The Internal Revenue Service (IRS) has announced that beginning May 13, 2019, only individuals with either a Social Security number (SSN) or an individual taxpayer identification number (ITIN) may request an employer identification number (EIN) as the “responsible party” on IRS Form SS-4. It is unclear how the changes will affect international EIN applications in which a foreign individual is listed as the responsible party.

Under current policy, foreign individuals without an SSN or ITIN (and otherwise ineligible to obtain one) may request an EIN as the responsible party for a foreign or a US entity. This could affect foreign taxpayers in two main circumstances:

• When a foreign entity, for tax planning purposes, wishes to make a “check-the-box” election (IRS Form 8832), which requires the electing entity to have an EIN
• When a foreign entity forms a corporation in the United States and all of the responsible parties of the US corporation are foreign individuals without an SSN or ITIN

In both situations, the taxpayer typically needs to obtain the EIN quickly, either to timely make the “check-the-box” election in the former case or to open a bank account in the United States in the latter case.

Taxpayers should be aware that, should the changes also apply to foreign individuals listed as the responsible party, such individuals may first need to obtain an ITIN or SSN, if they are eligible, which may take several weeks to obtain, before being listed as the responsible party on international EIN applications. Alternatively, a foreign taxpayer may be required to have a responsible party who has an SSN or ITIN. Note that the IRS also frowns upon a taxpayer using a nominee (i.e., a person given limited authority to act on behalf of the entity) who has an SSN or ITIN to obtain an EIN.

In its release, the IRS stated that the change is intended to prohibit entities from using their own EINs to obtain additional EINs, which are the nine-digit tax identification numbers assigned to sole proprietors, corporations, partnerships, estates and other entities for tax filing and reporting purposes. The IRS believes that requiring an individual to be the responsible party will improve transparency and will result in greater security to the EIN process. This new requirement will apply to both paper and online EIN applications. This change should not impact who can act as a “third-party designee” during the EIN application process.