with 98 Prefix, FTSIG
   https://ftsig.org/how-to-getting-a-foreign-ein-with-98-prefix/

The IRS does not like issuing FOREIGN EINs to business entities residing in the Constitutional states. Typically, if your entity submits an SS-4 for a FOREIGN EIN, IRS may stonewall or ignore your request so as to FORCE you into a domestic status, at least initially. But they can’t KEEP you there. They still need to give you a choice.

Businesses residing in the COUNTRY “United States*” who desire a FOREIGN EIN therefore must take the circuitous route to the FOREIGN EIN in the form of option 3 above. By taking this route, they can avoid all K-1 reporting and even 8865 reporting as a result. They then have no tax liability or even filing liability beyond that point. Completely off the radar!

Note that the ability of the IRS to FORCE the default U.S. person status of the number in 26 C.F.R. §301.6109-1(g)(1)(ii):

26 C.F.R. §301.6109-1 – Identifying numbers.

§ 301.6109-1 Identifying numbers.

(g) Special rules for taxpayer identifying numbers issued to foreign persons—

(1) General rule—

[. . .]

(ii) Employer identification number. 

An employer identification number is generally identified in the records and database of the Internal Revenue Service as a number belonging to a U.S. person. However, the Internal Revenue Service may establish a separate class of employer identification numbers solely dedicated to foreign persons which will be identified as such in the records and database of the Internal Revenue Service. A person may establish a different status for the number either at the time of application or subsequently by providing proof of U.S. or foreign status with the Internal Revenue Service under such procedures as the Internal Revenue Service shall prescribe, including the use of a form as the Internal Revenue Service may specify. The Internal Revenue Service may require a person to apply for the type of employer identification number that reflects the status of that person as a U.S. or foreign person.

The fact that they may INITIALLY require a DOMESTIC status for the EIN they issue you originates from their OWNERSHIP over the number and its status initially. This is reflected in the following case:

Although Crowell and Raddatz do not explicitly distinguish between rights created by Congress [PUBLIC RIGHTS] and other [PRIVATE] rights, such a distinction underlies in part Crowell’s and Raddatz’ recognition of a critical difference between rights created by federal statute and rights recognized by the Constitution. Moreover, such a distinction seems to us to be necessary in light of the delicate accommodations required by the principle of separation of powers reflected in Art. III. The constitutional system of checks and balances is designed to guard against “encroachment or aggrandizement” by Congress at the expense of the other branches of government. Buckley v. Valeo, 424 U.S., at 122, 96 S.Ct., at 683. But when Congress creates a statutory right [a “privilege” or “public right” in this case, such as a “trade or business”], it clearly has the discretion, in defining that right, to create presumptions, or assign burdens of proof, or prescribe remedies; it may also provide that persons seeking to vindicate that right must do so before particularized tribunals created to perform the specialized adjudicative tasks related to that right. FN35 Such provisions do, in a sense, affect the exercise of judicial power, but they are also incidental to Congress’ power to define the right that it has created. No comparable justification exists, however, when the right being adjudicated is not of congressional creation. In such a situation, substantial inroads into functions that have traditionally been performed by the Judiciary cannot be characterized merely as incidental extensions of Congress’ power to define rights that it has created. Rather, such inroads suggest unwarranted encroachments upon the judicial power of the United States, which our Constitution reserves for Art. III courts.

[Northern Pipeline Const. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 69-70, 102 S.Ct. 2858 (1983);
SOURCE: https://scholar.google.com/scholar_case?case=17768408304219861886]

Notice the phrase above “create presumptions, or assign burdens of proof”. They are STARTING with a presumption of privileged DOMESTIC “U.S. person” status for the number that they OWN as property. Then they are relying on YOU to satisfy the BURDEN OF PROOF to prove a FOREIGN STATUS and thus SURRENDER the privileges initially associated with the number.

2. EIN Application Methods

The instructions for applying for an EIN are found on the IRS website:

1. How to Apply for an EIN, IRS
   https://www.irs.gov/businesses/small-businesses-self-employed/how-to-apply-for-an-ein
2. Apply for an employer identification number (EIN) online, IRS
   https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online

There are THREE methods to apply for an EIN:

1. Online: Immediately issued
   https://sa.www4.irs.gov/modiein/individual/index.jsp
2. Fax an SS-4: Can take up to two weeks.
   2.1. Download the SS-4
   https://www.irs.gov/pub/irs-pdf/fss4.pdf
   2.2 Fax it in
   https://www.irs.gov/filing/where-to-file-your-taxes-for-form-ss-4
3. Mail an SS-4: Can take several weeks.
   3.1. Download the SS-4
   https://www.irs.gov/pub/irs-pdf/fss4.pdf
   3.2 Mail it in
   https://www.irs.gov/filing/where-to-file-your-taxes-for-form-ss-4

3. Getting a Foreign EIN originally issued as a DOMESTIC EIN but later changed to Foreign

Note that filing Form 8832 is NOT another way to make this election. ALL the elections on Form 8832 make a DOMESTIC election, not a FOREIGN election.

https://www.irs.gov/forms-pubs/about-form-8832

The procedure to get a Foreign EIN originally issued as a DOMESTIC EIN but later changed to Foreign is:

1. Download the SS-4 form.
   https://www.irs.gov/pub/irs-pdf/fss4.pdf
2. Download IRS Publication 1635: Employer Identification Number, Understanding Your Ein
   https://www.irs.gov/pub/irs-pdf/p1635.pdf
3. Create your Partnership document to reflect the fact that you want to elect OUT of Subchapter K reporting.
4. Follow the instructions in IRS Publication 1635 for requesting a DOMESTIC EIN for your partnership.
5. Create and attach a STATEMENT to the SS-4 explaining the reason for needing the EIN. A sample statement is found later in section 4 of this article.
6. After the EIN is issued, immediately file a Form 1065 prepared per the 26 C.F.R §1.6031(a)-1(b)(5).
   6.1. You can find the IRS Form 1065 below:
   https://www.irs.gov/pub/irs-pdf/f1065.pdf
   6.3. This has the effect of REVOKING the default U.S. person status of the EIN that was issued in the previous step. If the partnership agreement permits it, the foreign partner can make this DE-ELECTION himself.
   6.4. This regulation says such a filing is NOT a partnership “return” but merely an election.
   6.5. 26 C.F.R §1.6031(a)-1(c) says the information provided in the DE-ELECTION is described in 26 C.F.R. §1.761-2(b)(2)(i).
   6.6. The excluded partnership is then deemed to not need to file a partnership return.
   6.7. Mail the SS-4 with a Certificate of Service or a Certified Mail so that you have proof you sent it. That way if the IRS tried to later institute notices or collection activity, you have proof you mad the DE-ELECTION.
7. Now look at 26 C.F.R. §1.6046A-1(f)(3), which says that U.S. person partners of the foreign partner is also excluded from Form 1065 and K-1 reporting.

By following the above procedure:

1. Your organization has a foreign status from the gitgo in its founding documents.
2. You apply for the EIN using the same procedures as any other partnership. You do this because 26 C.F.R. §301.6109-1(g)(1)(ii) says the IRS has the authority to FORCE you to have the the U.S. person status initially.
3. But then you turn around and IMMEDIATELY use an election to revoke THEIR election and thus return to a FOREIGN status for the partnership so that the founding documents.
4. Beyond that point, there is no reporting or filing for EITHER the foreign partner or the U.S. person partner.
5. The partnership also avoids the Beneficial Ownership Information Reporting (BOIR) as well, because it is not an INTERNATIONAL organization with an EIN that has a 98 prefix.
6. Since your partnership also is not a a foreign INTERNATIONAL partnership, it isn’t subject to K-2 or K-3 reporting either.

Beyond this point, if your partnership ever DOES receive an IRS collection notice or audit, simply respond via Certified mail with a cop of the Form 1065 DE-ELECTION.

4. Sample Statement to Attach to the SS-4 EIN Application

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SUPPLEMENTARY STATEMENT

• ________ HOLDINGS, LLC (“Foreign entity”) is applying for an EIN and providing this supplementary statement pursuant to 26 C.F.R. §301.6109-1(d)(2)(i).
• The foreign entity anticipates receipt of income from sources within the United States pursuant to 26 U.S.C. §864(c)(3) and accordingly, is required to furnish an EIN pursuant to 26 C.F.R. §301.6109-1(b)(2)(1) when the receipt of such income occurs.
• The foreign entity was created exclusively in the jurisdiction of the State of ________ (See Attachment 1 – Certificate of Fact) and elects to retain its status as a foreign business entity for federal Income  tax purposes pursuant to 26 C.F.R. §301.7701-5.
• The foreign entity is not making any domestic classification election under 26 C.F.R. §301.7701-3.
• The foreign entity has elected to forego treatment under Title 26, Subtitle A, Chapter 1, Subchapter K, as provided for in 26 C.F.R. §1.761-2(b).
• The foreign entity IS requesting an EIN to be issued under a foreign (non-International) status and reflected as such in the records and database of the Internal Revenue Service pursuant to 26 C.F.R. §301.6109-1(g)(1)(ii) (emphasis added). To Wit
  
  (II) Employer Identification number.
  
  An employer identification number is generally identified in the records  and database of  the Internal  Revenue  Service  as a number  belonging to a U.S. person. However   the  Internal  Revenue   Service may  establish  a  separate  class   of  employer identification numbers solely dedicated to foreign persons which will be Identified as such in the records and database of the Internal Revenue  Service. A person  may establish a different  status for the number  either at the time of application or subsequently by providing proof of U.S. or foreign status with  the  Internal Revenue  Service  under  such procedures as  the  Internal  Revenue Service shall prescribe, including the use of a form as the Internal Revenue Service may specify. The Internal Revenue Service may require a person  to apply for the  type of employer Identification number that reflects the status or that person as a U.S. or foreign person.
  
  28 C.F.R.  §301.6109-1(g)(1)(ii)
  https://www.law.cornell.edu/cfr/text/26/301.6109-1
  

I declare certify under penalty of perjury under the laws of the United States of America pursuant to 28 U.S.C §1746(1) that the foregoing is true and correct.

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