Introduction: What Is Form 5713 (Schedule B)?

Form 5713 (Schedule B), titled Specifically Attributable Taxes and Income (Section 999(c)(2)), is an official international tax schedule published by the Internal Revenue Service (IRS) and the Department of the Treasury. It is filed as an attachment to Form 5713 (International Boycott Report).

This schedule is governed under Section 999(c)(2) of the Internal Revenue Code (IRC) and Treasury Regulation Section 7.999-1. It is used by U.S. taxpayers and multinational business entities that participated in or cooperated with an unsanctioned international boycott to report the exact foreign taxes paid and foreign income earned directly from boycott-related operations.

Unlike Schedule A, which calculates a broad mathematical percentage (the International Boycott Factor), Schedule B uses a direct, itemized accounting method to determine the specific loss of valuable U.S. tax benefits.

Purpose of the Form

Under IRC Section 999, U.S. taxpayers who agree to participate in or cooperate with an unsanctioned foreign boycott (such as the Arab League boycott of Israel) face the denial of three primary tax benefits: the Foreign Tax Credit under Section 908, the deferral of taxation on Controlled Foreign Corporation (CFC) earnings under Subpart F (Section 952(a)(3)), and IC-DISC export benefits under Section 995(b)(1)(F)(ii).

Taxpayers can choose between two methods to calculate this penalty. Schedule B represents the specifically attributable method, allowing taxpayers with detailed, segregated books and records to identify the exact dollar amounts of foreign taxes and income directly connected to boycott agreements.

The itemized totals calculated on Schedule B transfer directly to Schedule C (Form 5713), ensuring that only the specific taxes and income tied to boycott operations are penalized, rather than reducing tax benefits across the company’s entire worldwide operations.

Who Needs to File This Form

Schedule B must be completed and attached to Form 5713 by any taxpayer subject to international boycott reporting who chooses the specific identification method. You are required to file Schedule B if you meet all of the following conditions:

Form 5713 Filing Obligation: You are a U.S. person (individual, C-corporation, partnership, estate, or trust) or a foreign corporation with U.S. shareholders that conducted business in or related to a boycotting country.
Boycott Participation or Cooperation: You, or a member of your controlled corporate group, agreed to participate in or cooperate with an international boycott during the tax year.
Specific Method Election: You choose to determine the loss of tax benefits using the Specifically Attributable Taxes and Income method under Section 999(c)(2) and can clearly demonstrate these amounts through segregated accounting records.

Who Is Exempt / Not Required to File

Many international taxpayers who submit Form 5713 do not need to complete Schedule B. You are exempt or not required to submit this schedule under the following circumstances:

Factor Method Filers: Taxpayers who choose to compute their tax benefit disallowance using the International Boycott Factor formula on Schedule A (Form 5713) instead of Schedule B.
Non-Participating Filers: Taxpayers who conduct business in listed boycotting countries but had no agreements, requests, or participation in boycott activities (they file Form 5713 alone without Schedule A or B).
Taxpayers Without Boycott Operations: U.S. entities and individuals with no operations in or related to boycotting nations.

When to File

Schedule B is an integral attachment to Form 5713 and follows the filing deadline of your primary federal income tax return:

Corporate Filers (Form 1120): Due by the 15th day of the 4th month after the end of the corporate tax year (typically April 15th for calendar-year filers, or October 15th on extension via Form 7004).
Partnership Filers (Form 1065): Due by the 15th day of the 3rd month (typically March 15th, or September 15th on extension).
Individual Filers (Form 1040): Due by April 15th (or October 15th with an automatic extension via Form 4868).

Where and How to File

Form 5713 and Schedule B are subject to a mandatory two-step filing procedure under IRS regulations:

Attached to Primary Return: Attach Form 5713 and Schedule B directly to your annual federal income tax return and file electronically or by mail as normal.
Mandatory Duplicate Submission: In addition to filing with your tax return, you must mail a separate duplicate copy of Form 5713 and all attached schedules directly to the dedicated IRS address as per the official Form 5713 instructions (Internal Revenue Service Center, Ogden, UT).

Step-by-Step Instructions to Fill Form 5713 (Schedule B)

Schedule B is a structured table that lists each boycotting country where operations occurred and isolates the specific foreign taxes and income attributable to those operations.

Column / Line	Key Focus Areas	What to Enter / Disclose
Header Section	Identity Details	Enter the filer’s legal name, federal Taxpayer Identification Number (EIN or SSN), and the name of the foreign corporation or partnership (if applicable).
Column (1)	Name of Country	List each country in or related to which you had operations involving participation in or cooperation with an international boycott.
Column (2)	Foreign Tax Credit Denied (Sec. 908)	Enter the foreign income taxes paid or accrued that are specifically attributable to the boycott operations in that country. These taxes are disallowed as foreign tax credits.
Column (3)	Subpart F Income (Sec. 952(a)(3))	Enter the net taxable income of Controlled Foreign Corporations (CFCs) specifically attributable to boycott operations in that country, which becomes immediately taxable under Subpart F.
Column (4)	IC-DISC / FSC / Extraterritorial Income	Enter the taxable income specifically attributable to boycott operations that loses IC-DISC export tax deferral benefits under Section 995(b)(1)(F)(ii).
Total Line	Column Sums	Calculate the sum of each column across all listed countries. These totals transfer directly to Schedule C (Form 5713).

Isolating Foreign Taxes in Column (2)

In Column (2), enter only the foreign income taxes that were actually paid or accrued on earnings generated by the specific contracts or operations involving boycott cooperation. These foreign taxes can no longer be claimed as a credit on Form 1118 or Form 1116, though they may generally be taken as a tax deduction under IRC Section 164.

Isolating CFC Subpart F Income in Column (3)

In Column (3), calculate the net income of your foreign subsidiaries generated from boycott-related operations. Under Section 952(a)(3), this specific income is treated as deemed taxable Subpart F income to U.S. shareholders, eliminating the ability to defer U.S. tax on those foreign earnings.

Required Documents and Information Needed Before Filling

To use Schedule B, the IRS requires you to demonstrate that your accounting records clearly segregate boycott transactions. Assemble the following documentation:

Segregated Project & Country Ledgers: Detailed general ledgers and project accounting records that isolate revenues, expenses, and taxes for boycott-related contracts.
Foreign Tax Returns & Receipts: Official tax assessments and payment vouchers showing the exact foreign income taxes paid on boycott-related earnings.
CFC Financial Statements: Income statements (Schedule C of Form 5471) broken down by specific commercial contracts or territories.
Contracts & Commercial Documents: Purchase orders, shipping invoices, and letters of credit containing boycott clauses.
Treasury List of Boycotting Countries: The current quarterly list published by the Department of the Treasury (including countries such as Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, and Yemen).

Common Mistakes to Avoid

Using Schedule B Without Adequate Records: Attempting to use the specific attribution method without clear, auditable accounting ledgers that segregate boycott transactions from non-boycott business.
Filing Both Schedule A and Schedule B: Filing both the factor method and the specific identification method for the same operating entity.
Mismatching Foreign Taxes: Entering figures in Column (2) that do not reconcile with foreign taxes reported on corporate Form 1118 or individual Form 1116.
Omitting Controlled Group Operations: Failing to include boycott operations conducted by controlled domestic or foreign affiliates.
Forgetting the Duplicate Mailing: Failing to mail a separate duplicate copy of Form 5713 and Schedule B to the IRS Service Center in Ogden, Utah.

Penalties and Compliance Risks

Failing to comply with international boycott reporting rules carries both criminal penalties and substantial civil tax consequences:

Criminal Penalties for Willful Failure: Under IRC Section 999(f), any person who willfully fails to file Form 5713 or required schedules is guilty of a crime and, upon conviction, may be fined up to $25,000, imprisoned for up to 1 year, or both.
Loss of the Specific Method on Audit: If the IRS audits your return and determines that your books and records do not clearly demonstrate specific attribution, the IRS can reject your Schedule B and force your company to use the Schedule A International Boycott Factor, which often results in a much larger tax penalty.
Disallowance of Foreign Tax Credits: Foreign taxes reported in Column (2) are permanently barred from being claimed as foreign tax credits under Section 908.
Immediate Taxation of Foreign Profits: CFC earnings reported in Column (3) are taxed immediately to U.S. shareholders as Subpart F income.

Related Forms and Schedules

When computing and applying specifically attributable boycott adjustments, tax professionals work with these related IRS documents:

Form 5713: International Boycott Report (the master parent return).
Schedule A (Form 5713): International Boycott Factor (the alternative formula method).
Schedule C (Form 5713): Tax Effect of the International Boycott Provisions (where Schedule B totals transfer).
Form 1118: Foreign Tax Credit—Corporations (Schedule G applies the Section 908 reduction).
Form 1116: Foreign Tax Credit—Individual (Part III applies the Section 908 reduction).
Form 5471: Information Return of U.S. Persons With Respect to Certain Foreign Corporations.
Form 1120-IC-DISC: Interest Charge Domestic International Sales Corporation Return.

Frequently Asked Questions (FAQs)

1. What is the main advantage of choosing Schedule B over Schedule A?

Schedule B is often advantageous for companies that have large worldwide operations but only minor, isolated boycott transactions. Schedule B limits the tax penalty strictly to the specific taxes and income tied to those transactions, whereas Schedule A applies a broad percentage reduction across all foreign operations.

2. Can a taxpayer switch between Schedule A and Schedule B from year to year?

Yes. Taxpayers can elect to use Schedule A or Schedule B on a year-by-year basis, provided their books and records support the method chosen for that tax year.

3. What happens if our accounting records cannot clearly isolate boycott income?

If you cannot clearly demonstrate the specific foreign taxes and income attributable to boycott operations through your accounting records, you are legally required to use the Schedule A International Boycott Factor method.

4. Are foreign taxes disallowed on Schedule B completely lost?

While disallowed foreign taxes in Column (2) cannot be claimed as a Foreign Tax Credit under Section 908, they can generally be taken as an itemized tax deduction under IRC Section 164.

5. Where do the totals from Schedule B transfer?

The totals from Columns (2), (3), and (4) transfer directly into the corresponding sections of Schedule C (Form 5713), which applies the adjustments to your corporate or individual income tax return.

6. Where do I send the duplicate copy of Form 5713 and Schedule B?

You must mail a separate duplicate copy of Form 5713 and Schedule B directly to the Internal Revenue Service Center in Ogden, Utah, as specified in the official Form 5713 instructions.

Conclusion

IRS Form 5713 (Schedule B) is a critical compliance tool for U.S. taxpayers and multinational companies seeking to quantify the exact tax impact of international boycott operations. By using the specific attribution method under IRC Section 999(c)(2), taxpayers with robust accounting systems can isolate boycott-related taxes and income, preventing unnecessary tax penalties across their broader global operations.

To ensure full compliance and avoid criminal penalties under Section 999(f), maintain segregated project accounting records, reconcile foreign taxes with Form 1118, transfer totals accurately to Schedule C, and submit the required duplicate filing to the IRS Ogden Center.

Form 5713 Schedule B Guide: Specific Boycott Taxes & Income