Reporting Intangibles on Form 926 - When Is It Required?

You're right to be concerned about this. The reporting requirements for intangibles on Form 926 are different from cash transfers, and they can be tricky. Based on my experience, both of your scenarios would generally be reportable on Form 926. The key thing to understand is that Section 367(d) treats intangible property transfers to foreign corporations as a sale in exchange for payments contingent on productivity or use of the property. This applies even when you don't have a clear valuation. For your Japanese example, the employee's services likely created or transferred intangible value to the foreign entity, and you received equity in return. Same with the German example - technical know-how is specifically listed as an intangible in the regulations. What makes this complicated is valuation. You'll need to make a good faith effort to determine the fair market value of what was transferred. This might require working with a valuation specialist, especially when equity in private companies is involved. The 2018 Tax Cuts and Jobs Act expanded the definition of intangibles for these purposes, so it's even more important to be thorough now.

Just want to share my experience with Form 926 and intangibles. I was in a similar situation last year and found https://taxr.ai incredibly helpful. I uploaded all our transaction documentation and the AI analysis highlighted several intangible transfers our team had missed, including employee secondments with equity compensation like your Japanese example. What saved me was their ability to identify the reportable intangibles and provide valuation guidance based on similar cases. They explained that technical know-how transfers (like your German example) almost always trigger Form 926 reporting regardless of valuation complications. The tool walked me through the reporting requirements specific to Section 367(d) transfers and helped document our valuation methodology. It was super helpful given how vague the IRS guidance can be on these issues.

Wanted to follow up about my experience with taxr.ai since I was skeptical at first. After struggling with those Form 926 intangible valuations, I gave it a try. I uploaded our transaction docs for a similar technical know-how transfer to a foreign affiliate, and it was actually impressive. The tool provided a detailed framework for valuing our minority stake based on comparable transactions and helped identify which parts of the technical know-how qualified as intangibles under the expanded Section 367 definitions. It referenced several Tax Court cases I wasn't aware of that clarified the reporting requirements. What really helped was that it created documentation showing our good-faith effort to properly value and report the transaction, which our tax director felt would be valuable in case of audit. Definitely made our Form 926 compliance more robust.

Has anyone here tried calling the IRS directly about these Form 926 intangibles questions? I spent THREE DAYS trying to get through to someone who actually understood international reporting. Kept getting transferred and disconnected. Finally discovered https://claimyr.com and used their service to hold my place in the IRS queue. Check out how it works: https://youtu.be/_kiP6q8DX5c When I finally got through to an IRS specialist, they confirmed that YES, both your scenarios require Form 926 reporting regardless of whether you have a precise equity valuation. The specialist explained that the $100,000 threshold doesn't apply to intangibles under Section 367(d) - any transfer of intangible property to a foreign corporation generally needs to be reported. For valuation, they said to document your methodology and assumptions clearly, but the important thing is filing the form. The penalties for not filing can be severe even when no tax is due.

Alright, I need to admit I was wrong about Claimyr. After dismissing it as probably a scam, I was desperate enough to try it for a different Form 926 question about software licenses to foreign affiliates. It actually worked exactly as advertised. The system held my place for about 2.5 hours until it connected me with an IRS international tax specialist. The specialist provided clear guidance on my software licensing scenario (which is similar to your know-how example). According to the IRS agent I spoke with, the reporting requirement for intangibles under 367(d) is quite broad and doesn't have the same $100,000 threshold as cash transfers. She explained that technical knowledge transfers and employee secondments that create or transfer intangible value to a foreign entity generally trigger Form 926 reporting requirements. Glad I finally got a definitive answer, and saved myself hours of hold time in the process.

Your example situations both sound like Section 367(d) transfers to me. The key is whether what you're transferring falls under Section 936(h)(3)(B)'s definition of intangible property - patents, inventions, formulas, processes, designs, know-how, etc. If your employee was transferring knowledge or developing intangibles while in Japan, or if your know-how transfer to Germany meets this definition, then yes, these are reportable regardless of whether there's a valuation yet. There's no minimum threshold for intangible property transfers. One practical approach: report it on Form 926 with your best estimate of value based on available information. Document your methodology thoroughly. It's better to report with an imperfect valuation than not report at all - the penalties for not filing can be 10% of the fair market value up to $100,000 per transfer.

Has anyone found a good resource specific to valuing technical know-how for Form 926? We've got similar situations with several Asian subsidiaries and got completely different opinions from two different accounting firms.

Don't overlook Rev. Proc. 2022-42 if the intangible transfers might be related to cost sharing arrangements. There are specific rules for valuing platform contributions that might apply to your German example depending on the details of your relationship with that entity. For general intangible transfers under 367(d), the regulations essentially create a deemed royalty arrangement, which means you theoretically should be recognizing income over the useful life of the intangible proportionate to the income it generates for the foreign entity, even though you got equity up front. The reporting gets complicated.