Federal Register / Vol. 79, No. 239 / Friday, December 12, 2014 / Rules and Regulations 73817 

the Revision 4 date of this service bulletin,’’ 

this AD requires compliance within the 

specified compliance time ‘‘after the effective 

date of this AD.’’ 

(2) Where Boeing Alert Service Bulletin 

737–53A1116, Revision 4, dated September 

30, 2013, specifies to contact Boeing for 

repair instructions: Before further flight, 

repair the cracking using a method approved 

in accordance with the procedures specified 

in paragraph (m) of this AD. 

(3) Note 14 of paragraph 3.A., ‘‘General 

Information’’ in the Accomplishment 

Instructions of Boeing Alert Service Bulletin 

737–53A1116, Revision 4, dated September 

30, 2013, states that inspections as given in 

that service bulletin are not required for the 

upper forward corner if there is a Boeingprovided repair which has been approved as 

an alternative method of compliance (AMOC) 

to AD 2008–11–04, Amendment 39–15526 

(73 FR 29421, May 21, 2008). This AD also 

does not require inspections for the upper 

forward corner given in Boeing Alert Service 

Bulletin 737–53A1116, Revision 4, dated 

September 30, 2013, if there is a Boeingprovided repair approved as an AMOC to the 

corresponding requirements of AD 2014–05– 

21, Amendment 39–17794 (79 FR 14992, 

March 18, 2014), for the repaired area only, 

provided the approval was made before the 

effective date of this AD and the repair 

doubler covers the doorway upper forward 

corner and the upper hinge cutout. 

(k) Credit for Previous Actions 

This paragraph provides credit for the 

inspections of the upper corners of the 

forward galley service doors specified in 

paragraph (g) of this AD, if those actions were 

performed before the effective date of this AD 

using any of the service information 

identified in paragraphs (k)(1) through (k)(4) 

of this AD (which are not incorporated by 

reference in this AD), provided that any 

preventative modification installed using this 

service information is inspected in 

accordance with paragraph (g) of this AD. 

(1) Boeing Service Bulletin 737–53–1116, 

dated July 21, 1988. 

(2) Boeing Service Bulletin 737–53–1116, 

Revision 1, dated September 7, 1989. 

(3) Boeing Service Bulletin 737–53–1116, 

Revision 2, dated September 30, 1993. 

(4) Boeing Service Bulletin 737–53–1116, 

Revision 3, dated July 27, 1995. 

(l) Post-Repair Inspections 

The post-repair inspections specified in 

Table 11 of paragraph 1.E., ‘‘Compliance,’’ of 

Boeing Alert Service Bulletin 737–53A1116, 

Revision 4, dated September 30, 2013, are not 

required by this AD. 

Note 1 to paragraph (l) of this AD: The 

post-repair inspections specified in Table 11 

of paragraph 1.E., ‘‘Compliance,’’ of Boeing 

Alert Service Bulletin 737–53A1116, 

Revision 4, dated September 30, 2013, may 

be used in support of compliance with 

section 121.1109(c)(2) or 129.109(b)(2) of the 

Federal Aviation Regulations (14 CFR 

121.1109(c)(2) or 14 CFR 129.109(b)(2)). 

(m) Alternative Methods of Compliance 

(AMOCs) 

(1) The Manager, Los Angeles Aircraft 

Certification Office (ACO), FAA, has the 

authority to approve AMOCs for this AD, if 

requested using the procedures found in 14 

CFR 39.19. In accordance with 14 CFR 39.19, 

send your request to your principal inspector 

or local Flight Standards District Office, as 

appropriate. If sending information directly 

to the manager of the ACO, send it to the 

attention of the person identified in 

paragraph (n) of this AD. Information may be 

emailed to: 9-ANM-LAACO-AMOCRequests@faa.gov. 

(2) Before using any approved AMOC, 

notify your appropriate principal inspector, 

or lacking a principal inspector, the manager 

of the local flight standards district office/

certificate holding district office. 

(3) An AMOC that provides an acceptable 

level of safety may be used for any repair 

required by this AD if it is approved by the 

Boeing Commercial Airplanes Organization 

Designation Authorization (ODA) that has 

been authorized by the Manager, Los Angeles 

ACO, to make those findings. For a repair 

method to be approved, the repair must meet 

the certification basis of the airplane, and the 

approval must specifically refer to this AD. 

(n) Related Information 

For more information about this AD, 

contact Nenita Odesa, Aerospace Engineer, 

Airframe Branch, ANM–120L, FAA, Los 

Angeles Aircraft Certification Office, 3960 

Paramount Boulevard, Lakewood, CA 90712– 

4137; phone: 562–627–5234; fax: 562–627– 

5210; email: nenita.odesa@faa.gov. 

(o) Material Incorporated by Reference 

(1) The Director of the Federal Register 

approved the incorporation by reference 

(IBR) of the service information listed in this 

paragraph under 5 U.S.C. 552(a) and 1 CFR 

part 51. 

(2) You must use this service information 

as applicable to do the actions required by 

this AD, unless the AD specifies otherwise. 

(i) Boeing Service Bulletin 737–53–1116, 

dated July 21, 1988. 

(ii) Boeing Service Bulletin 737–53–1116, 

Revision 1, dated September 7, 1989. Pages 

20, 21, and 22 are dated July 21, 1988. 

(iii) Boeing Service Bulletin 737–53–1116, 

Revision 2, dated September 30, 1993. 

(iv) Boeing Service Bulletin 737–53–1116, 

Revision 3, dated July 27, 1995. 

(v) Boeing Alert Service Bulletin 737– 

53A1116, Revision 4, dated September 30, 

2013. 

(3) For service information identified in 

this AD, contact Boeing Commercial 

Airplanes, Attention: Data & Services 

Management, P. O. Box 3707, MC 2H–65, 

Seattle, WA 98124–2207; telephone 206– 

544–5000, extension 1; fax 206–766–5680; 

Internet https://www.myboeingfleet.com. 

(4) You may view this service information 

at FAA, Transport Airplane Directorate, 1601 

Lind Avenue SW., Renton, WA. For 

information on the availability of this 

material at the FAA, call 425–227–1221. 

(5) You may view this service information 

that is incorporated by reference at the 

National Archives and Records 

Administration (NARA). For information on 

the availability of this material at NARA, call 

202–741–6030, or go to: http://

www.archives.gov/federal-register/cfr/ibrlocations.html. 

Issued in Renton, Washington, on 

November 28, 2014. 

John P. Piccola, Jr., 

Acting Manager, Transport Airplane 

Directorate, Aircraft Certification Service. 

[FR Doc. 2014–28926 Filed 12–11–14; 8:45 am] 

BILLING CODE 4910–13–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[TD 9706] 

RIN 1545–BJ69 

Reporting of Specified Foreign 

Financial Assets 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Final regulations and removal of 

temporary regulations. 

SUMMARY: This document contains final 

regulations providing guidance relating 

to the provisions of the Hiring 

Incentives to Restore Employment 

(HIRE) Act that require specified foreign 

financial assets to be reported to the 

Internal Revenue Service for taxable 

years beginning after March 18, 2010. In 

particular, the final regulations provide 

guidance relating to the requirement 

that individuals attach a statement to 

their income tax return to provide 

required information regarding specified 

foreign financial assets in which they 

have an interest. The final regulations 

affect individuals required to file Form 

1040, ‘‘U.S. Individual Income Tax 

Return,’’ or Form 1040–EZ, ‘‘Income 

Tax Return for Single and Joint Filers 

With No Dependents,’’ and certain 

individuals required to file Form 1040– 

NR, ‘‘Nonresident Alien Income Tax 

Return,’’ or Form 1040NR–EZ, ‘‘U.S. 

Income Tax Return for Certain 

Nonresident Aliens with No 

Dependents.’’ 

DATES: Effective Date: These regulations 

are effective on December 12, 2014. 

Applicability Date: For dates of 

applicability, see §§ 1.6038D–1(b), 

1.6038D–2(g), 1.6038D–3(e), 1.6038D– 

4(b), 1.6038D–5(g), 1.6038D–7(d), and 

1.6038D–8(g). 

FOR FURTHER INFORMATION CONTACT: 

Joseph S. Henderson or Michael 

Kaercher, (202) 317–6942 (not a toll-free 

number). 

SUPPLEMENTARY INFORMATION: 

Paperwork Reduction Act 

An agency may not conduct or 

sponsor, and a person is not required to 


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73818 Federal Register / Vol. 79, No. 239 / Friday, December 12, 2014 / Rules and Regulations 

respond to, a collection of information 

unless the collection of information 

displays a valid control number. The 

collection of information contained in 

these regulations has been submitted to 

the Office of Management and Budget 

for review in accordance with the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3507(d)). The collection of 

information is satisfied by filing Form 

8938, ‘‘Statement of Specified Foreign 

Financial Assets,’’ OMB No. 1545–2195, 

with the respondent’s income tax 

return. 

Books and records relating to a 

collection of information must be 

retained as long as their contents may 

become material in the administration 

of any internal revenue law. Generally, 

tax returns and tax return information 

are confidential, as required by 26 

U.S.C. 6103. 

Background 

On December 19, 2011, the 

Department of the Treasury (Treasury 

Department) and the Internal Revenue 

Service (IRS) published temporary 

regulations (TD 9567) (the ‘‘2011 

temporary regulations’’) and a notice of 

proposed rulemaking by cross-reference 

to the 2011 temporary regulations in the 

Federal Register addressing the 

reporting requirements under section 

6038D (76 FR 78553, TD 9567, 2012–1 

IRB 395); (76 FR 75894; REG–130302– 

10, 2012–1 IRB 412). The notice of 

proposed rulemaking also included 

Prop. Reg. § 1.6038D–6, setting out the 

conditions under which a domestic 

entity will be considered a specified 

domestic entity and, therefore, required 

to report specified foreign financial 

assets in which it holds an interest. 

Corrections to the 2011 temporary 

regulations were published on February 

21, 2012, in the Federal Register (77 FR 

9845). Corrections to Prop. Reg. 

§ 1.6038D–6 were published in the 

Federal Register on February 21, 2012 

(77 FR 9877) and February 22, 2012 (77 

FR 10422). 

The Treasury Department and the IRS 

received written comments on the 2011 

temporary regulations and Prop. Reg. 

§ 1.6038D–6. All comments are available 

at www.regulations.gov or upon request. 

Because no requests to speak were 

received, no public hearing was held. 

After consideration of the comments 

received, the Treasury Department and 

the IRS adopt the 2011 temporary 

regulations as final regulations with the 

modifications described herein. The 

Treasury Department and the IRS are 

not adopting Prop. Reg. § 1.6038D–6 as 

a final regulation at this time. Prop. Reg. 

§ 1.6038D–6 (REG–144339–14) will be 

adopted as a final regulation at a later 

date. 

Summary of Comments and 

Explanation of Revisions 

I. Requirement To Report Specified 

Foreign Financial Assets (§ 1.6038D–2) 

A. Individuals Required To Report 

(§ 1.6038D–2(a)) 

A number of comments were received 

requesting that additional categories of 

individuals be relieved of the 

requirement to report specified foreign 

financial assets under section 6038D. 

1. Dual Resident Taxpayers 

A comment recommended an 

exemption from the section 6038D 

reporting requirements be included for 

an individual who is a dual resident 

taxpayer and who, pursuant to a 

provision of a treaty that provides for 

resolution of conflicting claims of 

residence by the United States and the 

treaty partner, claims to be treated as a 

resident of the treaty partner. In such a 

case, a dual resident taxpayer may claim 

a treaty benefit as a resident of the treaty 

partner and will be taxed as a 

nonresident for U.S. tax purposes for the 

taxable year (or portion of the taxable 

year) that the individual is treated as a 

nonresident. The final rule adopts this 

recommendation for a dual resident 

taxpayer who determines his or her U.S. 

tax liability as if he or she were a 

nonresident alien and claims a treaty 

benefit as a nonresident of the United 

States as provided in § 301.7701(b)–7 by 

timely filing a Form 1040NR, 

‘‘Nonresident Alien Income Tax 

Return,’’ (or such other appropriate form 

under that section) and attaching a Form 

8833, ‘‘Treaty-Based Return Position 

Disclosure Under Section 6114 or 

7701(b).’’ The Treasury Department and 

the IRS have concluded that reporting 

under section 6038D is closely 

associated with the determination of an 

individual’s income tax liability. 

Because the taxpayer’s filing of a Form 

8833 with his or her Form 1040NR (or 

other appropriate form) will permit the 

IRS to identify individuals in this 

category and take follow-up tax 

enforcement actions when considered 

appropriate, reporting on Form 8938, 

‘‘Statement of Specified Foreign 

Financial Assets,’’ is not essential to 

effective IRS tax enforcement efforts 

relating to this category of U.S. 

residents. 

2. Individuals Resident in the United 

States Under Non-Immigrant Visas 

A number of comments requested an 

exemption from the section 6038D 

reporting requirements for foreign 

executives and employees resident in 

the United States under non-immigrant 

H, L, or E visas. The final rule does not 

adopt this recommendation. Section 

6038D is intended to provide the IRS 

with information concerning the 

specified foreign financial assets of U.S. 

taxpayers to aid the IRS in enforcing tax 

laws fairly and uniformly. Because all 

U.S. residents are taxable on worldwide 

income, excluding categories of 

residents from the scope of section 

6038D reporting is not consistent with 

the purposes for which the provision 

was enacted. Individuals in the United 

States under non-immigrant visas often 

stay in the United States for years, 

making it difficult to justify treating 

them more favorably than other U.S. 

residents. For stays in the United States 

of a shorter duration, the Treasury 

Department and the IRS have 

determined that the distinctions drawn 

in the definition of a U.S. resident in 

§ 1.6038D–1(a)(3) (which crossreferences section 7701(b)) best carry 

out the purposes of section 6038D. 

3. Persons That Do Not Owe U.S. Tax 

for the Taxable Year 

Another comment requested revising 

§ 1.6038D–2(a)(7) to exempt from the 

section 6038D reporting requirements 

specified persons that do not owe U.S. 

taxes for the taxable year. The final rule 

does not adopt this comment. As 

provided in the 2011 temporary 

regulations, the final rule states that a 

specified person that does not have to 

file a tax return for the year does not 

have to file a Form 8938. See § 1.6038D– 

2(a)(7)(i). If the law requires the filing of 

a tax return, however, information 

reported on a Form 8938 concerning the 

taxpayer’s specified foreign financial 

assets is an important component of that 

return, even if no tax liability is shown. 

Requiring this filing will aid the IRS in 

devising effective enforcement programs 

with respect to such returns. 

B. Applicable Reporting Thresholds 

(§ 1.6038D–2(a)) 

Several comments requested increases 

to the reporting thresholds provided in 

§ 1.6038D–2(a) for certain types of assets 

or for certain classes of individuals. 

Other comments recommended that the 

increased thresholds in the 2011 

temporary regulations applicable to 

certain specified individuals living 

abroad be extended to additional 

categories of taxpayers. 

1. Assets Received in Connection With 

the Performance of Personal Services 

Some comments requested increased 

reporting thresholds, or a complete 

exemption from reporting, for specified 


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Federal Register / Vol. 79, No. 239 / Friday, December 12, 2014 / Rules and Regulations 73819 

foreign financial assets received in 

connection with an individual’s 

performance of personal services as an 

employee of a foreign employer. The 

concerns raised in these comment 

letters primarily relate to the difficulty 

of valuing these types of assets. 

However, the 2011 temporary 

regulations already broadly address 

valuation concerns relating to these 

assets by providing a simplified 

valuation rule for interests in foreign 

pension plans or foreign deferred 

compensation plans if the beneficiary 

does not know, or have reason to know 

based on readily accessible information, 

the value of the interest. In such cases, 

the value of the individual’s interest in 

the plan is limited to the value of the 

distributions received from the plan 

during the year for purposes of both 

calculating the applicable reporting 

thresholds and reporting the maximum 

value of the interest. See § 1.6038D– 

5(f)(3). 

These comments are further 

addressed by clarifying in the final rule 

that nonvested interests in property 

received in connection with the 

performance of personal services are not 

required to be reported. See section I.C.1 

in this preamble, which describes this 

clarification incorporated in the final 

rule. 

Because the Treasury Department and 

the IRS have determined that the 

concerns underlying these comments 

are best addressed by these rules and 

that the method of acquisition of a 

specified foreign financial asset should 

not determine an individual’s section 

6038D reporting obligations, the final 

rule does not adopt this request. 

2. Employees Seconded to the United 

States 

Comments requested that higher 

reporting thresholds (or a reporting 

exemption) should apply in the case of 

certain employees seconded to the 

United States by foreign employers. For 

the reasons set forth in section I.A.2 

(relating to individuals resident in the 

United States under non-immigrant 

visas) and in section I.B.3 (addressing 

U.S. residents who do not qualify for 

section 911 benefits), the final rule does 

not adopt this recommendation. 

3. Non-Citizen U.S. Residents Who Do 

Not Qualify for Section 911 Benefits 

A comment was received requesting 

that higher reporting thresholds apply 

in the case of a non-citizen resident of 

the United States who would qualify for 

benefits under section 911(d)(1)(A) if he 

or she were a U.S. citizen. This request 

has not been adopted in the final rule 

for administrability reasons. The 2011 

temporary regulations tie the increased 

reporting thresholds in § 1.6038D–2(a) 

to an individual’s status as a qualified 

individual under section 911(d)(1) in 

order to allow the IRS to use the 

taxpayer’s filing of the return required 

to claim section 911 benefits (Form 

2555, ‘‘Foreign Earned Income’’, or 

Form 2555–EZ, ‘‘Foreign Earned Income 

Exclusion’’) as a marker to indicate that 

higher reporting thresholds may apply 

to the taxpayer. The ability to easily 

identify taxpayers who may be eligible 

for the increased thresholds is essential 

to permit the IRS to target appropriate 

enforcement programs to taxpayers 

subject to different reporting thresholds 

in a cost effective manner. 

C. Interest in a Specified Foreign 

Financial Asset (§ 1.6038D–2(b)) 

A number of comments requested that 

the final regulations clarify the reporting 

requirements with respect to certain 

interests in assets under § 1.6038D–2(b). 

These clarifications have been 

incorporated in the final rule. 

1. Nonvested Property Under Section 83 

A comment requested clarification 

regarding whether an individual is 

considered to have an interest in 

property transferred in connection with 

the performance of personal services 

during any period that the individual’s 

interest in the property is not vested. 

The final rule in § 1.6038D–2(b)(2) 

clarifies that a specified person that is 

transferred property in connection with 

the performance of personal services is 

first considered to have an interest in 

the property for purposes of section 

6038D on the first date that the property 

is substantially vested (within the 

meaning of § 1.83–3(b)) or, in the case 

of property with respect to which a 

specified person makes a valid election 

under section 83(b), on the date of 

transfer of the property. 

2. Assets Held by a Disregarded Entity 

A number of comments requested 

clarification of the section 6038D 

reporting requirements with respect to 

specified foreign financial assets held by 

an entity disregarded as an entity 

separate from its owner under 

§ 301.7701–2 of this chapter (a 

disregarded entity). In response to these 

requests, and consistent with 

instructions to Form 8938, the final rule 

provides in § 1.6038D–2(b)(4)(iii) that a 

specified person that owns a foreign or 

domestic entity that is a disregarded 

entity is treated as having an interest in 

any specified foreign financial assets 

held by the disregarded entity. As a 

result, a specified person that owns a 

disregarded entity (whether domestic or 

foreign) that, in turn, owns specified 

foreign financial assets must include the 

value of those assets in determining 

whether the specified person meets the 

reporting thresholds in § 1.6038D–2(a) 

and, if so, must report such assets on 

Form 8938. 

D. Jointly Owned Assets (§ 1.6038D–2(c)) 

A number of comments requested 

clarification of aspects of the rules in 

§ 1.6038D–2(c) and (d) relating to joint 

owners of a specified foreign financial 

asset. These comments have been 

adopted. Specifically, the final rule 

clarifies that each of the joint owners of 

a specified foreign financial asset who 

are not married to each other must 

include the full value of the asset (rather 

than only the value of the specified 

person’s interest in the asset) in 

determining whether the aggregate value 

of such specified individual’s specified 

foreign financial assets exceeds the 

applicable reporting thresholds, and 

each joint owner must report the full 

value of the asset on his or her Form 

8938. See § 1.6038D–2(c)(1)(i) and 

(c)(1)(ii). In addition, the final rule 

clarifies that, in the case of joint owners 

who are married to each other and file 

separate returns, each joint owner of a 

specified foreign financial asset must 

report the full value of the asset (rather 

than only the value of the specified 

person’s interest in the asset) on the 

individual’s Form 8938, even if both 

spouses are specified individuals and 

only one-half of the value of the asset 

is considered in determining the 

applicable reporting thresholds under 

§ 1.6038D–2(c)(3)(i). See § 1.6038D– 

2(d)(2). 

II. Specified Foreign Financial Assets 

(§ 1.6038D–3) 

A. Financial Account (§ 1.6038D–3(a)) 

1. Retirement and Pension Accounts 

and Certain Non-Retirement Savings 

Accounts 

The definition of a financial account 

in the 2011 temporary regulations is 

based on the definition of a financial 

account for chapter 4 purposes, subject 

to an exception for certain retirement 

and pension accounts and nonretirement savings accounts that are 

financial accounts for section 6038D 

purposes but that are not treated as 

financial accounts for purposes of 

chapter 4. See §§ 1.6038D–1(a)(7), 

1.1471–1(b)(49), and 1.1471–5(b). These 

final regulations modify the definition 

of a financial account for purposes of 

section 6038D in order to require 

consistent reporting under section 

6038D with respect to retirement and 

pension accounts and certain nonVerDate Sep<11>2014 14:38 Dec 11, 2014 Jkt 235001 PO 00000 Frm 00019 Fmt 4700 Sfmt 4700 E:\FR\FM\12DER1.SGM 12DER1

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retirement savings accounts regardless 

of whether the account is maintained in 

a jurisdiction treated as having in effect 

a Model 1 IGA or Model 2 IGA. For 

financial accounts that are maintained 

by a foreign financial institution that is 

not located in a jurisdiction treated as 

having in effect a Model 1 IGA or Model 

2 IGA, the definition of a financial 

account in the final rule continues to 

include the retirement and pension 

accounts and non-retirement savings 

accounts described in § 1.1471– 

5(b)(2)(i), consistent with the section 

6038D coordination rule in that section. 

See § 1.1471–5(b)(2)(i)(D). For taxable 

years beginning after December 12, 

2014, these final regulations also 

provide that retirement and pension 

accounts, non-retirement savings 

accounts, and accounts satisfying 

conditions similar to those described in 

§ 1.1471–5(b)(2)(i) and that are excluded 

from the definition of a financial 

account under an applicable Model 1 

IGA or Model 2 IGA (as provided in 

§ 1.1471–5(b)(2)(vi)) are included in the 

definition of a financial account for 

purposes of section 6038D. The 

Treasury Department and the IRS intend 

to amend the chapter 4 regulations to 

add a section 6038D coordination rule 

to § 1.1471–5(b)(2)(vi) providing that 

such accounts are included in the 

definition of a financial account for 

purposes of section 6038D. 

2. Short-Term Accounts 

One comment recommended the 

addition of an exception to the 

definition of a financial account for an 

account in which funds are held for less 

than 15 days, provided the income 

generated from the account does not 

exceed $1,000. The final rule does not 

incorporate this comment. The 2011 

temporary regulations already provide 

relief for many short-term accounts 

through a broad exception to the 

definition of financial account for 

escrow accounts. See §§ 1.6038D–1(a)(7) 

and 1.1471–5(b)(2)(iv). This exception is 

administrable because these accounts 

are of a type that is distinguishable from 

other accounts. A broader exception for 

short-term accounts could significantly 

complicate IRS efforts to devise effective 

enforcement programs based on 

comprehensive account reporting under 

section 6038D. 

3. Assets Held in an Account 

Maintained by a Foreign Financial 

Institution 

Another comment requested 

clarification that specified foreign 

financial assets held in a financial 

account are excluded from the 

definition of specified foreign financial 

assets. The 2011 temporary regulations 

already provide that the foreign 

financial account itself, and not the 

assets held in such an account, must be 

reported for section 6038D purposes. 

See § 1.6038D–3(a)(1). Accordingly, no 

change has been adopted in response to 

this comment. 

4. Life Insurance With a Cash Surrender 

Value 

A comment requested clarification of 

the section 6038D reporting 

requirements applicable to a life 

insurance policy with a cash surrender 

value. Because the definition of 

financial account for section 6038D 

purposes is based on the definition of a 

financial account for chapter 4 

purposes, which includes these 

contracts, the 2011 temporary 

regulations already provide clear rules 

requiring a taxpayer to report these 

contracts on Form 8938. Accordingly, 

the final rule is not modified to further 

address this issue. See §§ 1.6038D– 

1(a)(7), 1.1471–5(b)(1)(iv), and 1.1471– 

5(b)(3)(vii). 

5. Request for Examples of Foreign 

Financial Assets Not To Be Reported 

A number of comments requested 

examples of the types of financial assets 

that are not required to be reported 

under section 6038D. The Treasury 

Department and the IRS have not 

provided these examples in the final 

rule because the 2011 temporary 

regulations, as well as the relevant 

portions of the regulations under 

chapters 4 and 61, already include 

detailed rules to support taxpayer 

determinations as to whether an asset is 

a specified foreign financial asset that 

must be reported. For example, 

§ 1.6038D–3(d) includes examples of 

assets other than financial accounts that 

are included within the definition of 

specified foreign financial asset, and the 

rules in § 1.6049–5(b)(5)(i) provide 

detail concerning which financial 

institutions are U.S. payors for purposes 

of determining that an account is 

maintained by such an institution and 

therefore is not required to be reported 

under section 6038D. 

The Treasury Department and the IRS 

will continue to consider comments and 

whether additional guidance is 

warranted to address particular types of 

assets under section 6038D. 

B. Other Specified Foreign Financial 

Assets (§ 1.6038D–3(b)) 

1. Assets Held for Investment and Not 

Used in, or Held for Use in, the Conduct 

of the Taxpayer’s Trade or Business 

A number of comment letters 

recommended changes to the approach 

set forth in the 2011 temporary 

regulations for determining whether an 

asset other than a financial account is 

held for investment (and therefore may 

be reportable under section 6038D) or is 

instead excepted from the definition of 

a specified foreign financial asset 

because it is used in, or held for use in, 

the conduct of a trade or business under 

§ 1.6038D–3(b)(3), (b)(4), and (b)(5). 

Several comments requested a bright 

line test for distinguishing between nonfinancial account assets subject to 

reporting and those not subject to 

reporting. For example, one such 

comment recommended looking to 

whether an asset was acquired in the 

taxpayer’s trade or business rather than 

whether the asset was used in, or held 

for use in, the conduct of the taxpayer’s 

trade or business. Another comment 

suggested providing that contracts 

issued in the ordinary course of the 

issuer’s (rather than the taxpayer’s) 

trade or business should not be 

reportable by the taxpayer. The final 

rule does not change the definition of a 

specified foreign financial asset as 

suggested in these comments. The 

Treasury Department and the IRS have 

determined that the reporting rule under 

the 2011 temporary regulations strikes 

an appropriate balance under section 

6038D by focusing on whether an asset 

is held for investment. Distinguishing 

assets held for investment from assets 

with a close nexus to the taxpayer’s 

trade or business is an inherently factual 

determination that is not susceptible to 

a bright line test. The Treasury 

Department and the IRS have concluded 

that the 2011 temporary regulations 

provide reasonable rules that will yield 

appropriate reporting results in a wide 

variety of fact patterns involving the 

taxpayer’s trade or business. 

Another comment requested a rule 

specifying that an asset inadvertently 

acquired as a result of a corporate 

reorganization or an in-kind asset 

distribution not be treated as held for 

investment, so long as the asset is held 

by the taxpayer for only a short period 

of time. The Treasury Department and 

the IRS have concluded that this type of 

exception is not warranted because the 

general test set forth in the 2011 

temporary regulations is fair, should be 

uniformly applied, and should not be 

unduly burdensome to apply under 

these fact patterns. 


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2. Certain Hedging Transactions 

One comment recommended 

modifying § 1.6038D–3(b) to provide 

that certain hedging transactions 

described in section 1221(a)(7) are not 

specified foreign financial assets. The 

final rule does not adopt the requested 

change. The Treasury Department and 

the IRS have concluded that taxpayers 

engaging in hedging transactions should 

determine whether such transactions are 

specified foreign financial assets by 

applying the same general test applied 

by other taxpayers, that is, by 

determining whether the hedging 

transaction is ‘‘used in, or held for use 

in, the conduct of a trade or business 

and not held for investment.’’ 

3. Employment Contracts 

Another comment requested that the 

final rule provide that employment 

contracts are not specified foreign 

financial assets. The comment did not, 

however, suggest a definition of an 

employment contract for this purpose. 

Moreover, the scope of property that 

could be covered by such a contract may 

vary widely among taxpayers depending 

on the industry and the location in 

which the taxpayer works. The Treasury 

Department and the IRS have 

determined that the trade or business 

test of § 1.6038D–3(b)(3), (b)(4), and 

(b)(5) should apply broadly to a wide 

range of financial assets in order to 

achieve uniform reporting results for 

taxpayers with aggregate specified 

foreign financial assets of similar value, 

and that a broad exclusion for 

employment contracts should not be 

provided. Accordingly, the final rule 

does not adopt this recommendation. 

4. Shares of Foreign Corporations 

Traded on Public Stock Exchange 

Some comments recommended that 

the definition of a specified foreign 

financial asset exclude stock of a foreign 

corporation that is traded on a public 

stock exchange (whether or not the 

exchange is located in the United 

States). The Treasury Department and 

the IRS have concluded that it is not 

appropriate to exclude stock or 

securities issued by a person other than 

a U.S. person from section 6038D 

reporting. If such stock or securities are 

held in a financial account, the financial 

account would be reported for section 

6038D purposes, and if such stock or 

securities are held directly by a 

specified person and not in a financial 

account, based on section 6038D(b)(2), it 

is appropriate to require reporting of 

such stock or securities for section 

6038D purposes. Thus, this comment is 

not adopted. 

5. Interest in a Social Security, Social 

Insurance, or Similar Program 

Several comments recommended 

amending § 1.6038D–3(b) to specify that 

an interest in a social security, social 

insurance, or similar program of a 

foreign government is not considered a 

specified foreign financial asset. As a 

general matter, the definition of a 

specified foreign financial asset already 

excludes these interests because they 

are not assets described in § 1.6038D– 

3(b)(1). In addition, the preamble to the 

2011 temporary regulations and the 

instructions to Form 8938 already 

illustrate the application of this rule to 

these interests, stating that ‘‘an interest 

in a social security, social insurance, or 

other similar program of a foreign 

government’’ is not a specified foreign 

financial asset. A chart comparing the 

Form 8938 reporting requirements to the 

FBAR reporting requirements, available 

at www.irs.gov/Businesses/Comparisonof-Form-8938-and-FBAR-Requirements, 

also addresses these programs. Because 

the Treasury Department and the IRS 

already have addressed this issue, the 

final rule does not adopt the 

recommendation. 

6. Financial Assets Issued by a Person 

Organized Under the Laws of a U.S. 

Possession 

The final rule clarifies that specified 

foreign financial assets include stock, 

securities, financial instruments, and 

contracts that are held for investment 

and not held in an account maintained 

by a financial institution and are issued 

by a person organized under the laws of 

a U.S. possession. See § 1.6038D– 

3(b)(1). For special rules applicable to 

bona fide residents of the U.S. 

possessions, see § 1.6038D–7(c). 

C. Interest in a Foreign Trust or Foreign 

Estate (§ 1.6038D–3(c)) 

A number of comments expressed 

concern that the reason to know 

standard of knowledge to report an 

interest in a foreign trust or estate could 

result in compliance difficulties for 

specified individuals who are aware 

that they have a beneficial interest in a 

trust or estate but who have not received 

a distribution from the trust or estate 

and do not know the value of the 

interest. These comments recommended 

that the final rule provide that a 

beneficiary of a foreign trust or estate 

should not be required to report the 

interest on Form 8938 for any year in 

which the beneficiary did not receive a 

distribution. 

The Treasury Department and the IRS 

have concluded that the concerns 

expressed in these comments have 

already been addressed 

comprehensively in the 2011 temporary 

regulations, including by the adoption 

of simple valuation rules that 

substantially ease the reporting burdens 

of beneficiaries. In the case of a foreign 

trust, for a year in which the beneficiary 

does not know, or have reason to know 

based on readily accessible information, 

the fair market value of the beneficiary’s 

interest and the beneficiary does not 

receive a distribution, the value of the 

beneficiary’s interest in the trust, both 

for purposes of determining whether the 

beneficiary meets the reporting 

thresholds in § 1.6038D–2(a) and, if so, 

for reporting the maximum value of that 

beneficial interest, is considered to be 

zero. See § 1.6038D–5(f)(2). Similar 

rules apply with respect to a foreign 

estate. See § 1.6038D–5(f)(3). Thus, a 

specified individual who is such a 

beneficiary of a foreign trust or estate 

but has not received a distribution 

generally is only required to report the 

beneficial interest if the beneficiary 

otherwise is required to file Form 8938. 

If a Form 8938 filing is required, the 

taxpayer’s reporting burdens are 

minimal with respect to the beneficial 

interest. The Treasury Department and 

the IRS have determined that these rules 

achieve a reasonable and appropriate 

balance between the government’s tax 

administration interests and the 

beneficiary’s compliance burden. 

D. Request for Comments on the 

Treatment of Virtual Currency 

The Treasury Department and the IRS 

are considering the proper treatment of 

virtual currency under section 6038D 

and welcome comments on this topic. 

III. Information Required To Be 

Reported (§ 1.6038D–4) 

A. Reporting With Respect to Stock or 

Other Securities of a Foreign 

Corporation 

A comment requested clarification 

regarding whether to report on Form 

8938 the foreign office address of a 

foreign corporation in which the 

taxpayer has an interest or the address 

of the U.S. payor reported on Form 1099 

with respect to dividends paid by the 

foreign corporation. Because the rules 

set forth in the 2011 temporary 

regulations are clear, the final rule is not 

changed to reflect these comments. If 

stock of a foreign corporation is held by 

a taxpayer outside of a financial 

account, § 1.6038D–4(a)(2) provides that 

the corporation’s address must be 

reported. If stock of a foreign 

corporation is held through a financial 

account other than one maintained by a 

financial institution that is a U.S. payor, 


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the financial account is reported, and 

§ 1.6038D–4(a)(1) provides that the 

address of the financial institution with 

which the account is maintained must 

be reported. However, if stock of a 

foreign corporation is held by a taxpayer 

in a financial account maintained by a 

financial institution that is a U.S. payor, 

§ 1.6038D–3(a)(3)(i) provides that 

neither the financial account nor the 

foreign stock held in that account must 

be reported on Form 8938. 

B. Scope of Information Required To Be 

Reported With Respect to an Asset 

Another comment recommended that 

taxpayers not be required to report the 

items listed in § 1.6038D–4(a)(6), (a)(7) 

and (a)(8) (that is, whether a financial 

account was opened or closed during 

the year, the date on which a specified 

foreign financial asset (other than a 

financial account) was acquired or 

disposed of during the year, and details 

regarding income, gain, loss, deduction 

or credit items recognized during the 

year and where those items are reported 

by the taxpayer, respectively). This 

comment has not been adopted in the 

final rule. The Treasury Department and 

the IRS have determined that collection 

of this information is necessary for 

effective tax enforcement actions and is 

consistent with congressional intent in 

enacting section 6038D. 

IV. Valuation Guidelines (§ 1.6038D–5) 

The Treasury Department and the IRS 

received a number of comments 

requesting changes and clarifications to 

the applicable valuation guidelines 

under the regulations. 

A. Asset With No Positive Value During 

the Year 

Several comments requested that the 

final rule clarify the valuation and 

reporting rules applicable to specified 

foreign financial assets with no positive 

value during the year. Under § 1.6038D– 

2(a)(5), a specified foreign financial 

asset is subject to reporting even if the 

asset does not have a positive value 

during the year, although reporting on 

Form 8938 is required only if the 

aggregate fair market value of a 

taxpayer’s specified foreign financial 

assets exceeds the applicable reporting 

thresholds in § 1.6038D–2(a). The final 

rule clarifies in § 1.6038D–5(b)(3) that 

the maximum fair market value for a 

specified foreign financial asset with no 

positive value during the year is treated 

as zero. The final rule also is revised to 

include in § 1.6038D–2(a)(5) a crossreference to the valuation rules in 

§ 1.6038D–5(b)(3). 

B. Appraisals 

One comment recommended revising 

§ 1.6038D–5 to provide that a specified 

person is not required to obtain an 

appraisal from a third party to establish 

a reasonable estimate of an asset’s fair 

market value. For the reasons set forth 

in section IV.C. of this preamble 

(relating to a reasonable estimate of fair 

market value), the guidance provided 

with respect to the reasonable estimate 

standard adequately addresses this 

comment. In addition, the preamble to 

the 2011 temporary regulations and the 

instructions to Form 8938 already note 

that a taxpayer need not obtain a thirdparty appraisal to establish a reasonable 

estimate of a specified foreign financial 

asset’s fair market value for purposes of 

section 6038D. Accordingly, the final 

rule does not adopt the requested 

change. 

C. Reasonable Estimate of Fair Market 

Value 

Several comments requested that the 

final rule clarify what constitutes a 

reasonable estimate of an asset’s fair 

market value for purposes of reporting 

under section 6038D. Some comments 

also recommended including examples 

in the final rule addressing when a 

taxpayer would be considered to know, 

or have reason to know based on readily 

accessible information, that a valuation 

in a periodic account statement was not 

a reasonable estimate for purposes of 

reporting. 

The final rule does not provide 

additional guidance on what constitutes 

a reasonable estimate of fair market 

value under section 6038D. The 

Treasury Department and the IRS have 

concluded that the ‘‘reasonable 

estimate’’ standard is an appropriately 

flexible one that will result in helpful 

information for the IRS with respect to 

a wide range of assets, while not 

proving unduly burdensome for 

taxpayers. Further, valuation is an 

inherently factual inquiry, and it is not 

feasible to devise detailed rules that 

clearly describe outcomes that are 

appropriate for a broad range of factual 

situations. The 2011 temporary 

regulations and final rule incorporate 

valuation rules designed to reduce 

taxpayer reporting burdens in specific 

circumstances, such as the rule 

permitting reliance on periodic account 

statements from a financial institution 

to determine a financial account’s fair 

market value (see § 1.6038D–5(d)) and 

the rule permitting the use of a year-end 

value to determine a reasonable estimate 

of maximum value for certain specified 

foreign financial assets held outside of 

a financial account (see § 1.6038D– 

5(f)(1)). 

D. Hard-to-Value Assets 

A comment requested that the final 

rule establish a presumptive standard to 

be applied to determine the fair market 

value of certain illiquid assets such as 

contractual rights and interests in nonpublicly traded entities. The Treasury 

Department and the IRS recognize that 

the reporting burdens under section 

6038D can be significant with respect to 

hard-to-value assets. However, the 

Treasury Department and the IRS have 

concluded that the requirement under 

the 2011 temporary regulations to make 

a reasonable estimate strikes an 

appropriate balance between the 

usefulness of the information reported 

on Form 8938 and the taxpayer burdens 

associated with complying with the 

standard. For these reasons, the final 

rule does not adopt valuation 

presumptions for particular types of 

assets that are hard to value. 

E. Interests in Pension Plans and 

Deferred Compensation Plans 

Another comment recommended that 

the value of interests in pension plans 

and deferred compensation plans 

should not be considered to be readily 

ascertainable if the taxpayer has no 

current rights to withdraw plan assets 

without penalty. Adopting this 

recommendation would result in a 

taxpayer’s interest in a pension or 

deferred compensation plan being 

valued at zero if the taxpayer has no 

right to withdraw, even if the taxpayer 

regularly receives statements providing 

the fair market value of the interest in 

the pension or deferred compensation 

plan. This result is not consistent with 

the purpose for requiring reporting of 

the maximum value of a specified 

foreign financial asset and is not 

adopted in the final rule. 

F. Foreign Currency 

The final rule adopts two 

modifications to the valuation rules 

relating to foreign currency. First, in 

response to a comment, the final rule 

states that a foreign currency conversion 

shown on a periodic financial account 

statement is among the aspects of the 

statement that a taxpayer may rely upon 

to the extent provided in § 1.6038D– 

5(d). Second, § 1.6038D–5(c) of the 2011 

temporary regulations provides that, 

except as otherwise provided, a 

specified person must use the foreign 

currency exchange rate issued by the 

U.S. Treasury Department’s Financial 

Management Service for purposes of 

section 6038D. The final rule is updated 

to reflect the fact that foreign currency 


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Federal Register / Vol. 79, No. 239 / Friday, December 12, 2014 / Rules and Regulations 73823 

exchange rates are now issued by the 

Treasury Department’s Bureau of the 

Fiscal Service. 

V. Exceptions From the Reporting of 

Certain Assets Under Section 6038D 

(§ 1.6038D–6) 

A. General Alternatives To Reporting on 

Form 8938 

Several comments recommended that 

the Treasury Department and the IRS 

adopt an alternative approach to Form 

8938 reporting. One comment suggested 

consolidating all foreign asset reporting 

for U.S. tax purposes on one form and 

eliminating Form 8938. Another 

comment recommended a revision to 

Schedule B of Form 1040 to permit 

specified individuals to indicate on that 

schedule that all of their specified 

foreign financial assets were reported on 

the IRS forms specified in § 1.6038D– 

7(a) such that no Form 8938 is required. 

The final rule does not adopt these 

recommendations. The Treasury 

Department and the IRS have 

determined that consolidating a 

taxpayer’s information concerning his or 

her specified foreign financial assets on 

Form 8938 best carries out the purposes 

of section 6038D by making the 

information readily accessible for use in 

IRS enforcement programs. In addition, 

using Form 8938 avoids the need to 

incur costs disproportionate to expected 

benefits from revising existing IRS 

forms, IT systems, submission 

processing, and enforcement programs. 

B. Form 8858, ‘‘Information Return of 

U.S. Persons With Respect to Foreign 

Disregarded Entities’’ 

Several comments recommended 

revising § 1.6038D–7(a) to add Form 

8858, ‘‘Information Return of U.S. 

Persons With Respect to Foreign 

Disregarded Entities.’’ However, the 

Treasury Department and the IRS do not 

regard the information furnished on 

Form 8858 concerning specified foreign 

financial assets held by a disregarded 

entity as sufficiently detailed to 

consider reporting on Form 8938 

duplicative of reporting on Form 8858. 

Thus, the final rule does not adopt this 

recommendation. 

C. Form 8854, ‘‘Initial and Annual 

Expatriation Statement’’ 

Several comments recommended 

adding Form 8854, ‘‘Initial and Annual 

Expatriation Statement,’’ to the list of 

forms in § 1.6038D–7(a) intended to 

relieve duplicative reporting. However, 

after considering the nature of the 

information collected on Form 8854, the 

Treasury Department and the IRS have 

concluded that requiring Form 8938 

would not duplicate the information 

currently being reported on Form 8854. 

Further, filing of Form 8938 is expected 

to substantially enhance IRS compliance 

programs with respect to Form 8854 

filers. Thus, the final rule does not 

adopt this recommendation. 

D. Form 8891, ‘‘U.S. Information Return 

for Beneficiaries of Certain Canadian 

Registered Retirement Plans’’ 

Rev. Proc. 2014–55, 2014–44 IRB 753, 

obsoletes Form 8891, ‘‘U.S. Information 

Return for Beneficiaries of Certain 

Canadian Registered Retirement Plans,’’ 

on a prospective basis. Thus, the final 

rule is modified to describe the taxable 

years for which the taxpayer’s reporting 

of an asset on Form 8891 will relieve the 

taxpayer of reporting that asset on Form 

8938 (that is, taxable years beginning 

after March 18, 2010, and ending on or 

before December 31, 2013). 

E. Joint Filers of Forms Listed in 

§ 1.6038D–7(a) 

A comment requested clarification 

that a specified person included as part 

of a jointly filed Form 5471, 

‘‘Information Return of U.S. Persons 

With Respect to Certain Foreign 

Corporations,’’ pursuant to § 1.6038–2(j) 

or as a joint filer of Form 8865, ‘‘Return 

of U.S. Persons With Respect to Certain 

Foreign Partnerships,’’ pursuant to 

§ 1.6038–3(c) and who notifies the IRS 

as required by § 1.6038–2(i) and 

§ 1.6038–3(c) will be considered to have 

filed such forms for purposes of 

§ 1.6038D–7(a). Because a joint filer of 

Form 5471 or Form 8865 fully meets the 

reporting requirements for such forms, 

reporting on the Form 8938 would be 

duplicative. Thus, the final rule adopts 

this clarification in § 1.6038D–7(a)(3). 

F. Interests in Certain Foreign Trusts 

A number of comments recommended 

revisions to the section 6038D reporting 

requirements for specified persons with 

an interest in a foreign trust. 

One comment recommended that a 

foreign trustee of a foreign trust with a 

U.S. owner who is required to file Form 

3520–A, ‘‘Annual Information Return of 

Foreign Trust With a U.S. Owner,’’ be 

permitted to satisfy the section 6038D 

reporting requirements for all trust 

beneficiaries by filing Form 3520–A so 

as to consolidate all foreign trust filings 

in one place. Another comment 

recommended that a foreign trustee of a 

foreign trust be permitted to satisfy the 

Form 8938 filing requirements on behalf 

of the trust’s beneficiaries. Another 

comment recommended that trust 

beneficiaries should be excused from 

filing Form 8938 if a specified person 

files a Form 8938 as the owner of the 

trust and discloses the specified foreign 

financial assets of the foreign trust. 

The final rule does not adopt these 

recommendations to allow a 

beneficiary’s Form 8938 filing 

responsibilities to be satisfied by the 

trustee of the trust or to relieve the 

beneficiary’s reporting obligation in the 

case of a specified person filing Form 

8938 as the owner of the trust. The IRS 

can best use the information reported on 

the Form 8938 to enforce tax 

compliance when it is provided in 

connection with the filing of an annual 

return by the taxpayer who is the 

beneficial owner of the interest in the 

foreign trust. Thus, the final rule 

continues to provide that a beneficiary 

of a trust must file Form 8938 with his 

or her annual return when there is a 

section 6038D filing requirement. 

G. Reporting on Both FinCEN Form 114 

and Form 8938 

A number of comments recommended 

that a foreign account reported on 

FinCEN Form 114, ‘‘Report of Foreign 

Bank and Financial Accounts,’’ 

(formerly Form TD F 90–22.1, ‘‘Report 

of Foreign Bank and Financial 

Accounts’’) (an FBAR), should not be 

required to be reported on Form 8938. 

The final rule does not adopt this 

recommendation. 

Congress enacted both the Title 31 

and the Title 26 provisions regarding 

the reporting requirements of the FBAR 

and Form 8938. Reporting on the FBAR 

is required for law enforcement 

purposes under the Bank Secrecy Act, 

as well as for purposes of tax 

administration. As a consequence, 

different policy considerations apply to 

Form 8938 and FBAR reporting. These 

different policies are reflected in the 

different categories of persons required 

to file Form 8938 and the FBAR, the 

different filing thresholds for Form 8938 

and FBAR reporting, and the different 

assets (and accompanying information) 

required to be reported on each form. 

Although certain information may be 

reported on both Form 8938 and the 

FBAR, the information required by the 

forms is not identical in all cases, and 

reflects the different rules, key 

definitions (for example, ‘‘financial 

account’’), and reporting requirements 

applicable to Form 8938 and FBAR 

reporting. 

These differing policy considerations 

were recognized by Congress during the 

passage of the HIRE Act (Pub. L. 111– 

147 (124 Stat. 71)) and the enactment of 

Section 6038D. Congress’s intention to 

retain FBAR reporting requirements, 

notwithstanding the enactment of 

section 6038D, was specifically noted in 

the Technical Explanation of the 


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73824 Federal Register / Vol. 79, No. 239 / Friday, December 12, 2014 / Rules and Regulations 

Revenue Provisions Contained in Senate 

Amendment 3310, the ‘‘Hiring 

Incentives To Restore Employment Act,’’ 

Under Consideration by the Senate 

(Staff of the Joint Committee on 

Taxation, JCX–4–10 (February 23, 2010)) 

(Technical Explanation) accompanying 

the HIRE Act. The Technical 

Explanation states that ‘‘[n]othing in 

this provision [section 511 of the HIRE 

Act enacting new section 6038D] is 

intended as a substitute for compliance 

with the FBAR reporting requirements, 

which are unchanged by this 

provision.’’ (Technical Explanation at p. 

60) Against this background, reporting 

on the Form 8938 and on the FBAR is 

not duplicative and both forms must be 

filed, if required. The IRS Web site 

provides additional guidance comparing 

the requirements of both forms (http:// 

www.irs.gov/Businesses/Comparison-ofForm-8938-and-FBAR-Requirements). 

VI. Penalties 

A. Reasonable Cause for Failure to 

Report 

Several comments requested that the 

final rule provide additional guidance 

concerning the reasonable cause 

standard for relief from the section 

6038D penalty set forth in section 

6038D(g) and § 1.6038D–8(e). For 

example, one comment recommended 

that the final rule provide objective 

examples of when a taxpayer would be 

considered to have reasonable cause for 

failing to report under section 6083D. 

Another comment requested that the 

final rule state that a specified person’s 

failure to file Form 8938 would be 

considered due to reasonable cause and 

not subject to penalty if all of that 

person’s specified foreign financial 

assets were reflected on timely and 

properly filed forms described in 

§ 1.6038D–7(a)(i). Another comment 

recommended that the final rule provide 

a presumption that reasonable cause 

exists with respect to all Form 8938 

filing errors in the first year a taxpayer 

is required to file Form 8938. Yet 

another comment recommended that a 

specified person with a continuing 

failure to report for purposes of the 

section 6038D(d)(2) ‘‘add on’’ 

component of the penalty should no 

longer be subject to penalty once a 

specified person has requested the 

information necessary to complete Form 

8938, provided the specified person 

furnishes the IRS with proof of the 

requests to obtain that information. 

The final rule does not adopt these 

recommendations because the Treasury 

Department and the IRS have 

determined that the appropriate 

standards for determining whether the 

reasonable cause exception to the 

penalty applies in a particular case are 

the general standards set out in the 

Internal Revenue Manual (IRM) 

addressing the approach that IRS 

employees must take whenever 

considering the application of a civil 

penalty and whether a reasonable cause 

exception applies. The general 

reasonable cause standards are set out in 

the IRS’s ‘‘Penalty Handbook,’’ which is 

included in the IRM at section 20.1. The 

Penalty Handbook sets forth general 

policy and procedural requirements for 

assessing and abating penalties, as well 

as the criteria for relief from certain 

penalties. For example, IRM 20.1.1.2.2 

discusses the need to have a fair and 

consistent approach to penalty 

administration. Section 20.1.1.3.2 of the 

IRM discusses reasonable cause and 

what constitutes reasonable cause. 

Consistent with § 1.6038D–8(e)(3), the 

Penalty Handbook states that all of the 

facts and circumstances must be 

considered to determine whether or not 

there is reasonable cause for penalty 

relief in a particular case. 

B. Section 6038D Penalty and Other 

Potentially Applicable Civil Penalties 

Other comments requested the final 

rule modify the penalty amount and its 

application in the context of other 

potentially applicable civil penalties. 

One comment recommended that the 

final rule provide a range of penalties 

corresponding to the range of reporting 

errors as opposed to the $10,000 penalty 

amount of section 6038D(d). Another 

comment requested that the final rule 

provide that a specified person’s failure 

to report a specified foreign financial 

asset on Form 8938 would not be 

penalized under section 6038D if the 

specified person was also being 

penalized for failing to report the asset 

on a separate IRS form (for example, 

Form 5471). 

The final rule does not adopt these 

recommendations. The general penalty 

administration rules set forth in the IRM 

apply in the context of the section 

6038D penalty and its interaction with 

other potentially applicable penalties. In 

addition, section 6038D provides a 

specific dollar amount of penalty and 

does not permit selection of a penalty 

amount from a range of permissible 

penalty amounts based on taxpayerspecific considerations. 

Special Analyses 

It has been determined that this 

Treasury decision is not a significant 

regulatory action as defined in 

Executive Order 12866, as 

supplemented by Executive Order 

13653. Therefore, a regulatory 

assessment is not required. It also has 

been determined that section 553(b) of 

the Administrative Procedure Act (5 

U.S.C. chapter 5) does not apply to these 

regulations, and because the regulations 

do not impose a collection of 

information on small entities, the 

Regulatory Flexibility Act (5 U.S.C. 

chapter 6) does not apply. Pursuant to 

section 7805(f) of the Code, the notice 

of proposed rulemaking preceding this 

regulation was submitted to the Chief 

Counsel for Advocacy of the Small 

Business Administration for comment 

on its impact on small business. 

Drafting Information 

The principal author of these 

regulations is Joseph S. Henderson, 

Office of Associate Chief Counsel 

(International). However, other 

personnel from the Treasury 

Department and the IRS participated in 

their development. 

List of Subjects in 26 CFR Part 1 

Income taxes, Reporting and 

recordkeeping requirements. 

Adoption of Amendments to the 

Regulations 

Accordingly, 26 CFR part 1 is 

amended as follows: 

PART 1—INCOME TAXES 

■ Paragraph 1. The authority citation 

for part 1 is amended by removing the 

entries for §§ 1.6038D–0T, 1.6038D–1T, 

1.6038D–2T, 1.6038D–3T, 1.6038D–4T, 

1.6038D–5T, 1.6038D–7T, and 1.6038D– 

8T and adding entries for §§ 1.6038D–0, 

1.6038D–1, 1.6038D–2, 1.6038D–3, 

1.6038D–4, 1.6038D–5, 1.6038D–7, and 

1.6038D–8 in numerical order to read as 

follows: 

Authority: 26 U.S.C. 7805 * * * 

Section 1.6038D–0 also issued under 26 

U.S.C. 6038D. 

Section 1.6038D–1 also issued under 26 

U.S.C. 6038D. 

Section 1.6038D–2 also issued under 26 

U.S.C. 6038D. 

Section 1.6038D–3 also issued under 26 

U.S.C. 6038D. 

Section 1.6038D–4 also issued under 26 

U.S.C. 6038D. 

Section 1.6038D–5 also issued under 26 

U.S.C. 6038D. 

Section 1.6038D–7 also issued under 26 

U.S.C. 6038D. 

Section 1.6038D–8 also issued under 26 

U.S.C. 6038D. 

* * * * * 

■ Par. 2. Section 1.6038D–0 is added to 

read as follows: 


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Federal Register / Vol. 79, No. 239 / Friday, December 12, 2014 / Rules and Regulations 73825 

§ 1.6038D–0 Outline of regulation 

provisions. 

This section lists the table of contents 

for §§ 1.6038D–1 through 1.6038D–8. 

§ 1.6038D–1 Reporting with respect to 

specified foreign financial assets, definition 

of terms. 

(a) In general. 

(1) Specified person. 

(2) Specified individual. 

(3) Resident alien. 

(4) Bona fide resident of a U.S. 

possession. 

(5) U.S. possession. 

(6) Specified foreign financial asset. 

(7) Financial account. 

(8) Financial institution. 

(9) Foreign financial institution. 

(10) Foreign entity. 

(11) Annual return. 

(12) Specified domestic entity. 

[Reserved] 

(13) Model 1 IGA and Model 2 IGA. 

(b) Effective/applicability dates. 

(1) In general. 

(2) Financial accounts. 

§ 1.6038D–2 Requirement to report 

specified foreign financial assets. 

(a) Reporting requirement. 

(1) In general. 

(2) Special rule for married specified 

individuals filing a joint annual return. 

(3) Special rule for certain specified 

individuals living abroad. 

(4) Special rule for married specified 

individuals filing a joint annual return 

and living abroad. 

(5) Assets with no positive value. 

(6) Aggregate value calculation in case 

of specified foreign financial asset 

excluded from reporting. 

(7) Form 8938 filed with annual 

return. 

(i) General rule. 

(ii) Consolidated returns. 

(8) Reporting required regardless of 

tax result. 

(9) Reporting period. 

(10) Successor forms. 

(b) Interest in a specified foreign 

financial asset. 

(1) In general. 

(2) Property transferred in connection 

with the performance of services. 

(3) Special rule for parent making an 

election under section 1(g)(7). 

(4) Entities. 

(i) In general. 

(ii) Specified foreign financial assets 

held by certain trusts. 

(iii) Specified foreign financial assets 

held by a disregarded entity. 

(iv) Interest in a foreign trust or 

foreign estate. 

(c) Special rules for joint interests. 

(1) In general. 

(i) Determining aggregate value of 

assets. 

(ii) Reporting maximum value. 

(2) Aggregate asset value for married 

specified individuals filing a joint 

annual return. 

(3) Aggregate asset value for married 

specified individuals filing a separate 

annual return. 

(i) Both spouses are specified 

individuals. 

(ii) One spouse is not a specified 

individual. 

(d) Annual return filed by a married 

specified individual. 

(1) Joint annual return. 

(2) Separate annual return. 

(e) Special rules for dual resident 

taxpayers. 

(1) In general. 

(2) Dual resident taxpayer filing as a 

nonresident alien at end of taxable year. 

(3) Dual resident taxpayer filing as a 

resident alien at end of taxable year. 

(f) Example. 

(1) Facts. 

(2) Filing requirement. 

(i) Married specified individuals filing 

separate annual returns. 

(ii) Married specified individuals 

filing a joint annual return. 

(g) Effective/applicability dates. 

§ 1.6038D–3 Specified foreign financial 

assets. 

(a) Financial accounts. 

(1) In general. 

(2) Financial account in a U.S. 

possession. 

(3) Excepted financial accounts. 

(i) Accounts maintained by U.S. 

payors. 

(ii) Mark-to-market election under 

section 475. 

(b) Other specified foreign financial 

assets. 

(1) In general. 

(2) Mark-to-market election under 

section 475. 

(3) Held for investment. 

(4) Trade-or-business test. 

(5) Direct relationship between 

holding an asset and a trade or business. 

(i) In general. 

(ii) Presumption of direct 

relationship. 

(c) Special rule for interests in foreign 

trusts and foreign estates. 

(d) Examples. 

(e) Effective/applicability dates. 

§ 1.6038D–4 Information required to be 

reported. 

(a) Required information. 

(b) Effective/applicability dates. 

§ 1.6038D–5 Valuation guidelines. 

(a) Fair market value. 

(b) Valuation of assets. 

(1) Maximum value. 

(2) U.S. dollars. 

(3) Asset with no positive value. 

(c) Foreign currency conversion. 

(1) In general. 

(2) Other publicly available exchange 

rate. 

(3) Currency exchange rate. 

(4) Determination date. 

(d) Financial accounts. 

(e) Asset held in a financial account. 

(f) Other specified foreign financial 

assets. 

(1) General rule. 

(2) Interests in trusts that are specified 

foreign financial assets. 

(i) Maximum value. 

(ii) Reporting threshold. 

(3) Interests in estates, pension plans, 

and deferred compensation plans. 

(i) Maximum value. 

(ii) Reporting threshold. 

(g) Effective/applicability dates. 

§ 1.6038D–6 Specified domestic entities. 

[Reserved] 

§ 1.6038D–7 Exceptions from the reporting 

of certain assets under section 6038D. 

(a) Elimination of duplicative 

reporting of assets. 

(1) In general. 

(2) Foreign grantor trusts. 

(3) Joint Form 5471 or Form 8865 

filing. 

(b) Owner of certain trusts. 

(c) Special rules for bona fide 

residents of a U.S. possession. 

(d) Effective/applicability dates. 

§ 1.6038D–8 Penalties for failure to 

disclose. 

(a) In general. 

(b) Married specified individuals 

filing a joint annual return. 

(c) Increase in penalty. 

(d) Presumption of aggregate value. 

(e) Reasonable cause exception. 

(1) In general. 

(2) Affirmative showing required. 

(3) Facts and circumstances taken into 

account. 

(f) Penalties for underpayments 

attributable to undisclosed foreign 

financial assets. 

(1) Accuracy related penalty. 

(2) Criminal penalties. 

(g) Effective/applicability dates. 

§ 1.6038D–0T [Removed] 

■ Par. 3. Section 1.6038D–0T is 

removed. 

■ Par. 4. Section 1.6038D–1 is added to 

read as follows: 

§ 1.6038D–1 Reporting with respect to 

specified foreign financial assets, definition 

of terms. 

(a) In general. The following 

definitions apply for purposes of section 

6038D and the regulations— 

(1) Specified person. The term 

specified person means a specified 


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individual or a specified domestic 

entity. 

(2) Specified individual. The term 

specified individual means an 

individual who is a— 

(i) U.S. citizen; 

(ii) Resident alien of the United States 

for any portion of the taxable year; 

(iii) Nonresident alien for whom an 

election under section 6013(g) or (h) is 

in effect; or 

(iv) Nonresident alien who is a bona 

fide resident of Puerto Rico or a section 

931 possession (as defined in § 1.931– 

1(c)(1)). 

(3) Resident alien. The term resident 

alien has the meaning set forth in 

section 7701(b) and §§ 301.7701(b)-1 

through 301.7701(b)-9 of this chapter. 

(4) Bona fide resident of a U.S. 

possession. The term bona fide resident 

of a U.S. possession means an 

individual who is a ‘‘bona fide resident’’ 

under section 937(a) and § 1.937–1. 

(5) U.S. possession. The term U.S. 

possession means American Samoa, 

Guam, the Northern Mariana Islands, 

Puerto Rico, or the U.S. Virgin Islands. 

(6) Specified foreign financial asset. 

The term specified foreign financial 

asset has the meaning set forth in 

§ 1.6038D–3. 

(7) Financial account. The term 

financial account has the meaning set 

forth in § 1.1471–5(b), provided, 

however, that the exclusions of 

retirement and pension accounts and 

non-retirement savings accounts under 

§ 1.1471–5(b)(2)(i) and retirement and 

pension accounts, non-retirement 

savings accounts, and accounts 

satisfying similar conditions in an 

applicable Model 1 IGA or Model 2 IGA 

under § 1.1471–5(b)(2)(vi) shall not 

apply (see the section 6038D 

coordination rule in § 1.1471– 

5(b)(2)(i)(D)). See § 1.6038D–3(a)(2) 

relating to financial accounts 

maintained by a financial institution 

that is organized under the laws of a 

U.S. possession. 

(8) Financial institution. The term 

financial institution has the meaning set 

forth in section 1471(d)(5) and the 

regulations thereunder. 

(9) Foreign financial institution. The 

term foreign financial institution has the 

meaning set forth in § 1.1471–5(d). 

(10) Foreign entity. The term foreign 

entity has the meaning set forth in 

§ 1.1473–1(e). 

(11) Annual return. The term annual 

return means an annual federal income 

tax return of a specified individual or an 

annual federal income tax return or 

information return of a specified 

domestic entity filed with the Internal 

Revenue Service under section 876, 

6011, 6012, 6013, 6031, or 6037, and the 

regulations. 

(12) Specified domestic entity. 

[Reserved]. 

(13) Model 1 IGA and Model 2 IGA. 

The terms Model 1 IGA and Model 2 

IGA have the meanings set forth in 

§ 1.1471–1(b)(78) and (79), respectively. 

(b) Effective/applicability dates—(1) 

In general. Except as otherwise 

provided in this paragraph (b), this 

section applies to taxable years ending 

after December 19, 2011. Taxpayers may 

elect to apply the rules of this section 

to taxable years ending prior to 

December 19, 2011. 

(2) Financial accounts. For purposes 

of applying the financial account 

definition in § 1.6038D–1(a)(7), the 

treatment under § 1.1471–5(b)(2)(vi) of 

retirement and pension accounts, nonretirement savings accounts, and 

accounts satisfying similar conditions in 

an applicable Model 1 IGA or Model 2 

IGA (see § 1.1471–1(b)(78) and (79)) as 

financial accounts for purposes of the 

reporting required under section 6038D 

and § 1.6038D–2(a) shall apply to 

taxable years beginning after December 

12, 2014. 

§ 1.6038D–1T [Removed] 

■ Par. 5. Section 1.6038D–1T is 

removed. 

■ Par. 6. Section 1.6038D–2 is added to 

read as follows: 

§ 1.6038D–2 Requirement to report 

specified foreign financial assets. 

(a) Reporting requirement—(1) In 

general. Except as otherwise provided, a 

specified person that has any interest in 

a specified foreign financial asset during 

the taxable year must attach Form 8938, 

‘‘Statement of Specified Foreign 

Financial Assets,’’ to that specified 

person’s annual return for the taxable 

year to report the information required 

by section 6038D and § 1.6038D–4 if the 

aggregate value of all such assets 

exceeds— 

(i) $50,000 on the last day of the 

taxable year; or 

(ii) $75,000 at any time during the 

taxable year. 

(2) Special rule for married specified 

individuals filing a joint annual return. 

Except as provided in paragraph (a)(4) 

of this section, married specified 

individuals who file a joint annual 

return for the taxable year must attach 

a single Form 8938 to their joint annual 

return for the taxable year to report the 

information required by section 6038D 

and § 1.6038D–4 if the aggregate value 

of all of the specified foreign financial 

assets in which either married specified 

individual has an interest exceeds— 

(i) $100,000 on the last day of the 

taxable year; or 

(ii) $150,000 at any time during the 

taxable year. 

(3) Special rule for certain specified 

individuals living abroad. Except as 

provided in paragraph (a)(4) of this 

section, a specified individual who is a 

qualified individual under section 

911(d)(1) for the taxable year must 

attach a Form 8938 to his or her annual 

return for the taxable year to report the 

information required by section 6038D 

and § 1.6038D–4 if the aggregate value 

of the specified foreign financial assets 

in which the specified individual has an 

interest exceeds— 

(i) $200,000 on the last day of the 

taxable year; or 

(ii) $300,000 at any time during the 

taxable year. 

(4) Special rule for married specified 

individuals filing a joint annual return 

and living abroad. A specified 

individual who is a qualified individual 

under section 911(d)(1) for the taxable 

year and the qualified individual’s 

spouse who file a joint annual return for 

the taxable year must attach a single 

Form 8938 to their return for the taxable 

year to report the information required 

by section 6038D and § 1.6038D–4 if the 

aggregate value of the all of the specified 

foreign financial assets in which either 

married individual has an interest 

exceeds— 

(i) $400,000 on the last day of the 

taxable year; or 

(ii) $600,000 at any time during the 

taxable year. 

(5) Assets with no positive value. A 

specified foreign financial asset is 

subject to reporting even if the specified 

foreign financial asset does not have a 

positive value. See § 1.6038D–5(b)(3) to 

determine the maximum value of a 

specified foreign financial asset that 

does not have a positive value during 

the taxable year. 

(6) Aggregate value calculation in 

case of specified foreign financial asset 

excluded from reporting. The value of 

any specified foreign financial asset in 

which a specified individual has an 

interest and that is excluded from 

reporting on Form 8938 pursuant to 

§ 1.6038D–7(a) (concerning certain 

assets reported on another form) is 

included for purposes of determining 

the aggregate value of specified foreign 

financial assets. The value of any 

specified foreign financial asset in 

which a specified individual has an 

interest and that is excluded from 

reporting under § 1.6038D–7(b) 

(concerning assets held by certain 

domestic trusts) or § 1.6038D–7(c) 

(concerning certain assets owned by a 

bona fide resident of a U.S. possession) 

is excluded for purposes of determining 


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Federal Register / Vol. 79, No. 239 / Friday, December 12, 2014 / Rules and Regulations 73827 

the aggregate value of specified foreign 

financial assets. 

(7) Form 8938 filed with annual 

return—(i) General rule. A specified 

person, including a specified individual 

who is a bona fide resident of a U.S. 

possession, is not required to file Form 

8938 with respect to a taxable year if the 

specified person is not required to file 

an annual return with the Internal 

Revenue Service with respect to such 

taxable year. 

(ii) Consolidated returns. If a specified 

domestic entity is a member of an 

affiliated group of corporations that files 

a consolidated income tax return, the 

Form 8938 of the specified domestic 

entity must be filed with the affiliated 

group’s annual return. 

(8) Reporting required regardless of 

tax result. The Form 8938 required by 

section 6038D and this section must be 

furnished by a specified person even if 

none of the specified foreign financial 

assets that must be reported affect the 

specified person’s tax liability under the 

Internal Revenue Code for the taxable 

year. 

(9) Reporting period. The reporting 

period covered by Form 8938 is the 

specified person’s taxable year, except 

the reporting period for a specified 

person that is a specified individual for 

less than an entire taxable year is the 

portion of the taxable year that the 

specified person is a specified 

individual. 

(10) Successor forms. References to 

Form 8938 include any successor form. 

(b) Interest in a specified foreign 

financial asset—(1) In general. A 

specified person has an interest in a 

specified foreign financial asset if any 

income, gains, losses, deductions, 

credits, gross proceeds, or distributions 

attributable to the holding or disposition 

of the specified foreign financial asset 

are or would be required to be reported, 

included, or otherwise reflected by the 

specified person on an annual return. A 

specified person has an interest in a 

specified foreign financial asset even if 

no income, gains, losses, deductions, 

credits, gross proceeds, or distributions 

are attributable to the holding or 

disposition of the specified foreign 

financial asset for the taxable year. 

(2) Property transferred in connection 

with the performance of services. A 

specified person that is transferred 

property in connection with the 

performance of personal services is first 

considered to have an interest in the 

property for purposes of section 6038D 

on the first date that the property is 

substantially vested (within the 

meaning of § 1.83–3(b)) or, in the case 

of property with respect to which a 

specified person makes a valid election 

under section 83(b), on the date of 

transfer of the property. 

(3) Special rule for parent making 

election under section 1(g)(7). A parent 

who makes an election under section 

1(g)(7) to include certain unearned 

income of a child in the parent’s gross 

income has an interest in any specified 

foreign financial asset held by the child 

for the purposes of section 6038D and 

the regulations. 

(4) Entities—(i) In general. Except as 

provided in this paragraph (b)(4), a 

specified person is not treated as having 

an interest in any specified foreign 

financial assets held by a corporation, 

partnership, trust, or estate solely as a 

result of the specified person’s status as 

a shareholder, partner, or beneficiary of 

such entity. 

(ii) Specified foreign financial assets 

held by certain trusts. A specified 

person that is treated as the owner of a 

trust or any portion of a trust under 

sections 671 through 679, other than a 

domestic liquidating trust under 

§ 301.7701–4(d) of this chapter created 

pursuant to a court order issued in a 

bankruptcy under Chapter 7 (11 U.S.C. 

701 et seq.) or a confirmed plan under 

Chapter 11 (11 U.S.C. 1101 et seq.) of 

the Bankruptcy Code, or a domestic 

widely held fixed investment trust 

under § 1.671–5, is treated as having an 

interest in any specified foreign 

financial assets held by the trust or the 

portion of the trust. 

(iii) Specified foreign financial assets 

held by a disregarded entity. A specified 

person that owns a foreign or domestic 

entity that is disregarded as an entity 

separate from its owner as described in 

§ 301.7701–2 of this chapter (a 

disregarded entity) is treated as having 

an interest in any specified foreign 

financial assets held by the disregarded 

entity. 

(iv) Interest in a foreign trust or 

foreign estate. See § 1.6038D–3(c) to 

determine whether an interest in a 

foreign trust or foreign estate is a 

specified foreign financial asset. See 

§ 1.6038D–5(f) to determine the 

maximum value of an interest in a 

foreign trust or foreign estate. 

(c) Special rules for joint interests—(1) 

In general—(i) Determining aggregate 

value of assets. Except as otherwise 

provided in this paragraph (c), each 

specified person that is a joint owner of 

a specified foreign financial asset 

(whether with a spouse or other person) 

must include the entire value of the 

specified foreign financial asset (and not 

the value of the specified person’s 

interest) for purposes of determining 

whether the aggregate value of the 

specified person’s specified foreign 

financial assets exceeds the reporting 

thresholds set forth in § 1.6038D–2(a). 

(ii) Reporting maximum value. Except 

as provided in paragraph (d) of this 

section, a specified person that is a joint 

owner of a specified foreign financial 

asset must report the entire value of 

each jointly owned specified foreign 

financial asset on Form 8938. 

(2) Aggregate asset value for married 

specified individuals filing a joint 

annual return. Married specified 

individuals who file a joint annual 

return must include the value of each 

specified foreign financial asset that 

they jointly own or in which both have 

an interest under paragraph (b)(1) of this 

section only once in determining 

whether the aggregate value of all of the 

specified foreign financial assets in 

which either married specified 

individual has an interest exceeds the 

reporting thresholds set forth in 

§ 1.6038D–2(a). 

(3) Aggregate asset value for married 

specified individual filing a separate 

annual return—(i) Both spouses are 

specified individuals. If a married 

specified individual files a separate 

annual return and his or her spouse is 

a specified individual, the married 

specified individual must include onehalf of the value of a specified foreign 

financial asset that the married specified 

individual jointly owns with his or her 

spouse in determining whether the 

married specified individual has an 

interest in specified foreign financial 

assets the aggregate value of which 

exceeds the reporting thresholds set 

forth in § 1.6038D–2(a). 

(ii) One spouse is not a specified 

individual. If a married specified 

individual files a separate annual return 

and his or her spouse is not a specified 

individual, the married specified 

individual must include the entire value 

of a specified foreign financial asset that 

the married specified individual jointly 

owns with his or her spouse in 

determining whether the married 

specified individual has an interest in 

specified foreign financial assets the 

aggregate value of which exceeds the 

reporting thresholds set forth in 

§ 1.6038D–2(a). 

(d) Annual return filed by a married 

specified individual—(1) Joint annual 

return. Married specified individuals 

who file a joint annual return must file 

a single Form 8938 to fulfill their 

reporting requirements under section 

6038D and § 1.6038D–2(a). The single 

Form 8938 must report all of the 

specified foreign financial assets in 

which either married specified 

individual has an interest. If both 

married specified individuals jointly 

own a specified foreign financial asset 


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or if they have an interest in a specified 

foreign financial asset under paragraph 

(b)(1) of this section, the asset must be 

reported only once on the single Form 

8938 filed for the taxable year. 

(2) Separate annual return. A married 

specified individual who files a separate 

annual return for the taxable year must 

fulfill the reporting requirements under 

section 6038D and § 1.6038D–2(a) by 

filing a separate Form 8938 with his or 

her return that reports all of the 

specified foreign financial assets in 

which the married specified individual 

has an interest, including each of the 

assets jointly owned with the married 

specified individual’s spouse or with 

another person. If both of the spouses 

are specified individuals, each specified 

individual must report the entire value 

of each specified foreign financial asset 

that the spouses jointly own on Form 

8938, not the value taken into account 

under paragraph (c)(3)(i) of this section 

for purposes of applying the applicable 

reporting thresholds. 

(e) Special rules for dual resident 

taxpayers—(1) In general. Subject to the 

provisions of paragraphs (e)(2) and (3) of 

this section, a specified individual is 

not required to report specified foreign 

financial assets on Form 8938 for a 

taxable year or any portion of a taxable 

year that the individual is a dual 

resident taxpayer (within the meaning 

of § 301.7701(b)–7(a)(1) of this chapter) 

who is treated as a nonresident alien 

pursuant to § 301.7701(b)–7 of this 

chapter for purposes of computing his 

or her U.S. tax liability with respect to 

the portion of the taxable year the 

individual is considered a dual resident 

taxpayer. 

(2) Dual resident taxpayer filing as a 

nonresident alien at end of taxable year. 

If a specified individual to whom this 

paragraph (e) applies computes his or 

her U.S. income tax liability as a 

nonresident alien on the last day of the 

taxable year and complies with the 

filing requirements of § 301.7701(b)–7(b) 

and (c) of this chapter and, in particular, 

such individual timely files with the 

Internal Revenue Service Form 1040NR, 

‘‘U.S. Nonresident Alien Income Tax 

Return,’’ or Form 1040NR–EZ, ‘‘U.S. 

Income Tax Return for Certain 

Nonresident Aliens With No 

Dependents,’’ as applicable, and 

attaches thereto Form 8833, ‘‘TreatyBased Return Position Disclosure Under 

Section 6114 or 7701(b),’’ such 

individual will not be required to report 

specified foreign financial assets on 

Form 8938 with respect to the portion 

of the taxable year covered by Form 

1040NR (or Form 1040NR–EZ). 

(3) Dual resident taxpayer filing as 

resident alien at end of taxable year. If 

a specified individual to whom this 

paragraph (e) applies computes his or 

her U.S. income tax liability as a 

resident alien on the last day of the 

taxable year and complies with the 

filing requirements of § 1.6012– 

1(b)(2)(ii)(a) and, in particular, such 

individual timely files with the Internal 

Revenue Service Form 1040, ‘‘U.S. 

Individual Income Tax Return,’’ or Form 

1040EZ, ‘‘Income Tax Return for Single 

and Joint Filers With No Dependents,’’ 

as applicable, and attaches a properly 

completed Form 8833 to the schedule 

required by § 1.6012–1(b)(2)(ii)(a), such 

individual will not be required to report 

specified foreign financial assets on 

Form 8938 with respect to the portion 

of the individual’s taxable year reflected 

on the schedule to such Form 1040 or 

Form 1040EZ required by § 1.6012– 

1(b)(2)(ii)(a). 

(f) Example. The following example 

illustrates the application of paragraph 

(c) of this section: 

Example (1) Facts. Two married specified 

individuals, H and W, jointly own a specified 

foreign financial asset with a value of 

$90,000 at all times during the taxable year. 

H separately has an interest in a specified 

foreign financial asset with a value of 

$10,000 at all times during the taxable year. 

W separately has an interest in a specified 

foreign financial asset with a value of $1,000 

at all times during the taxable year. 

(2) Filing requirement—(i) Married 

specified individuals filing separate annual 

returns. If H and W file separate annual 

returns, the aggregate value of the specified 

foreign financial assets in which H has an 

interest at the end of the taxable year is 

$55,000, comprising one-half of the value of 

the jointly owned asset, $45,000, and the 

value of H’s separately owned specified 

foreign financial asset, $10,000. The 

aggregate value of the specified foreign 

financial assets in which W has an interest 

at the end of the taxable year is $46,000, 

comprising one-half of the value of the 

jointly owned asset, $45,000, and the value 

of W’s separately owned specified foreign 

financial asset, $1,000. H must file Form 

8938 with his annual return for the taxable 

year because the aggregate value of the 

specified foreign financial assets in which H 

has an interest exceeds the applicable 

reporting threshold ($50,000) set forth in 

§ 1.6038D–2(a)(1). H must report the 

maximum value of the entire jointly owned 

asset, $90,000, and the maximum value of the 

separately owned asset, $10,000. See 

§ 1.6038D–5(b) regarding the maximum value 

of a jointly owned specified foreign financial 

asset to be reported by a specified person, 

including a married specified individual, that 

is a joint owner of an asset. The aggregate 

value of the specified foreign financial assets 

in which W has an interest, $46,000, does not 

exceed the applicable reporting threshold set 

forth in § 1.6038D–2(a)(1). W is not required 

to file Form 8938 with her separate annual 

return. 

(ii) Married specified individuals filing a 

joint annual return. If H and W file a joint 

annual return, they must file a single Form 

8938 with their joint annual return for the 

taxable year because the aggregate value of all 

of the specified foreign financial assets in 

which either H or W have an interest 

($90,000 (included only once), $10,000, and 

$1000, or $101,000) exceeds the applicable 

reporting threshold ($100,000) set forth in 

§ 1.6038D–2(a)(2). The single Form 8938 

must report the maximum value of the jointly 

owned specified foreign financial asset, 

$90,000, and the maximum value of the 

specified foreign financial assets separately 

owned by H and W, $10,000 and $1,000, 

respectively. 

(g) Effective/applicability dates. This 

section applies to taxable years ending 

after December 19, 2011. Taxpayers may 

elect to apply the rules of this section 

to taxable years ending prior to 

December 19, 2011. 

§ 1.6038D–2T [Removed] 

■ Par. 7. Section 1.6038D–2T is 

removed. 

■ Par. 8. Section 1.6038D–3 is added to 

read as follows: 

§ 1.6038D–3 Specified foreign financial 

assets. 

(a) Financial accounts—(1) In general. 

Except as otherwise provided in this 

section, a specified foreign financial 

asset includes any financial account 

maintained by a foreign financial 

institution. An asset held in a financial 

account maintained by a foreign 

financial institution is not required to be 

separately reported on Form 8938, 

‘‘Statement of Specified Foreign 

Financial Assets.’’ 

(2) Financial account in a U.S. 

possession. A specified foreign financial 

asset includes a financial account 

maintained by a financial institution 

that is organized under the laws of a 

U.S. possession. 

(3) Excepted financial accounts—(i) 

Accounts maintained by U.S. payors. A 

financial account maintained by a U.S. 

payor as defined in § 1.6049–5(c)(5)(i) 

(including assets held in such an 

account) is not a specified foreign 

financial asset for purposes of section 

6038D and the regulations. 

(ii) Mark-to-market election under 

section 475. A financial account is not 

a specified foreign financial asset if the 

rules of section 475(a) apply to all of the 

holdings in the account or an election 

under section 475(e) or (f) is made with 

respect to all of the holdings in the 

account. 

(b) Other specified foreign financial 

assets—(1) In general. Except as 

otherwise provided in this section, a 

specified foreign financial asset 

includes any of the following assets that 


rljohnson on DSK3VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 239 / Friday, December 12, 2014 / Rules and Regulations 73829 

are not financial accounts and that are 

held for investment and not held in an 

account maintained by a financial 

institution— 

(i) Stock or securities issued by a 

person other than a United States 

person (including stock or securities 

issued by a person organized under the 

laws of a U.S. possession); 

(ii) A financial instrument or contract 

that has an issuer or counterparty which 

is other than a United States person 

(including a financial instrument or 

contract issued by a person organized 

under the laws of a U.S. possession); 

and 

(iii) An interest in a foreign entity. 

(2) Mark-to-market election under 

section 475. An asset is not a specified 

foreign financial asset if the rules of 

section 475(a) apply to the asset or an 

election under section 475(e) or (f) is 

made with respect to the asset. 

(3) Held for investment. An asset is 

held for investment for purposes of 

section 6038D and the regulations if that 

asset is not used in, or held for use in, 

the conduct of a trade or business of a 

specified person. 

(4) Trade-or-business test. For 

purposes of section 6038D and the 

regulations, an asset is used in, or held 

for use in, the conduct of a trade or 

business and not held for investment if 

the asset is— 

(i) Held for the principal purpose of 

promoting the present conduct of the 

trade or business; 

(ii) Acquired and held in the ordinary 

course of the trade or business, as, for 

example, in the case of an account or 

note receivable arising from that trade or 

business; or 

(iii) Otherwise held in a direct 

relationship to the trade or business as 

determined under paragraph (b)(5) of 

this section. 

(5) Direct relationship between 

holding an asset and a trade or 

business—(i) In general. In determining 

whether an asset is held in a direct 

relationship to the conduct of a trade or 

business by a specified person, 

principal consideration will be given to 

whether the asset is needed in the trade 

or business of the specified person. An 

asset shall be considered needed in the 

trade or business, for this purpose, only 

if the asset is held to meet the present 

needs of that trade or business and not 

its anticipated future needs. An asset 

shall be considered as needed in the 

trade or business if, for example, the 

asset is held to meet the operating 

expenses of the trade or business. 

Conversely, an asset shall be considered 

as not needed in the trade or business 

if, for example, the asset is held for the 

purpose of providing for future 

diversification into a new trade or 

business, future plant replacement, or 

future business contingencies. Stock is 

never considered used or held for use in 

a trade or business for purposes of 

applying this test. 

(ii) Presumption of direct relationship. 

An asset will be treated as held in a 

direct relationship to the conduct of a 

trade or business of a specified person 

if— 

(A) The asset was acquired with funds 

generated by the trade or business of the 

specified person or the affiliated group 

of the specified person, if any; 

(B) The income from the asset is 

retained or reinvested in the trade or 

business; and 

(C) Personnel who are actively 

involved in the conduct of the trade or 

business exercise significant 

management and control over the 

investment of such asset. 

(c) Special rule for interests in foreign 

trusts and foreign estates. An interest in 

a foreign trust or a foreign estate is not 

a specified foreign financial asset of a 

specified person unless the person 

knows, or has reason to know based on 

readily accessible information, of the 

interest. Receipt of a distribution from 

the foreign trust or foreign estate 

constitutes actual knowledge for this 

purpose. 

(d) Examples. Examples of assets 

other than financial accounts that may 

be considered other specified foreign 

financial assets include, but are not 

limited to— 

(1) Stock issued by a foreign 

corporation; 

(2) A capital or profits interest in a 

foreign partnership; 

(3) A note, bond, debenture, or other 

form of indebtedness issued by a foreign 

person; 

(4) An interest in a foreign trust; 

(5) An interest rate swap, currency 

swap, basis swap, interest rate cap, 

interest rate floor, commodity swap, 

equity swap, equity index swap, credit 

default swap, or similar agreement with 

a foreign counterparty; and 

(6) Any option or other derivative 

instrument with respect to any of the 

items listed as examples in this 

paragraph or with respect to any 

currency or commodity that is entered 

into with a foreign counterparty or 

issuer. 

(e) Effective/applicability dates. This 

section applies to taxable years ending 

after December 19, 2011. Taxpayers may 

elect to apply the rules of this section 

to taxable years ending prior to 

December 19, 2011. 

§ 1.6038D–3T [Removed] 

■ Par. 9. Section 1.6038D–3T is 

removed. 

■ Par. 10. Section 1.6038D–4 is added 

to read as follows: 

§ 1.6038D–4 Information required to be 

reported. 

(a) Required information. The 

following information must be reported 

on Form 8938, ‘‘Statement of Specified 

Foreign Financial Assets,’’ with respect 

to each specified foreign financial asset: 

(1) In the case of a financial account, 

the name and address of the foreign 

financial institution with which the 

account is maintained and the account 

number of the financial account; 

(2) In the case of stock or securities, 

the name and address of the issuer, and 

information that identifies the class or 

issue of which the stock or security is 

a part; 

(3) In the case of a financial 

instrument or contract, information that 

identifies the financial instrument or 

contract, including the names and 

addresses of all issuers and 

counterparties; 

(4) In the case of an interest in a 

foreign entity, information that 

identifies the interest, including the 

name and address of the foreign entity 

in which the interest is held; 

(5) The maximum value of the 

specified foreign financial asset during 

the portion of the taxable year in which 

the specified person has an interest in 

the asset; 

(6) In the case of a financial account 

that is a depository account as defined 

in § 1.1471–5(b)(3)(i) or a custodial 

account as defined in § 1.1471– 

5(b)(3)(ii), whether the account was 

opened or closed during the taxable 

year; 

(7) The date, if any, on which the 

specified foreign financial asset, other 

than a financial account that is a 

depository account as defined in 

§ 1.1471–5(b)(3)(i) or a custodial 

account as defined in § 1.1471– 

5(b)(3)(ii), was either acquired or 

disposed of (or both) during the taxable 

year; 

(8) The amount of any income, gain, 

loss, deduction, or credit recognized for 

the taxable year with respect to the 

reported specified foreign financial 

asset, and the schedule, form, or return 

filed with the Internal Revenue Service 

on which the income, gain, loss, 

deduction, or credit, if any, is reported 

or included by the specified person; 

(9) The foreign currency in which the 

account is maintained or the asset is 

denominated, the foreign currency 

exchange rate and, if the source of such 

rate is other than as described in 

§ 1.6038D–5(c)(1), the source of the rate 

used to determine the specified foreign 


rljohnson on DSK3VPTVN1PROD with RULES
73830 Federal Register / Vol. 79, No. 239 / Friday, December 12, 2014 / Rules and Regulations 

financial asset’s U.S. dollar value, 

including maximum value; 

(10) For any specified foreign 

financial asset excepted from reporting 

on Form 8938 under § 1.6038D–7(a), the 

specified person must report the 

number of Forms 3520, ‘‘Annual Return 

To Report Transactions With Foreign 

Trusts and Receipt of Certain Foreign 

Gifts,’’ Forms 3520–A, ‘‘Annual 

Information Return of Foreign Trust 

With a U.S. Owner,’’ Forms 5471, 

‘‘Information Return of U.S. Persons 

With Respect To Certain Foreign 

Corporations,’’ Forms 8621, ‘‘Return by 

a Shareholder of a Passive Foreign 

Investment Company or a Qualified 

Electing Fund,’’ Forms 8865, ‘‘Return of 

U.S. Persons With Respect To Certain 

Foreign Partnerships,’’ and, solely for 

taxable years beginning after March 18, 

2010, and ending on or before December 

31, 2013, Forms 8891, ‘‘U.S. Information 

Return for Beneficiaries of Certain 

Canadian Registered Retirement Plans,’’ 

or such other form under Title 26 of the 

United States Code identified by the 

Secretary under § 1.6038D–7(a), timely 

filed with the Internal Revenue Service 

on which excepted foreign financial 

assets are reported or reflected for the 

taxable year; and 

(11) Such other information as may be 

required by Form 8938 or its 

instructions or other guidance. 

(b) Effective/applicability dates. This 

section applies to taxable years ending 

after December 19, 2011. Taxpayers may 

elect to apply the rules of this section 

to taxable years ending prior to 

December 19, 2011. 

§ 1.6038D–4T [Removed] 

■ Par. 11. Section 1.6038D–4T is 

removed. 

■ Par. 12. Section 1.6038D–5 is added 

to read as follows: 

§ 1.6038D–5 Valuation guidelines. 

(a) Fair market value. Except as 

provided in paragraphs (c) and (e) of 

this section, the value of a specified 

foreign financial asset for purposes of 

determining the aggregate value of 

specified foreign financial assets held by 

a specified person and the maximum 

value of a specified foreign financial 

asset required to be reported on Form 

8938, ‘‘Statement of Specified Foreign 

Financial Assets,’’ is the asset’s fair 

market value. 

(b) Valuation of assets—(1) Maximum 

value. Except as provided in this 

section, the maximum value of a 

specified foreign financial asset means a 

reasonable estimate of the asset’s 

maximum fair market value during the 

taxable year. 

(2) U.S. dollars. For purposes of 

determining the aggregate value of 

specified foreign financial assets in 

which a specified person has an interest 

and determining the maximum value of 

a specified foreign financial asset, the 

value of a specified foreign financial 

asset denominated in a foreign currency 

during the taxable year must be 

determined in the foreign currency and 

then converted to U.S. dollars. 

(3) Asset with no positive value. If the 

maximum fair market value of a 

specified foreign financial asset is zero 

or less than zero, then the asset’s value 

is treated as zero for purposes of 

determining the aggregate value of 

specified foreign financial assets in 

which a specified person has an 

interest, and the maximum value of the 

specified foreign financial asset is zero 

for purposes of reporting under 

§ 1.6038D–4(a)(5). 

(c) Foreign currency conversion—(1) 

In general. Except as provided in 

paragraphs (c)(2) and (d) of this section, 

the U.S. Treasury Department’s Bureau 

of the Fiscal Service foreign currency 

exchange rate is to be used to convert 

the value of a specified foreign financial 

asset into U.S. dollars for purposes of 

determining the aggregate value of 

specified foreign financial assets in 

which a specified person has an interest 

and determining the maximum value of 

a specified foreign financial asset. 

(2) Other publicly available exchange 

rate. If no U.S. Treasury Department 

Bureau of the Fiscal Service foreign 

currency exchange rate is available for 

a particular currency, another publicly 

available foreign currency exchange rate 

may be used to convert the value of a 

specified foreign financial asset into 

U.S. dollars. In such case, the source of 

the foreign currency exchange rate must 

be disclosed on Form 8938. 

(3) Currency exchange rate. In 

converting the currency of a foreign 

country, the foreign currency exchange 

rate applicable for converting the 

currency into U.S. dollars (that is, to 

purchase U.S. dollars) must be used. 

(4) Determination date. In converting 

the currency of a foreign country into 

U.S. dollars for purposes of determining 

the maximum value of a specified 

foreign financial asset and determining 

the aggregate value of specified foreign 

financial assets in which a specified 

person has an interest, the applicable 

foreign currency exchange rate is the 

rate on the last day of the taxable year 

of the specified person, even if the 

specified person sold or otherwise 

disposed of a specified foreign financial 

asset prior to the last day of such year. 

(d) Financial accounts. A specified 

person may rely upon periodic account 

statements that are provided at least 

annually by or on behalf of a financial 

institution maintaining an account, 

including the foreign currency 

conversion reflected in those 

statements, to determine the financial 

account’s maximum value unless the 

specified person has actual knowledge, 

or reason to know based on readily 

accessible information, that the 

statements do not reflect a reasonable 

estimate of the maximum account value 

during the taxable year. 

(e) Asset held in a financial account. 

The value of an asset held in a financial 

account maintained by a foreign 

financial institution is included in 

determining the value of that financial 

account for purposes of § 1.6038D–5(a). 

(f) Other specified foreign financial 

assets—(1) General rule. Except as 

provided in paragraphs (f)(2) and (3) of 

this section, for specified foreign 

financial assets that are not financial 

accounts and that are held for 

investment and not held in an account 

maintained by a financial institution, a 

specified person may use the value of 

the asset as of the last day of the taxable 

year on which the specified person has 

an interest in the asset as the maximum 

value of that asset, unless the specified 

person has actual knowledge, or reason 

to know based on readily accessible 

information, that the value does not 

reflect a reasonable estimate of the 

maximum value of the asset during the 

taxable year. 

(2) Interests in trusts that are specified 

foreign financial assets—(i) Maximum 

value. If a specified person is a 

beneficiary of a foreign trust, the 

maximum value of the specified 

person’s interest in the trust is the sum 

of— 

(A) The fair market value, determined 

as of the last day of the taxable year, of 

all of the currency or other property 

distributed from the foreign trust during 

the taxable year to the specified person 

as a beneficiary; and 

(B) The value, determined as of the 

last day of the taxable year, of the 

specified person’s right as a beneficiary 

to receive mandatory distributions from 

the foreign trust as determined under 

section 7520. 

(ii) Reporting threshold. For purposes 

of determining the aggregate value of 

specified foreign financial assets in 

which a specified person has an 

interest, if the specified person does not 

know, or have reason to know based on 

readily accessible information, the fair 

market value of the person’s interest in 

a foreign trust during the taxable year, 

the value to be included in determining 

the aggregate value of the specified 

foreign financial assets is the maximum 


rljohnson on DSK3VPTVN1PROD with RULES
Federal Register / Vol. 79, No. 239 / Friday, December 12, 2014 / Rules and Regulations 73831 

value of the specified person’s interest 

in the foreign trust under paragraph 

(f)(2)(i) of this section. 

(3) Interests in estates, pension plans, 

and deferred compensation plans—(i) 

Maximum value. The maximum value 

of a specified person’s interest in a 

foreign estate, foreign pension plan, or 

foreign deferred compensation plan is 

the fair market value, determined as of 

the last day of the taxable year, of the 

specified person’s beneficial interest in 

the assets of the foreign estate, foreign 

pension plan, or foreign deferred 

compensation plan. If the specified 

person does not know, or have reason to 

know based on readily accessible 

information, such fair market value, the 

maximum value to be reported is the 

fair market value, determined as of the 

last day of the taxable year, of the 

currency and other property distributed 

during the taxable year to the specified 

person as a beneficiary or participant. 

(ii) Reporting threshold. For purposes 

of determining the aggregate value of 

specified foreign financial assets in 

which a specified person has an 

interest, if the specified person does not 

know, or have reason to know based on 

readily accessible information, the fair 

market value of the person’s interest in 

a foreign estate, foreign pension plan, or 

foreign deferred compensation plan 

during the taxable year, the value to be 

included in determining the aggregate 

value of the specified foreign financial 

assets is the fair market value, 

determined as of the last day of the 

taxable year, of the currency and other 

property distributed during the taxable 

year to the specified person as a 

beneficiary or participant. 

(g) Effective/applicability dates. This 

section applies to taxable years ending 

after December 19, 2011. Taxpayers may 

elect to apply the rules of this section 

to taxable years ending prior to 

December 19, 2011. 

§ 1.6038D–5T [Removed] 

■ Par. 13. Section 1.6038D–5T is 

removed. 

■ Par. 14. Section 1.6038D–6 is added 

to read as follows: 

§ 1.6038D–6 Specified domestic entities. 

[Reserved] 

§ 1.6038D–6T [Removed] 

■ Par. 15. Section 1.6038D–6T is 

removed. 

■ Par. 16. Section 1.6038D–7 is added 

to read as follows: 

§ 1.6038D–7 Exceptions from the reporting 

of certain assets under section 6038D. 

(a) Elimination of duplicative 

reporting of assets—(1) In general. A 

specified person is not required to 

report a specified foreign financial asset 

on Form 8938, ‘‘Statement of Specified 

Foreign Financial Assets,’’ if the 

specified person— 

(i) Reports the asset on at least one of 

the following forms timely filed with 

the Internal Revenue Service for the 

taxable year— 

(A) Form 3520, ‘‘Annual Return To 

Report Transactions With Foreign 

Trusts and Receipt of Certain Foreign 

Gifts’’ (in the case of a specified person 

that is the beneficiary of a foreign trust); 

(B) Form 5471, ‘‘Information Return of 

U.S. Persons With Respect To Certain 

Foreign Corporations’’; 

(C) Form 8621, ‘‘Return by a 

Shareholder of a Passive Foreign 

Investment Company or Qualified 

Electing Fund’’; 

(D) Form 8865, ‘‘Return of U.S. 

Persons With Respect To Certain 

Foreign Partnerships’’; 

(E) For taxable years beginning after 

March 18, 2010, and ending on or before 

December 31, 2013, Form 8891, ‘‘U.S. 

Information Return for Beneficiaries of 

Certain Canadian Registered Retirement 

Plans’’; or 

(F) Any other form under Title 26 of 

the United States Code timely filed with 

the Internal Revenue Service and 

identified for this purpose by the 

Secretary in regulations or other 

guidance; and 

(ii) Reports on Form 8938 the filing of 

the form on which the asset is reported. 

(2) Foreign grantor trusts. A specified 

person that is treated as an owner of a 

foreign trust or any portion of a foreign 

trust under sections 671 through 679 is 

not required to report any specified 

foreign financial assets held by the 

foreign trust on Form 8938, provided— 

(i) The specified person reports the 

trust on a Form 3520 timely filed with 

the Internal Revenue Service for the 

taxable year; 

(ii) The trust timely files Form 3520– 

A, ‘‘Annual Information Return of 

Foreign Trust With a U.S. Owner,’’ with 

the Internal Revenue Service for the 

taxable year; and 

(iii) The Form 8938 filed by the 

specified person for the taxable year 

reports the filing of the Form 3520 and 

Form 3520–A. 

(3) Joint Form 5471 or Form 8865 

filing. A specified person that is 

included as part of a joint Form 5471 

filing pursuant to § 1.6038–2(j) or a joint 

Form 8865 filing pursuant to § 1.6038– 

3(c) and who notifies the Internal 

Revenue Service as required by 

§ 1.6038–2(i) or § 1.6038D–(3)(c) will be 

considered to have filed a Form 5471 or 

Form 8865 for purposes of paragraph 

(a)(1) of this section. 

(b) Owner of certain trusts. A 

specified person that is treated as an 

owner of any portion of a domestic trust 

under sections 671 through 678 is not 

required to file Form 8938 to report any 

specified foreign financial asset held by 

the trust if the trust is— 

(1) A widely-held fixed investment 

trust under § 1.671–5; or 

(2) A liquidating trust within the 

meaning of § 301.7701–4(d) of this 

chapter that is created pursuant to a 

court order issued in a bankruptcy 

under Chapter 7 (11 U.S.C. 701 et seq.) 

or a confirmed plan under Chapter 11 

(11 U.S.C. 1101 et seq.) of the 

Bankruptcy Code. 

(c) Special rules for bona fide 

residents of a U.S. possession. A 

specified individual who is a bona fide 

resident of a U.S. possession is not 

required to include the following 

specified foreign financial assets in the 

determination of the aggregate value of 

his or her specified foreign financial 

assets and, if required to file Form 8938 

with the Internal Revenue Service, is 

not required to report the following 

specified foreign financial assets: 

(1) A financial account maintained by 

a financial institution organized under 

the laws of the U.S. possession of which 

the specified individual is a bona fide 

resident; 

(2) A financial account maintained by 

a branch of a financial institution not 

organized under the laws of the U.S. 

possession of which the specified 

individual is a bona fide resident, if the 

branch is subject to the same tax and 

information reporting requirements 

applicable to a financial institution 

organized under the laws of the U.S. 

possession; 

(3) Stock or securities issued by an 

entity organized under the laws of the 

U.S. possession of which the specified 

individual is a bona fide resident; 

(4) An interest in an entity organized 

under the laws of the U.S. possession of 

which the specified individual is a bona 

fide resident; and 

(5) A financial instrument or contract 

held for investment, provided each 

issuer or counterparty that is not a 

United States person is— 

(i) An entity organized under the laws 

of the U.S. possession of which the 

specified individual is a bona fide 

resident; or 

(ii) A bona fide resident of the U.S. 

possession of which the specified 

individual is a bona fide resident. 

(d) Effective/applicability dates. This 

section applies to taxable years ending 

after December 19, 2011. Taxpayers may 

elect to apply the rules of this section 

to taxable years ending prior to 

December 19, 2011. 


rljohnson on DSK3VPTVN1PROD with RULES
73832 Federal Register / Vol. 79, No. 239 / Friday, December 12, 2014 / Rules and Regulations 

§ 1.6038D–7T [Removed] 

■ Par. 17. Section 1.6038D–7T is 

removed. 

■ Par. 18. Section 1.6038D–8 is added 

to read as follows: 

§ 1.6038D–8 Penalties for failure to 

disclose. 

(a) In general. If a specified person 

fails to file a Form 8938, ‘‘Statement of 

Specified Foreign Financial Assets,’’ 

that includes the information required 

by section 6038D(c) and § 1.6038D–4 

with respect to any taxable year at the 

time and in the manner described in 

section 6038D(a) and § 1.6038D–2, a 

penalty of $10,000 will apply to that 

specified person. 

(b) Married specified individuals 

filing a joint annual return. Married 

specified individuals who file a joint 

annual return and fail to file a required 

Form 8938 that includes the information 

required by section 6038D(c) and 

§ 1.6038D–4 with respect to any taxable 

year at the time and in the manner 

described in section 6038D(a) and 

§ 1.6038D–2 are subject to penalties 

under this section as if the married 

specified individuals are a single 

specified individual. The liability of 

married specified individuals who file a 

joint annual return with respect to any 

penalties under this section is joint and 

several. 

(c) Increase in penalty. If any failure 

to comply with the applicable reporting 

requirement of section 6038D and the 

regulations continues for more than 90 

days after the day on which the 

Commissioner or his delegate mails a 

notice of the failure to the specified 

person required to file the Form 8938, 

the specified person is required to pay 

an additional penalty of $10,000 for 

each 30-day period (or fraction thereof) 

during which the failure continues after 

the 90-day period has expired. The 

additional penalty imposed by section 

6038D(d)(2) and this paragraph (c) is 

limited to a maximum of $50,000 for 

each such failure. 

(d) Presumption of aggregate value. 

For the purpose of assessing penalties 

imposed under section 6038D(d), if the 

Commissioner or his delegate 

determines that a specified person has 

an interest in one or more specified 

foreign financial assets and the specified 

person does not provide sufficient 

information to demonstrate the 

aggregate value of the assets upon 

request by the Commissioner or his 

delegate, then the aggregate value of the 

assets is treated as being in excess of the 

applicable reporting threshold set forth 

in § 1.6038D–2(a). 

(e) Reasonable cause exception—(1) 

In general. If the failure to report the 

information required in section 

6038D(c) and § 1.6038D–4 is shown to 

be due to reasonable cause and not due 

to willful neglect, no penalty will be 

imposed under section 6038D(d) or this 

section. 

(2) Affirmative showing required. In 

order to show that the failure to report 

the information required in section 

6038D(c) and § 1.6038D–4 is due to 

reasonable cause and not due to willful 

neglect for purposes of section 6038D(g) 

and this section, the specified person 

must make an affirmative showing of all 

the facts alleged as reasonable cause for 

the failure to disclose. 

(3) Facts and circumstances taken 

into account. The determination of 

whether a failure to disclose a specified 

foreign financial asset on Form 8938 

was due to reasonable cause and not 

due to willful neglect is made on a caseby-case basis, taking into account all 

pertinent facts and circumstances. The 

fact that a foreign jurisdiction would 

impose a civil or criminal penalty on 

the specified person (or any other 

person) for disclosing the required 

information is not reasonable cause. 

(f) Penalties for underpayments 

attributable to undisclosed foreign 

financial assets—(1) Accuracy-related 

penalty. For application of the accuracyrelated penalty in the case of any 

portion of an underpayment attributable 

to any undisclosed foreign financial 

asset understatement, see section 

6662(j). 

(2) Criminal penalties. In addition to 

other penalties, failure to comply with 

the reporting requirements of section 

6038D and the regulations, or any 

underpayment related to such failure, 

may result in criminal penalties under 

sections 7201, 7203, 7206, et seq., or 

other provisions of Federal law. 

(g) Effective/applicability dates. This 

section applies to taxable years ending 

after December 19, 2011. Taxpayers may 

elect to apply the rules of this section 

to taxable years ending prior to 

December 19, 2011. 

§ 1.6038D–8T [Removed] 

■ Par. 19. Section 1.6038D–8T is 

removed. 

John Dalrymple, 

Deputy Commissioner for Services and 

Enforcement. 

Approved: December 4, 2014. 

Mark J. Mazur, 

Assistant Secretary of the Treasury (Tax 

Policy). 

[FR Doc. 2014–29125 Filed 12–11–14; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF THE INTERIOR 

Bureau of Ocean Energy Management 

30 CFR Part 553 

[Docket ID: BOEM–2012–0076] 

RIN 1010–AD87 

Consumer Price Index Adjustments of 

the Oil Pollution Act of 1990 Limit of 

Liability for Offshore Facilities 

AGENCY: Bureau of Ocean Energy 

Management (BOEM), Interior. 

ACTION: Final rule. 

SUMMARY: The Oil Pollution Act of 1990 

(OPA) establishes a comprehensive 

regime for addressing the consequences 

of oil spills, ranging from spill response 

to compensation for damages to injured 

parties. Other than deepwater ports 

subject to the Deepwater Port Act of 

1974, the Bureau of Ocean Energy 

Management (BOEM) is authorized to 

adjust the limit of liability in OPA for 

offshore facilities, including pipelines. 

This rule amends BOEM’s regulations to 

add to the regulations on Oil Spill 

Financial Responsibility (OSFR) for 

offshore facilities in order to increase 

the limit of liability for damages caused 

by the responsible party for an offshore 

facility from which oil is discharged, or 

which poses the substantial threat of an 

oil discharge, as described in OPA. This 

rule adjusts the limit of liability to 

reflect the significant increase in the 

Consumer Price Index (CPI) that has 

taken place since 1990. It also 

establishes a methodology for BOEM to 

use to periodically adjust the OPA 

offshore facility limit of liability for 

inflation. BOEM is hereby increasing the 

limit of liability for damages under OPA 

from $75 million to $133.65 million. 

DATES: This final rule is effective 

January 12, 2015. 

FOR FURTHER INFORMATION CONTACT: 

Peter Meffert, Office of Policy, 

Regulations and Analysis (OPRA), 

Bureau of Ocean Energy Management, 

Department of the Interior, at 381 Elden 

Street, MS–4050 Herndon, Virginia 

20170–4817 at (703) 787–1610, or email 

at peter.meffert@boem.gov. Questions 

related to the limit of liability or the 

adjustment process should be directed 

to Dr. Marshall Rose, Chief, Economics 

Division, Office of Strategic Resources, 

Bureau of Ocean Energy Management, at 

381 Elden Street, MS–4050 Herndon, 

Virginia 20170–4817 at (703) 787–1538, 

or email at marshall.rose@boem.gov. 

SUPPLEMENTARY INFORMATION: 


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