II 

111TH CONGRESS 

1ST SESSION S. 1934 

To amend the Internal Revenue Code of 1986 to prevent the avoidance 

of tax on income from assets held abroad, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

OCTOBER 27, 2009 

Mr. BAUCUS (for himself, Mr. KERRY, and Mrs. SHAHEEN) introduced the 

following bill; which was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to prevent 

the avoidance of tax on income from assets held abroad, 

and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE, ETC. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Foreign Account Tax Compliance Act of 2009’’. 

6 (b) REFERENCE.—Except as otherwise expressly pro7 vided, whenever in this Act an amendment or repeal is 

8 expressed in terms of an amendment to, or repeal of, a 

9 section or other provision, the reference shall be considVerDate Nov 24 2008 23:16 Oct 27, 2009 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1934.IS S1934

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1 ered to be made to a section or other provision of the In2 ternal Revenue Code of 1986. 

3 (c) TABLE OF CONTENTS.—The table of contents for 

4 this Act is as follows: 

Sec. 1. Short title, etc. 

TITLE I—INCREASED DISCLOSURE OF BENEFICIAL OWNERS 

Sec. 101. Reporting on certain foreign accounts. 

Sec. 102. Repeal of certain foreign exceptions to registered bond requirements. 

TITLE II—UNDER REPORTING WITH RESPECT TO FOREIGN 

ASSETS 

Sec. 201. Disclosure of information with respect to foreign financial assets. 

Sec. 202. Penalties for underpayments attributable to undisclosed foreign financial assets. 

Sec. 203. Modification of statute of limitations for significant omission of income in connection with foreign assets. 

TITLE III—OTHER DISCLOSURE PROVISIONS 

Sec. 301. Disclosure of assistance in acquiring or forming a foreign entity. 

Sec. 302. Reporting of activities with respect to passive foreign investment companies. 

Sec. 303. Secretary permitted to require financial institutions to file certain returns related to withholding on foreign transfers electronically. 

TITLE IV—PROVISIONS RELATED TO FOREIGN TRUSTS 

Sec. 401. Clarifications with respect to foreign trusts which are treated as having a United States beneficiary. 

Sec. 402. Presumption that foreign trust has United States beneficiary. 

Sec. 403. Uncompensated use of trust property treated as a distribution. 

Sec. 404. Reporting requirement of United States owners of foreign trusts. 

Sec. 405. Minimum penalty with respect to failure to report on certain foreign 

trusts. 

TITLE V—DIVIDEND EQUIVALENT PAYMENTS RECEIVED BY 

FOREIGN PERSONS TREATED AS DIVIDENDS 

Sec. 501. Dividend equivalent payments received by foreign persons treated as 

dividends. 


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1 TITLE I—INCREASED DISCLO2 SURE OF BENEFICIAL OWN3 ERS 

4 SEC. 101. REPORTING ON CERTAIN FOREIGN ACCOUNTS. 

5 (a) IN GENERAL.—The Internal Revenue Code of 

6 1986 is amended by inserting after chapter 3 the following 

7 new chapter: 

8 ‘‘CHAPTER 4—TAXES TO ENFORCE RE9 PORTING ON CERTAIN FOREIGN AC10 COUNTS 

‘‘Sec. 1471. Withholdable payments to foreign financial institutions. 

‘‘Sec. 1472. Withholdable payments to other foreign entities. 

‘‘Sec. 1473. Definitions. 

‘‘Sec. 1474. Special rules. 

11 ‘‘SEC. 1471. WITHHOLDABLE PAYMENTS TO FOREIGN FI12 NANCIAL INSTITUTIONS. 

13 ‘‘(a) IN GENERAL.—In the case of any withholdable 

14 payment to a foreign financial institution which does not 

15 meet the requirements of subsection (b), the withholding 

16 agent with respect to such payment shall deduct and with17 hold from such payment a tax equal to 30 percent of the 

18 amount of such payment. 

19 ‘‘(b) REPORTING REQUIREMENTS, ETC.— 

20 ‘‘(1) IN GENERAL.—The requirements of this 

21 subsection are met with respect to any foreign finan22 cial institution if an agreement is in effect between 


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1 such institution and the Secretary under which such 

2 institution agrees— 

3 ‘‘(A) to obtain such information from each 

4 holder of each account maintained by such in5 stitution as is necessary to determine which (if 

6 any) of such accounts are United States ac7 counts, 

8 ‘‘(B) to comply with such verification and 

9 due diligence procedures as the Secretary may 

10 require with respect to the identification of 

11 United States accounts, 

12 ‘‘(C) in the case of any United States ac13 count maintained by such institution, to report 

14 on an annual basis (at such time and in such 

15 manner as the Secretary may provide) the in16 formation described in subsection (c) with re17 spect to such account, 

18 ‘‘(D) to comply with requests by the Sec19 retary for additional information with respect to 

20 any United States account maintained by such 

21 institution, and 

22 ‘‘(E) in any case in which any foreign law 

23 would (but for a waiver described in clause (i)) 

24 prevent the reporting of any information re25 ferred to in this subsection or subsection (c) 


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1 with respect to any United States account 

2 maintained by such institution— 

3 ‘‘(i) to attempt to obtain a valid and 

4 effective waiver of such law from each 

5 holder of such account, and 

6 ‘‘(ii) if a waiver described in clause (i) 

7 is not obtained from each such holder, to 

8 close such account. 

9 ‘‘(2) TERMINATION OF AGREEMENT.—Any 

10 agreement entered into under this subsection may be 

11 terminated by the Secretary upon a determination 

12 by the Secretary that the foreign financial institu13 tion is out of compliance with such agreement. 

14 ‘‘(c) INFORMATION REQUIRED TO BE REPORTED ON

15 UNITED STATES ACCOUNTS.— 

16 ‘‘(1) IN GENERAL.—The agreement described in 

17 subsection (b) shall require the foreign financial in18 stitution to report the following with respect to each 

19 United States account maintained by such institu20 tion: 

21 ‘‘(A) The name, address, and TIN of each 

22 account holder which is a specified United 

23 States person and, in the case of any account 

24 holder which is a United States owned foreign 


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1 entity, the name, address, and TIN of each sub2 stantial United States owner of such entity. 

3 ‘‘(B) The account number. 

4 ‘‘(C) The account balance or value (deter5 mined at such time and in such manner as the 

6 Secretary may provide). 

7 ‘‘(D) The gross receipts and gross with8 drawals or payments from the account (deter9 mined for such period and in such manner as 

10 the Secretary may provide). 

11 ‘‘(2) ELECTION TO BE SUBJECT TO SAME RE12 PORTING AS UNITED STATES FINANCIAL INSTITU13 TIONS.—In the case of a foreign financial institution 

14 which elects the application of this paragraph— 

15 ‘‘(A) subparagraphs (C) and (D) of para16 graph (1) shall not apply, and 

17 ‘‘(B) the agreement described in subsection 

18 (b) shall require such foreign financial institu19 tion to report such information with respect to 

20 each United States account maintained by such 

21 institution as such institution would be required 

22 to report under sections 6041, 6042, 6045, and 

23 6049 if— 

24 ‘‘(i) such institution were a United 

25 States person, and 


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1 ‘‘(ii) each holder of such account 

2 which is a specified United States person 

3 or United States owned foreign entity were 

4 a natural person and citizen of the United 

5 States. 

6 An election under this paragraph shall be made 

7 at such time, in such manner, and subject to 

8 such conditions as the Secretary may provide. 

9 ‘‘(3) INFORMATION SUPPLIED BY ACCOUNT

10 HOLDERS.—The foreign financial institution may 

11 rely on a certification from an account holder as to 

12 whether an account is a United States account and 

13 for the information required under paragraph (1)(A) 

14 with respect to such account holder if neither the fi15 nancial institution nor any entity which is a member 

16 of the same expanded affiliated group as such finan17 cial institution knows, or has reason to know, that 

18 any information provided in such certification is in19 correct. 

20 ‘‘(4) SEPARATE REQUIREMENTS FOR QUALI21 FIED INTERMEDIARIES.—In the case of a foreign fi22 nancial institution which is treated as a qualified 

23 intermediary by the Secretary for purposes of sec24 tion 1441 and the regulations issued thereunder, the 

25 requirements of this section shall be in addition to 


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1 any reporting or other requirements imposed by the 

2 Secretary for purposes of such treatment. 

3 ‘‘(d) DEFINITIONS.—For purposes of this section— 

4 ‘‘(1) UNITED STATES ACCOUNT.— 

5 ‘‘(A) IN GENERAL.—The term ‘United 

6 States account’ means any financial account 

7 which is held by one or more specified United 

8 States persons or United States owned foreign 

9 entities. 

10 ‘‘(B) EXCEPTION FOR CERTAIN ACCOUNTS

11 HELD BY INDIVIDUALS.—Unless the foreign fi12 nancial institution elects to not have this sub13 paragraph apply, such term shall not include 

14 any depository account maintained by such fi15 nancial institution if— 

16 ‘‘(i) each holder of such account is a 

17 natural person, and 

18 ‘‘(ii) with respect to each holder of 

19 such account, the aggregate value of all de20 pository accounts held (in whole or in part) 

21 by such holder and maintained by the 

22 same financial institution which maintains 

23 such account does not exceed $10,000 

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1 ence on the date of the enactment of this 

2 section). 

3 For purposes of clause (ii), all financial institu4 tions which are members of the same expanded 

5 affiliated group shall be treated as a single fi6 nancial institution. 

7 ‘‘(2) FINANCIAL ACCOUNT.—The term ‘finan8 cial account’ means, with respect to any financial in9 stitution— 

10 ‘‘(A) any depository account maintained by 

11 such financial institution, 

12 ‘‘(B) any custodial account maintained by 

13 such financial institution, and 

14 ‘‘(C) except as otherwise provided by the 

15 Secretary, any equity or debt interest in such 

16 financial institution (other than interests which 

17 are regularly traded on an established securities 

18 market). 

19 Any equity or debt interest which constitutes a fi20 nancial account under subparagraph (C) with re21 spect to any financial institution shall be treated for 

22 purposes of this section as maintained by such fi23 nancial institution. 

24 ‘‘(3) UNITED STATES OWNED FOREIGN ENTI25 TY.—The term ‘United States owned foreign entity’ 


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1 means any foreign entity which has one or more sub2 stantial United States owners. 

3 ‘‘(4) FOREIGN FINANCIAL INSTITUTION.—The 

4 term ‘foreign financial institution’ means any finan5 cial institution which is a foreign entity. 

6 ‘‘(5) FINANCIAL INSTITUTION.—Except as oth7 erwise provided by the Secretary, the term ‘financial 

8 institution’ means any entity that— 

9 ‘‘(A) accepts deposits in the ordinary 

10 course of a banking or similar business, 

11 ‘‘(B) is engaged in the business of holding 

12 financial assets for the account of others, or 

13 ‘‘(C) is engaged (or holding itself out as 

14 being engaged) primarily in the business of in15 vesting, reinvesting, or trading in securities (as 

16 defined in section 475(c)(2) without regard to 

17 the last sentence thereof), partnership interests, 

18 commodities (as defined in section 475(e)(2)), 

19 or any interest (including a futures or forward 

20 contract or option) in such securities, partner21 ship interests, or commodities. 

22 ‘‘(e) AFFILIATED GROUPS.— 

23 ‘‘(1) IN GENERAL.—The requirements of sub24 sections (b), (c)(1), and (c)(3) shall apply— 


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1 ‘‘(A) with respect to United States ac2 counts maintained by the foreign financial insti3 tution, and 

4 ‘‘(B) except as otherwise provided by the 

5 Secretary, with respect to United States ac6 counts maintained by each other foreign finan7 cial institution (other than any foreign financial 

8 institution which meets the requirements of 

9 subsection (b)) which is a member of the same 

10 expanded affiliated group as such foreign finan11 cial institution. 

12 ‘‘(2) EXPANDED AFFILIATED GROUP.—For pur13 poses of this section, the term ‘expanded affiliated 

14 group’ means an affiliated group as defined in sec15 tion 1504(a), determined— 

16 ‘‘(A) by substituting ‘more than 50 per17 cent’ for ‘at least 80 percent’ each place it ap18 pears, and 

19 ‘‘(B) without regard to paragraphs (2) and 

20 (3) of section 1504(b). 

21 A partnership or any other entity (other than a cor22 poration) shall be treated as a member of an ex23 panded affiliated group if such entity is controlled 

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1 bers of such group (including any entity treated as 

2 a member of such group by reason of this sentence). 

3 ‘‘(f) EXCEPTION FOR CERTAIN PAYMENTS.—Sub4 section (a) shall not apply to any payment if the beneficial 

5 owner of such payment is— 

6 ‘‘(1) any foreign government, any political sub7 division of a foreign government, or any wholly 

8 owned agency or instrumentality of any one or more 

9 of the foregoing, 

10 ‘‘(2) any international organization or any 

11 wholly owned agency or instrumentality thereof, 

12 ‘‘(3) any foreign central bank of issue, or 

13 ‘‘(4) any other class of persons identified by the 

14 Secretary for purposes of this subsection as posing 

15 a low risk of tax evasion. 

16 ‘‘SEC. 1472. WITHHOLDABLE PAYMENTS TO OTHER FOR17 EIGN ENTITIES. 

18 ‘‘(a) IN GENERAL.—In the case of any withholdable 

19 payment to a non-financial foreign entity, if— 

20 ‘‘(1) the beneficial owner of such payment is 

21 such entity or any other non-financial foreign entity, 

22 and 

23 ‘‘(2) the requirements of subsection (b) are not 

24 met with respect to such beneficial owner, 


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1 then the withholding agent with respect to such payment 

2 shall deduct and withhold from such payment a tax equal 

3 to 30 percent of the amount of such payment. 

4 ‘‘(b) REQUIREMENTS FOR WAIVER OF WITH5 HOLDING.—The requirements of this subsection are met 

6 with respect to the beneficial owner of a payment if— 

7 ‘‘(1) such beneficial owner or the payee provides 

8 the withholding agent with either— 

9 ‘‘(A) a certification that such beneficial 

10 owner does not have any substantial United 

11 States owners, or 

12 ‘‘(B) the name, address, and TIN of each 

13 substantial United States owner of such bene14 ficial owner, 

15 ‘‘(2) the withholding agent does not know, or 

16 have reason to know, that any information provided 

17 under paragraph (1) is incorrect, and 

18 ‘‘(3) the withholding agent reports the informa19 tion provided under paragraph (1)(B) to the Sec20 retary in such manner as the Secretary may provide. 

21 ‘‘(c) EXCEPTIONS.—Subsection (a) shall not apply 

22 to— 

23 ‘‘(1) except as otherwise provided by the Sec24 retary, any payment beneficially owned by— 


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1 ‘‘(A) any corporation the stock of which is 

2 regularly traded on an established securities 

3 market, 

4 ‘‘(B) any corporation which is a member of 

5 the same expanded affiliated group (as defined 

6 in section 1471(e)(2) without regard to the last 

7 sentence thereof) as a corporation described in 

8 subparagraph (A), 

9 ‘‘(C) any foreign government, any political 

10 subdivision of a foreign government, or any 

11 wholly owned agency or instrumentality of any 

12 one or more of the foregoing, 

13 ‘‘(D) any international organization or any 

14 wholly owned agency or instrumentality thereof, 

15 ‘‘(E) any foreign central bank of issue, or 

16 ‘‘(F) any other class of persons identified 

17 by the Secretary for purposes of this subsection, 

18 and 

19 ‘‘(2) any class of payments identified by the 

20 Secretary for purposes of this subsection as posing 

21 a low risk of tax evasion. 

22 ‘‘(d) NON-FINANCIAL FOREIGN ENTITY.—For pur23 poses of this section, the term ‘non-financial foreign enti24 ty’ means any foreign entity which is not a financial insti25 tution (as defined in section 1471(d)(5)). 


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1 ‘‘SEC. 1473. DEFINITIONS. 

2 ‘‘For purposes of this subchapter— 

3 ‘‘(1) WITHHOLDABLE PAYMENT.—The term 

4 ‘withholdable payment’ means— 

5 ‘‘(A) any payment of interest (including 

6 any original issue discount), dividends, rents, 

7 salaries, wages, premiums, annuities, compensa8 tions, remunerations, emoluments, and other 

9 fixed or determinable annual or periodical 

10 gains, profits, and income, if such payment is 

11 from sources within the United States, and 

12 ‘‘(B) any gross proceeds from the sale of 

13 any property of a type which can produce inter14 est or dividends from sources within the United 

15 States. 

16 ‘‘(2) SUBSTANTIAL UNITED STATES OWNER.— 

17 ‘‘(A) IN GENERAL.—The term ‘substantial 

18 United States owner’ means— 

19 ‘‘(i) with respect to any corporation, 

20 any specified United States person which 

21 owns, directly or indirectly, more than 10 

22 percent of the stock of such corporation 

23 (by vote or value), 

24 ‘‘(ii) with respect to any partnership, 

25 any specified United States person which 

26 owns, directly or indirectly, more than 10 


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1 percent of the profits interests or capital 

2 interests in such partnership, and 

3 ‘‘(iii) in the case of a trust, any speci4 fied United States person treated as an 

5 owner of any portion of such trust under 

6 subpart E of part I of subchapter J of 

7 chapter 1. 

8 ‘‘(B) SPECIAL RULE FOR INVESTMENT VE9 HICLES.—In the case of any financial institu10 tion described in section 1471(d)(5)(C), clauses 

11 (i) and (ii) of subparagraph (A) shall be applied 

12 by substituting ‘0 percent’ for ‘10 percent’. 

13 ‘‘(3) SPECIFIED UNITED STATES PERSON.—Ex14 cept as otherwise provided by the Secretary, the 

15 term ‘specified United States person’ means any 

16 United States person other than— 

17 ‘‘(A) any corporation the stock of which is 

18 regularly traded on an established securities 

19 market, 

20 ‘‘(B) any corporation which is a member of 

21 the same expanded affiliated group (as defined 

22 in section 1471(e)(2) without regard to the last 

23 sentence thereof) as a corporation described in 

24 subparagraph (A), 


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1 ‘‘(C) any organization exempt from tax2 ation under section 501(a) or an individual re3 tirement plan, 

4 ‘‘(D) the United States or any wholly 

5 owned agency or instrumentality thereof, 

6 ‘‘(E) any State, the District of Columbia, 

7 any possession of the United States, any polit8 ical subdivision of any of the foregoing, or any 

9 wholly owned agency or instrumentality of any 

10 one or more of the foregoing, 

11 ‘‘(F) any bank (as defined in section 581), 

12 ‘‘(G) any real estate investment trust (as 

13 defined in section 856), 

14 ‘‘(H) any regulated investment company 

15 (as defined in section 851), 

16 ‘‘(I) any common trust fund (as defined in 

17 section 584(a)), and 

18 ‘‘(J) any trust which— 

19 ‘‘(i) is exempt from tax under section 

20 664(c), or 

21 ‘‘(ii) is described in section 

22 4947(a)(1). 

23 ‘‘(4) WITHHOLDING AGENT.—The term ‘with24 holding agent’ means all persons, in whatever capacVerDate Nov 24 2008 23:16 Oct 27, 2009 Jkt 089200 PO 00000 Frm 00017 Fmt 6652 Sfmt 6201 E:\BILLS\S1934.IS S1934

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1 ity acting, having the control, receipt, custody, dis2 posal, or payment of any withholdable payment. 

3 ‘‘(5) FOREIGN ENTITY.—The term ‘foreign en4 tity’ means any entity which is not a United States 

5 person. 

6 ‘‘SEC. 1474. SPECIAL RULES. 

7 ‘‘(a) LIABILITY FOR WITHHELD TAX.—Every person 

8 required to deduct and withhold any tax under this chap9 ter is hereby made liable for such tax and is hereby indem10 nified against the claims and demands of any person for 

11 the amount of any payments made in accordance with the 

12 provisions of this chapter. 

13 ‘‘(b) CREDITS AND REFUNDS.— 

14 ‘‘(1) IN GENERAL.—Except as provided in para15 graph (2), the determination of whether any tax de16 ducted and withheld under this chapter results in an 

17 overpayment shall be made as if such tax had been 

18 deducted and withheld under subchapter A of chap19 ter 3. 

20 ‘‘(2) SPECIAL RULE WHERE FOREIGN FINAN21 CIAL INSTITUTION IS BENEFICIAL OWNER OF PAY22 MENT.— 

23 ‘‘(A) IN GENERAL.—In the case of any tax 

24 deducted and withheld under section 1471(a) 

25 from a specified financial institution payment— 


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1 ‘‘(i) if the foreign financial institution 

2 referred to in subparagraph (B) with re3 spect to such payment is entitled to a re4 duced rate of tax with respect to such pay5 ment by reason of any treaty obligation of 

6 the United States— 

7 ‘‘(I) the amount of any credit or 

8 refund with respect to such tax shall 

9 not exceed the amount of credit or re10 fund attributable to such reduction in 

11 rate, and 

12 ‘‘(II) no interest shall be allowed 

13 or paid with respect to such credit or 

14 refund, and 

15 ‘‘(ii) if such foreign financial institu16 tion is not so entitled, no credit or refund 

17 shall be allowed or paid with respect to 

18 such tax. 

19 ‘‘(B) SPECIFIED FINANCIAL INSTITUTION

20 PAYMENT.—The term ‘specified financial insti21 tution payment’ means any withholdable pay22 ment if the foreign financial institution payee 

23 referred to in section 1471(a) with respect to 

24 such payment is the beneficial owner of such 

25 payment. 


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1 ‘‘(c) CONFIDENTIALITY OF INFORMATION.— 

2 ‘‘(1) IN GENERAL.—For purposes of this chap3 ter, rules similar to the rules of section 3406(f) shall 

4 apply. 

5 ‘‘(2) DISCLOSURE OF LIST OF QUALIFIED FOR6 EIGN FINANCIAL INSTITUTIONS PERMITTED.—The 

7 identity of a foreign financial institution which 

8 meets the requirements of section 1471(b) shall not 

9 be treated as return information for purposes of sec10 tion 6103. 

11 ‘‘(d) REGULATIONS.—The Secretary shall prescribe 

12 such regulations or other guidance as may be necessary 

13 or appropriate to carry out the purposes of this chapter.’’. 

14 (b) COORDINATION WITH OTHER WITHHOLDING

15 PROVISIONS.— 

16 (1) WITHHOLDING OF TAX ON NONRESIDENT

17 ALIENS AND FOREIGN CORPORATIONS.—Subsection 

18 (c) of section 1441 is amended by adding at the end 

19 the following new paragraph: 

20 ‘‘(13) WITHHOLDABLE PAYMENTS TAXED

21 UNDER CHAPTER 4.—No tax shall be required to be 

22 deducted and withheld under subsection (a) from 

23 any amount with respect to which tax is required to 

24 be deducted and withheld under chapter 4.’’. 


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1 (2) WITHHOLDING OF TAX ON DISPOSITIONS OF

2 UNITED STATES REAL PROPERTY INTERESTS.—Sub3 section (b) of section 1445 is amended by adding at 

4 the end the following new paragraph: 

5 ‘‘(10) WITHHOLDABLE PAYMENTS TAXED

6 UNDER CHAPTER 4.—No tax shall be required to be 

7 deducted and withheld under subsection (a) from 

8 any amount with respect to which tax is required to 

9 be deducted and withheld under chapter 4.’’. 

10 (c) CLERICAL AMENDMENT.—The table of chapters 

11 of such Code is amended by adding at the end the fol12 lowing new item: 

‘‘CHAPTER 4. TAXES TO ENFORCE REPORTING ON CERTAIN FOREIGN

ACCOUNTS.’’. 

13 (d) EFFECTIVE DATE.— 

14 (1) IN GENERAL.—Except as provided in para15 graph (2), the amendments made by this section 

16 shall apply to payments made after December 31, 

17 2010. 

18 (2) GRANDFATHERED TREATMENT OF CERTAIN

19 OUTSTANDING OBLIGATIONS.—The amendments 

20 made by this section shall not apply to any obliga21 tion outstanding on the date of first committee ac22 tion, if such obligation— 

23 (A) is in bearer form, or 


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1 (B) includes (on the date of the issuance 

2 of such obligation) a provision under which the 

3 issuer would (but for this paragraph) be obli4 gated to make additional payments under such 

5 obligation by reason of the amendments made 

6 by this section. 

7 SEC. 102. REPEAL OF CERTAIN FOREIGN EXCEPTIONS TO 

8 REGISTERED BOND REQUIREMENTS. 

9 (a) REPEAL OF EXCEPTION TO DENIAL OF DEDUC10 TION FOR INTEREST ON NON-REGISTERED BONDS.— 

11 (1) IN GENERAL.—Paragraph (2) of section 

12 163(f) is amended by striking subparagraph (B) and 

13 by redesignating subparagraph (C) as subparagraph 

14 (B). 

15 (2) CONFORMING AMENDMENTS.— 

16 (A) Subparagraph (A) of section 163(f)(2) 

17 is amended by inserting ‘‘or’’ at the end of 

18 clause (ii), by striking ‘‘, or’’ at the end of 

19 clause (iii) and inserting a period, and by strik20 ing clause (iv). 

21 (B) Subparagraph (B) of section 

22 163(f)(2), as redesignated by paragraph (1), is 

23 amended— 


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1 (i) by striking ‘‘, and subparagraph 

2 (B),’’ in the matter preceding clause (i), 

3 and 

4 (ii) by amending clause (i) to read as 

5 follows: 

6 ‘‘(i) such obligation is of a type which 

7 the Secretary has determined by regula8 tions to be used frequently in avoiding 

9 Federal taxes, and’’. 

10 (C) Sections 165(j)(2)(A) and 1287(b)(1) 

11 are each amended by striking ‘‘except that 

12 clause (iv) of subparagraph (A), and subpara13 graph (B), of such section shall not apply’’. 

14 (b) REPEAL OF TREATMENT AS PORTFOLIO DEBT.— 

15 (1) IN GENERAL.—Paragraph (2) of section 

16 871(h) is amended to read as follows: 

17 ‘‘(2) PORTFOLIO INTEREST.—For purposes of 

18 this subsection, the term ‘portfolio interest’ means 

19 any interest (including original issue discount) 

20 which— 

21 ‘‘(A) would be subject to tax under sub22 section (a) but for this subsection, and 

23 ‘‘(B) is paid on an obligation— 

24 ‘‘(i) which is in registered form, and 


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1 ‘‘(ii) with respect to which the United 

2 States person who would otherwise be re3 quired to deduct and withhold tax from 

4 such interest under section 1441(a) re5 ceives a statement (which meets the re6 quirements of paragraph (5)) that the ben7 eficial owner of the obligation is not a 

8 United States person.’’. 

9 (2) CONFORMING AMENDMENT.—Section 

10 871(h)(3)(A) is amended by striking ‘‘subparagraph 

11 (A) or (B) of’’. 

12 (c) REPEAL OF EXCEPTION TO REQUIREMENT THAT

13 TREASURY OBLIGATIONS BE IN REGISTERED FORM.— 

14 (1) IN GENERAL.—Subsection (g) of section 

15 3121 of title 31, United States Code, is amended by 

16 striking paragraph (2) and by redesignating para17 graphs (3) and (4) as paragraphs (2) and (3), re18 spectively. 

19 (2) CONFORMING AMENDMENTS.—Paragraph 

20 (1) of section 3121(g) of such title is amended— 

21 (A) by adding ‘‘or’’ at the end of subpara22 graph (A), 

23 (B) by striking ‘‘; or’’ at the end of sub24 paragraph (B) and inserting a period, and 

25 (C) by striking subparagraph (C). 


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1 (d) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to obligations issued after the date 

3 which is 180 days after the date of the enactment of this 

4 Act. 

5 TITLE II—UNDER REPORTING 

6 WITH RESPECT TO FOREIGN 

7 ASSETS 

8 SEC. 201. DISCLOSURE OF INFORMATION WITH RESPECT 

9 TO FOREIGN FINANCIAL ASSETS. 

10 (a) IN GENERAL.—Subpart A of part III of sub11 chapter A of chapter 61 is amended by inserting after sec12 tion 6038C the following new section: 

13 ‘‘SEC. 6038D. INFORMATION WITH RESPECT TO FOREIGN FI14 NANCIAL ASSETS. 

15 ‘‘(a) IN GENERAL.—Any individual who, during any 

16 taxable year, holds any interest in a specified foreign fi17 nancial asset shall attach to such person’s return of tax 

18 imposed by subtitle A for such taxable year the informa19 tion described in subsection (c) with respect to each such 

20 asset if the aggregate value of all such assets exceeds 

21 $50,000 (or such higher dollar amount as the Secretary 

22 may prescribe). 

23 ‘‘(b) SPECIFIED FOREIGN FINANCIAL ASSETS.—For 

24 purposes of this section, the term ‘specified foreign finan25 cial asset’ means— 


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1 ‘‘(1) any financial account (as defined in section 

2 1471(d)(2)) maintained by a foreign financial insti3 tution (as defined in section 1471(d)(4)), and 

4 ‘‘(2) any of the following assets which are not 

5 held in an account maintained by a financial institu6 tion (as defined in section 1471(d)(5))— 

7 ‘‘(A) any stock or security issued by a per8 son other than a United States person, 

9 ‘‘(B) any financial instrument or contract 

10 held for investment that has an issuer or 

11 counterparty which is other than a United 

12 States person, and 

13 ‘‘(C) any interest in a foreign entity (as 

14 defined in section 1473). 

15 ‘‘(c) REQUIRED INFORMATION.—The information de16 scribed in this subsection with respect to any asset is: 

17 ‘‘(1) In the case of any account, the name and 

18 address of the financial institution in which such ac19 count is maintained and the number of such ac20 count. 

21 ‘‘(2) In the case of any stock or security, the 

22 name and address of the issuer and such informa23 tion as is necessary to identify the class or issue of 

24 which such stock or security is a part. 


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1 ‘‘(3) In the case of any other instrument, con2 tract, or interest— 

3 ‘‘(A) such information as is necessary to 

4 identify such instrument, contract, or interest, 

5 and 

6 ‘‘(B) the names and addresses of all 

7 issuers and counterparties with respect to such 

8 instrument, contract, or interest. 

9 ‘‘(4) The maximum value of the asset during 

10 the taxable year. 

11 ‘‘(d) PENALTY FOR FAILURE TO DISCLOSE.— 

12 ‘‘(1) IN GENERAL.—If any individual fails to 

13 furnish the information described in subsection (c) 

14 with respect to any taxable year at the time and in 

15 the manner described in subsection (a), such person 

16 shall pay a penalty of $10,000. 

17 ‘‘(2) INCREASE IN PENALTY WHERE FAILURE

18 CONTINUES AFTER NOTIFICATION.—If any failure 

19 described in paragraph (1) continues for more than 

20 90 days after the day on which the Secretary mails 

21 notice of such failure to the individual, such indi22 vidual shall pay a penalty (in addition to the pen23 alties under paragraph (1)) of $10,000 for each 30- 

24 day period (or fraction thereof) during which such 

25 failure continues after the expiration of such 90-day 


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1 period. The penalty imposed under this paragraph 

2 with respect to any failure shall not exceed $50,000. 

3 ‘‘(e) PRESUMPTION THAT VALUE OF SPECIFIED

4 FOREIGN FINANCIAL ASSETS EXCEEDS DOLLAR

5 THRESHOLD.—If— 

6 ‘‘(1) the Secretary determines that an indi7 vidual has an interest in one or more specified for8 eign financial assets, and 

9 ‘‘(2) such individual does not provide sufficient 

10 information to demonstrate the aggregate value of 

11 such assets, 

12 then the aggregate value of such assets shall be treated 

13 as being in excess of $50,000 (or such higher dollar 

14 amount as the Secretary prescribes for purposes of sub15 section (a)) for purposes of assessing the penalties im16 posed under this section. 

17 ‘‘(f) APPLICATION TO CERTAIN ENTITIES.—To the 

18 extent provided by the Secretary in regulations or other 

19 guidance, the provisions of this section shall apply to any 

20 domestic entity which is formed or availed of for purposes 

21 of holding, directly or indirectly, specified foreign financial 

22 assets, in the same manner as if such entity were an indi23 vidual. 

24 ‘‘(g) REASONABLE CAUSE EXCEPTION.—No penalty 

25 shall be imposed by this section on any failure which is 


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1 shown to be due to reasonable cause and not due to willful 

2 neglect. The fact that a foreign jurisdiction would impose 

3 a civil or criminal penalty on the taxpayer (or any other 

4 person) for disclosing the required information is not rea5 sonable cause. 

6 ‘‘(h) REGULATIONS.—The Secretary shall prescribe 

7 such regulations or other guidance as may be necessary 

8 or appropriate to carry out the purposes of this section, 

9 including regulations or other guidance which provide ap10 propriate exceptions from the application of this section 

11 in the case of— 

12 ‘‘(1) classes of assets identified by the Sec13 retary, including any assets with respect to which 

14 the Secretary determines that disclosure under this 

15 section would be duplicative of other disclosures, and 

16 ‘‘(2) nonresident aliens.’’. 

17 (b) CLERICAL AMENDMENT.—The table of sections 

18 for subpart A of part III of subchapter A of chapter 61 

19 is amended by inserting after the item relating to section 

20 6038C the following new item: 

‘‘Sec. 6038D. Information with respect to foreign financial assets.’’. 

21 (c) EFFECTIVE DATE.—The amendments made by 

22 this section shall apply to taxable years beginning after 

23 the date of the enactment of this Act. 


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•S 1934 IS

1 SEC. 202. PENALTIES FOR UNDERPAYMENTS ATTRIB2 UTABLE TO UNDISCLOSED FOREIGN FINAN3 CIAL ASSETS. 

4 (a) IN GENERAL.—Section 6662 is amended— 

5 (1) in subsection (b), by inserting after para6 graph (5) the following new paragraph: 

7 ‘‘(6) Any undisclosed foreign financial asset un8 derstatement.’’, and 

9 (2) by adding at the end the following new sub10 section: 

11 ‘‘(i) UNDISCLOSED FOREIGN FINANCIAL ASSET UN12 DERSTATEMENT.— 

13 ‘‘(1) IN GENERAL.—For purposes of this sec14 tion, the term ‘undisclosed foreign financial asset 

15 understatement’ means, for any taxable year, the 

16 portion of the understatement for such taxable year 

17 which is attributable to any transaction involving an 

18 undisclosed foreign financial asset. 

19 ‘‘(2) UNDISCLOSED FOREIGN FINANCIAL

20 ASSET.—For purposes of this subsection, the term 

21 ‘undisclosed foreign financial asset’ means, with re22 spect to any taxable year, any asset with respect to 

23 which information was required to be provided under 

24 section 6038, 6038B, 6038D, 6046A, or 6048 for 

25 such taxable year but was not provided by the taxVerDate Nov 24 2008 23:16 Oct 27, 2009 Jkt 089200 PO 00000 Frm 00030 Fmt 6652 Sfmt 6201 E:\BILLS\S1934.IS S1934

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1 payer as required under the provisions of those sec2 tions. 

3 ‘‘(3) INCREASE IN PENALTY FOR UNDISCLOSED

4 FOREIGN FINANCIAL ASSET UNDERSTATEMENTS.— 

5 In the case of any portion of an underpayment 

6 which is attributable to any undisclosed foreign fi7 nancial asset understatement, subsection (a) shall be 

8 applied with respect to such portion by substituting 

9 ‘40 percent’ for ‘20 percent’.’’. 

10 (b) EFFECTIVE DATE.—The amendments made by 

11 this section shall apply to taxable years beginning after 

12 the date of the enactment of this Act. 

13 SEC. 203. MODIFICATION OF STATUTE OF LIMITATIONS 

14 FOR SIGNIFICANT OMISSION OF INCOME IN 

15 CONNECTION WITH FOREIGN ASSETS. 

16 (a) EXTENSION OF STATUTE OF LIMITATIONS.— 

17 (1) IN GENERAL.—Paragraph (1) of section 

18 6501(e) is amended by redesignating subparagraphs 

19 (A) and (B) as subparagraphs (B) and (C), respec20 tively, and by inserting before subparagraph (B) (as 

21 so redesignated) the following new subparagraph: 

22 ‘‘(A) GENERAL RULE.—If the taxpayer 

23 omits from gross income an amount properly 

24 includible therein and— 


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1 ‘‘(i) such amount is in excess of 25 

2 percent of the amount of gross income 

3 stated in the return, or 

4 ‘‘(ii) such amount— 

5 ‘‘(I) is attributable to one or 

6 more assets with respect to which in7 formation is required to be reported 

8 under section 6038D (or would be so 

9 required if such section were applied 

10 without regard to the dollar threshold 

11 specified in subsection (a) thereof and 

12 without regard to any exceptions pro13 vided pursuant to subsection (h)(1) 

14 thereof), and 

15 ‘‘(II) is in excess of $5,000, 

16 the tax may be assessed, or a proceeding in 

17 court for collection of such tax may be begun 

18 without assessment, at any time within 6 years 

19 after the return was filed.’’. 

20 (2) CONFORMING AMENDMENTS.— 

21 (A) Subparagraph (B) of section 

22 6501(e)(1), as redesignated by paragraph (1), 

23 is amended by striking all that precedes clause 

24 (i) and inserting the following: 


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•S 1934 IS

1 ‘‘(B) DETERMINATION OF GROSS IN2 COME.—For purposes of subparagraph (A)—’’. 

3 (B) Paragraph (2) of section 6229(c) is 

4 amended by striking ‘‘which is in excess of 25 

5 percent of the amount of gross income stated in 

6 its return’’ and inserting ‘‘and such amount is 

7 described in clause (i) or (ii) of section 

8 6501(e)(1)(A)’’. 

9 (b) ADDITIONAL REPORTS SUBJECT TO EXTENDED

10 PERIOD.—Paragraph (8) of section 6501(c) is amended— 

11 (1) by inserting ‘‘pursuant to an election under 

12 section 1295(b) or’’ before ‘‘under section 6038’’, 

13 (2) by inserting ‘‘1298(f),’’ before ‘‘6038’’, and 

14 (3) by inserting ‘‘6038D,’’ after ‘‘6038B,’’. 

15 (c) CLARIFICATIONS RELATED TO FAILURE TO DIS16 CLOSE FOREIGN TRANSFERS.—Paragraph (8) of section 

17 6501(c) is amended by striking ‘‘event’’ and inserting ‘‘tax 

18 return, event,’’. 

19 (d) EFFECTIVE DATE.—The amendments made by 

20 this section shall apply to— 

21 (1) returns filed after the date of the enactment 

22 of this Act; and 

23 (2) returns filed on or before such date if the 

24 period specified in section 6501 of the Internal Rev25 enue Code of 1986 (determined without regard to 


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•S 1934 IS

1 such amendments) for assessment of such taxes has 

2 not expired as of such date. 

3 TITLE III—OTHER DISCLOSURE 

4 PROVISIONS 

5 SEC. 301. DISCLOSURE OF ASSISTANCE IN ACQUIRING OR 

6 FORMING A FOREIGN ENTITY. 

7 (a) IN GENERAL.—Subchapter B of chapter 61 is 

8 amended by redesignating section 6116 as section 6117 

9 and by inserting after 6115 the following new section: 

10 ‘‘SEC. 6116. DISCLOSURE OF ASSISTANCE IN ACQUIRING OR 

11 FORMING A FOREIGN ENTITY. 

12 ‘‘(a) IN GENERAL.—Each material advisor with re13 spect to any foreign entity transaction shall make a return 

14 (in such form as the Secretary may prescribe) setting 

15 forth— 

16 ‘‘(1) the identity of the foreign entity referred 

17 to in subsection (d), 

18 ‘‘(2) the identity of the citizen or resident of 

19 the United States referred to in subsection (d), and 

20 ‘‘(3) such other information as the Secretary 

21 may prescribe. 

22 Such return shall be filed not later than the date specified 

23 by the Secretary. 

24 ‘‘(b) PENALTY FOR NONDISCLOSURE.—Any person 

25 who is required to file a return under subsection (a) with 


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•S 1934 IS

1 respect to any foreign entity transaction and fails to file 

2 such return on or before the date prescribed therefor (or 

3 files false or incomplete information with respect to such 

4 transaction) shall pay a penalty equal to the greater of— 

5 ‘‘(1) $10,000, or 

6 ‘‘(2) 50 percent of the gross income derived by 

7 such person with respect to aid, assistance or advice 

8 which is provided with respect to such transaction 

9 before the date the return is filed under subsection 

10 (a). 

11 ‘‘(c) MATERIAL ADVISOR.—For purposes of this sec12 tion, the term ‘material advisor’ means any person— 

13 ‘‘(1) who provides any material aid, assistance, 

14 or advice with respect to carrying out one or more 

15 foreign entity transactions, and 

16 ‘‘(2) who directly or indirectly derives gross in17 come in excess of $100,000 for providing such aid, 

18 assistance or advice during the calendar year. 

19 ‘‘(d) FOREIGN ENTITY TRANSACTION.—For pur20 poses of this section, the term ‘foreign entity transaction’ 

21 means the direct or indirect acquisition of any interest in 

22 a foreign entity (including any interest acquired in connec23 tion with the formation of such entity) if any citizen or 

24 resident of the United States is required to file a report 


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•S 1934 IS

1 under section 6038, 6038B, 6046, 6046A, or 6048 in con2 nection with such acquisition. 

3 ‘‘(e) REASONABLE CAUSE EXCEPTION.—No penalty 

4 shall be imposed by this section on any failure which is 

5 shown to be due to reasonable cause and not due to willful 

6 neglect. 

7 ‘‘(f) REGULATIONS.—The Secretary may prescribe 

8 regulations or other guidance which provide— 

9 ‘‘(1) that only 1 person shall be required to 

10 meet the requirements of subsection (a) in cases in 

11 which 2 or more persons would otherwise be re12 quired to meet such requirements, 

13 ‘‘(2) exemptions from the requirements of this 

14 section, and 

15 ‘‘(3) such rules as may be necessary or appro16 priate to carry out the purposes of this section.’’. 

17 (b) CLERICAL AMENDMENT.—The table of sections 

18 for subchapter B of chapter 61 is amended by redesig19 nating the item relating to section 6116 as an item relat20 ing to section 6117 and by inserting after the item relating 

21 to section 6115 the following new item: 

‘‘Sec. 6116. Disclosure of assistance in acquiring or forming a foreign entity.’’. 

22 (c) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to aid, assistance, and advice pro24 vided after the date of the enactment of this Act. 


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•S 1934 IS

1 SEC. 302. REPORTING OF ACTIVITIES WITH RESPECT TO 

2 PASSIVE FOREIGN INVESTMENT COMPANIES. 

3 (a) IN GENERAL.—Section 1298 is amended by re4 designating subsection (f) as subsection (g) and by insert5 ing after subsection (e) the following new subsection: 

6 ‘‘(f) REPORTING REQUIREMENT.—Each person who 

7 is a shareholder of a passive foreign investment company 

8 shall file an annual report containing such information as 

9 the Secretary may require.’’. 

10 (b) CONFORMING AMENDMENT.—Subsection (e) of 

11 section 1291 is amended by striking ‘‘, (d), and (f)’’ and 

12 inserting ‘‘and (d)’’. 

13 (c) EFFECTIVE DATE.—The amendments made by 

14 this section take effect on the date of the enactment of 

15 this Act. 

16 SEC. 303. SECRETARY PERMITTED TO REQUIRE FINANCIAL 

17 INSTITUTIONS TO FILE CERTAIN RETURNS 

18 RELATED TO WITHHOLDING ON FOREIGN 

19 TRANSFERS ELECTRONICALLY. 

20 (a) IN GENERAL.—Subsection (e) of section 6011 is 

21 amended by adding at the end the following new para22 graph: 

23 ‘‘(3) SPECIAL RULE FOR RETURNS FILED BY

24 FINANCIAL INSTITUTIONS WITH RESPECT TO WITH25 HOLDING ON FOREIGN TRANSFERS.—Paragraph 

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1 cial institution (as defined in section 1471(d)(5)) 

2 with respect to tax for which such institution is 

3 made liable under section 1461 or 1474(a).’’. 

4 (b) EFFECTIVE DATE.—The amendment made by 

5 this section shall apply to returns the due date for which 

6 (determined without regard to extensions) is after the date 

7 of the enactment of this Act. 

8 TITLE IV—PROVISIONS RELATED 

9 TO FOREIGN TRUSTS 

10 SEC. 401. CLARIFICATIONS WITH RESPECT TO FOREIGN 

11 TRUSTS WHICH ARE TREATED AS HAVING A 

12 UNITED STATES BENEFICIARY. 

13 (a) IN GENERAL.—Paragraph (1) of section 679(c) 

14 is amended by adding at the end the following: 

15 ‘‘For purposes of subparagraph (A), an amount 

16 shall be treated as accumulated for the benefit of a 

17 United States person even if the United States per18 son’s interest in the trust is contingent on a future 

19 event.’’. 

20 (b) CLARIFICATION REGARDING DISCRETION TO

21 IDENTIFY BENEFICIARIES.—Subsection (c) of section 679 

22 is amended by adding at the end the following new para23 graph: 

24 ‘‘(4) SPECIAL RULE IN CASE OF DISCRETION TO

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1 graph (1)(A), if any person has the discretion (by 

2 authority given in the trust agreement, by power of 

3 appointment, or otherwise) of making a distribution 

4 from the trust to, or for the benefit of, any person, 

5 such trust shall be treated as having a beneficiary 

6 who is a United States person unless— 

7 ‘‘(A) the terms of the trust specifically 

8 identify the class of persons to whom such dis9 tributions may be made, and 

10 ‘‘(B) none of those persons are United 

11 States persons during the taxable year.’’. 

12 (c) CLARIFICATION THAT CERTAIN AGREEMENTS

13 AND UNDERSTANDINGS ARE TERMS OF THE TRUST.— 

14 Subsection (c) of section 679, as amended by subsection 

15 (b), is amended by adding at the end the following new 

16 paragraph: 

17 ‘‘(5) CERTAIN AGREEMENTS AND UNDER18 STANDINGS TREATED AS TERMS OF THE TRUST.— 

19 For purposes of paragraph (1)(A), if any United 

20 States person who directly or indirectly transfers 

21 property to the trust is directly or indirectly involved 

22 in any agreement or understanding (whether writ23 ten, oral, or otherwise) that may result in the in24 come or corpus of the trust being paid or accumu25 lated to or for the benefit of a United States person, 


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•S 1934 IS

1 such agreement or understanding shall be treated as 

2 a term of the trust.’’. 

3 SEC. 402. PRESUMPTION THAT FOREIGN TRUST HAS 

4 UNITED STATES BENEFICIARY. 

5 (a) IN GENERAL.—Section 679 is amended by redes6 ignating subsection (d) as subsection (e) and inserting 

7 after subsection (c) the following new subsection: 

8 ‘‘(d) PRESUMPTION THAT FOREIGN TRUST HAS

9 UNITED STATES BENEFICIARY.—If a United States per10 son directly or indirectly transfers property to a foreign 

11 trust (other than a trust described in section 

12 6048(a)(3)(B)(ii)), such trust shall be presumed to have 

13 a United States beneficiary for purposes of applying this 

14 section to such transfer unless such person— 

15 ‘‘(1) submits such information to the Secretary 

16 as the Secretary may require with respect to such 

17 transfer, and 

18 ‘‘(2) demonstrates to the satisfaction of the 

19 Secretary that such trust satisfies the requirements 

20 of subparagraphs (A) and (B) of subsection (c)(1).’’. 

21 (b) EFFECTIVE DATE.—The amendments made by 

22 this section shall apply to transfers of property after the 

23 date of the enactment of this Act. 


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1 SEC. 403. UNCOMPENSATED USE OF TRUST PROPERTY 

2 TREATED AS A DISTRIBUTION. 

3 (a) IN GENERAL.—Paragraph (1) of section 643(i) 

4 is amended— 

5 (1) by striking ‘‘directly or indirectly to’’ and 

6 inserting ‘‘(or permits the use of any other trust 

7 property) directly or indirectly to or by’’, and 

8 (2) by inserting ‘‘(or the fair market value of 

9 the use of such property)’’ after ‘‘the amount of 

10 such loan’’. 

11 (b) EXCEPTION FOR COMPENSATED USE.—Para12 graph (2) of section 643(i) is amended by adding at the 

13 end the following new subparagraph: 

14 ‘‘(E) EXCEPTION FOR COMPENSATED USE

15 OF PROPERTY.—In the case of the use of any 

16 trust property other than a loan of cash or 

17 marketable securities, paragraph (1) shall not 

18 apply to the extent that the trust is paid the 

19 fair market value of such use within a reason20 able period of time of such use.’’. 

21 (c) APPLICATION TO GRANTOR TRUSTS.—Subsection 

22 (c) of section 679, as amended by section 401, is amended 

23 by adding at the end the following new paragraph: 

24 ‘‘(6) UNCOMPENSATED USE OF TRUST PROP25 ERTY TREATED AS A PAYMENT.—For purposes of 

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1 ties (or the use of any other trust property) directly 

2 or indirectly to or by any United States person 

3 (whether or not a beneficiary under the terms of the 

4 trust) shall be treated as paid or accumulated for 

5 the benefit of a United States person. The preceding 

6 sentence shall not apply to the extent that the 

7 United States person repays the loan at a market 

8 rate of interest (or pays the fair market value of the 

9 use of such property) within a reasonable period of 

10 time.’’. 

11 (d) CONFORMING AMENDMENTS.—Paragraph (3) of 

12 section 643(i) is amended— 

13 (1) by inserting ‘‘(or use of property)’’ after ‘‘If 

14 any loan’’, 

15 (2) by inserting ‘‘or the return of such prop16 erty’’ before ‘‘shall be disregarded’’, and 

17 (3) by striking ‘‘REGARDING LOAN PRINCIPAL’’ 

18 in the heading thereof. 

19 (e) EFFECTIVE DATE.—The amendments made by 

20 this section shall apply to loans made, and uses of prop21 erty, after the date of the enactment of this Act. 

22 SEC. 404. REPORTING REQUIREMENT OF UNITED STATES 

23 OWNERS OF FOREIGN TRUSTS. 

24 (a) IN GENERAL.—Paragraph (1) of section 6048(b) 

25 is amended by inserting ‘‘shall submit such information 


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•S 1934 IS

1 as the Secretary may prescribe with respect to such trust 

2 for such year and’’ before ‘‘shall be responsible to ensure’’. 

3 (b) EFFECTIVE DATE.—The amendment made by 

4 this section shall apply to taxable years beginning after 

5 the date of the enactment of this Act. 

6 SEC. 405. MINIMUM PENALTY WITH RESPECT TO FAILURE 

7 TO REPORT ON CERTAIN FOREIGN TRUSTS. 

8 (a) IN GENERAL.—Subsection (a) of section 6677 is 

9 amended— 

10 (1) by inserting ‘‘the greater of $10,000 or’’ be11 fore ‘‘35 percent’’, and 

12 (2) by striking the last sentence and inserting 

13 the following: ‘‘At such time as the gross reportable 

14 amount with respect to any failure can be deter15 mined by the Secretary, any subsequent penalty im16 posed under this subsection with respect to such fail17 ure shall be reduced as necessary to assure that the 

18 aggregate amount of such penalties do not exceed 

19 the gross reportable amount (and to the extent that 

20 such aggregate amount already exceeds the gross re21 portable amount the Secretary shall refund such ex22 cess to the taxpayer).’’ 

23 (b) EFFECTIVE DATE.—The amendments made by 

24 this section shall apply to notices and returns required to 

25 be filed after December 31, 2009. 


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•S 1934 IS

1 TITLE V—DIVIDEND EQUIVA2 LENT PAYMENTS RECEIVED 

3 BY FOREIGN PERSONS 

4 TREATED AS DIVIDENDS 

5 SEC. 501. DIVIDEND EQUIVALENT PAYMENTS RECEIVED BY 

6 FOREIGN PERSONS TREATED AS DIVIDENDS. 

7 (a) IN GENERAL.—Section 871 is amended by redes8 ignating subsection (l) as subsection (m) and by inserting 

9 after subsection (k) the following new subsection: 

10 ‘‘(l) TREATMENT OF DIVIDEND EQUIVALENT PAY11 MENTS.— 

12 ‘‘(1) IN GENERAL.—For purposes of this sec13 tion, sections 881 and 4948(a), and chapters 3 and 

14 4, a dividend equivalent shall be treated as a divi15 dend from sources within the United States. 

16 ‘‘(2) DIVIDEND EQUIVALENT.—For purposes of 

17 this subsection— 

18 ‘‘(A) IN GENERAL.—The term ‘dividend 

19 equivalent’ means— 

20 ‘‘(i) any payment made pursuant to a 

21 notional principal contract that (directly or 

22 indirectly) is contingent upon, or deter23 mined by reference to, the payment of a 

24 dividend from sources within the United 

25 States, and 


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•S 1934 IS

1 ‘‘(ii) any other payment determined 

2 by the Secretary to be substantially similar 

3 to a payment described in clause (i). 

4 ‘‘(B) EXCEPTIONS.—Such term does not 

5 include any payment pursuant to any contract 

6 or other arrangement which the Secretary de7 termines does not have the potential for tax 

8 avoidance. In making such determination, the 

9 Secretary may take into account the following 

10 factors with respect to such contract or ar11 rangement: 

12 ‘‘(i) The term (including provisions 

13 for early terminations and offsetting finan14 cial contracts). 

15 ‘‘(ii) The amount of each party’s in16 vestment and the amounts of any collateral 

17 posted. 

18 ‘‘(iii) Whether the price of the equity 

19 used to measure the parties’ entitlements 

20 or obligations is based on an objectively 

21 observable price. 

22 ‘‘(iv) Whether either party sells (di23 rectly or indirectly) to the other party the 

24 security giving rise to dividends from 

25 sources within the United States. 


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•S 1934 IS

1 ‘‘(v) Whether there are terms that ad2 dress the hedge position of either party or 

3 other conditions which would compel either 

4 party to hold or acquire the security giving 

5 rise to dividends from sources within the 

6 United States. 

7 ‘‘(vi) Such other factors as the Sec8 retary determines appropriate. 

9 ‘‘(C) PAYMENTS DETERMINED ON GROSS

10 BASIS.—The term ‘payment’ includes any gross 

11 amount which is used in computing any net 

12 amount which is transferred to or from the tax13 payer. 

14 ‘‘(D) COORDINATION WITH CHAPTERS 3

15 AND 4.—For purposes of chapters 3 and 4, 

16 each person that is a party to any contract or 

17 other arrangement that provides for the pay18 ment of a dividend equivalent shall be treated 

19 as having control of such payment.’’. 

20 (b) EFFECTIVE DATE.—The amendments made by 

21 this section shall apply to payments made on or after the 

22 date that is 90 days after the date of the enactment of 

23 this Act. 

Æ 


srobinson on DSKHWCL6B1PROD with BILLS