Note:

There cannot be any nonresident alien shareholders or other foreign person as a shareholder. After December 31, 2017, an electing small business trust (ESBT) that is a shareholder of an S corporation may have potential current beneficiaries (PCBs) that are nonresident alien individuals without terminating the corporation’s status as an S corporation or the trust’s status as an S corporation or the trust’s status as a permitted shareholder. If so, no income of the S corporation is allocated to any NRA PCBs.

In tax years beginning after 2004, S Corporations that have more than 100 shareholders (counting married shareholders as a single shareholder for this purpose) may be in violation of their S election.

If

Then

1. S corp. application indicates more than 100 shareholders

Verify that the overflow is not due to shareholders that are married.

2. Count all shareholders that are married as one and there are still have more than 100 shareholders

Forward a copy of the case, Certification Application and shareholders list to Examination Classification indicating taxpayer may be in violation of S election (more than 100 shareholders).

An S corporation, although incorporated in the U.S., is not taxable by the U.S. at the entity (corporate) level (S corp. level) on its worldwide income.

S corporations are not considered residents within the meaning of the residence article of U.S. income tax treaties.

The corporate income, whether distributed, is taxed to the shareholders under a pass-through approach based largely on the partnership model.

Shareholders within the S corporation are taxed on their respective shares of the income of the S Corp.

Based upon the facts listed in paragraph (4) above, the certification issued to an S corporation is not like certifications issued to a C corporation (1120 filer).

Certifications of residency are issued at the shareholders' level.

Shareholders are certified based upon the shareholders having filed the tax forms for which they are liable.

A requestor (this includes shareholders within the S corporation) of a S corporation certification must have written authorization from each shareholder to receive the requested certification information. Approved authorizations include:

Form 8802, Line 3b

Form 8821, Tax Information Authorization, or like statement

Form 2848, Power of Attorney and Declaration of Representative