(1) returns filed after the date of the enactment 
of this Act; and 
(2) returns filed on or before such date if the 
period specified in section 6501 of the Internal Rev-
enue Code of 1986 (determined without regard to 
such amendments) for assessment of such taxes has 
not expired as of such date. 
Subtitle C—Other Disclosure 
Provisions 
SEC. 521. REPORTING OF ACTIVITIES WITH RESPECT TO 
PASSIVE FOREIGN INVESTMENT COMPANIES. 
(a) IN GENERAL.—Section 1298 is amended by re-
designating subsection (f) as subsection (g) and by insert-
ing after subsection (e) the following new subsection: 
‘‘(f) REPORTING REQUIREMENT.—Except as other-
wise provided by the Secretary, each United States person 
who is a shareholder of a passive foreign investment com-
pany shall file an annual report containing such informa-
tion as the Secretary may require.’’. 
(b) CONFORMING AMENDMENT.—Subsection (e) of 
section 1291 is amended by striking ‘‘, (d), and (f)’’ and 
inserting ‘‘and (d)’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section take effect on the date of the enactment of 
this Act.
SEC. 522. SECRETARY PERMITTED TO REQUIRE FINANCIAL 
INSTITUTIONS TO FILE CERTAIN RETURNS 
RELATED TO WITHHOLDING ON FOREIGN 
TRANSFERS ELECTRONICALLY. 
(a) IN GENERAL.—Subsection (e) of section 6011 is 
amended by adding at the end the following new para-
graph: 
‘‘(3) SPECIAL RULE FOR RETURNS FILED BY 
FINANCIAL INSTITUTIONS WITH RESPECT TO WITH-
HOLDING
ON
FOREIGN
TRANSFERS.—Paragraph 
(2)(A) shall not apply to any return filed by a finan-
cial institution (as defined in section 1471(d)(5)) 
with respect to tax for which such institution is 
made liable under section 1461 or 1474(a).’’. 
(b) CONFORMING AMENDMENT.—Subsection (c) of 
section 6724 is amended by inserting ‘‘or with respect to 
a return described in section 6011(e)(3)’’. 
(c) EFFECTIVE DATE.—The amendment made by 
this section shall apply to returns the due date for which 
(determined without regard to extensions) is after the date 
of the enactment of this Act.
Subtitle D—Provisions Related to 
Foreign Trusts 
SEC. 531. CLARIFICATIONS WITH RESPECT TO FOREIGN 
TRUSTS WHICH ARE TREATED AS HAVING A 
UNITED STATES BENEFICIARY. 
(a) IN GENERAL.—Paragraph (1) of section 679(c) 
is amended by adding at the end the following: 
‘‘For purposes of subparagraph (A), an amount 
shall be treated as accumulated for the benefit of a 
United States person even if the United States per-
son’s interest in the trust is contingent on a future 
event.’’. 
(b) CLARIFICATION REGARDING DISCRETION TO 
IDENTIFY BENEFICIARIES.—Subsection (c) of section 679 
is amended by adding at the end the following new para-
graph: 
‘‘(4) SPECIAL RULE IN CASE OF DISCRETION TO 
IDENTIFY BENEFICIARIES.—For purposes of para-
graph (1)(A), if any person has the discretion (by 
authority given in the trust agreement, by power of 
appointment, or otherwise) of making a distribution 
from the trust to, or for the benefit of, any person, 
such trust shall be treated as having a beneficiary 
who is a United States person unless—
‘‘(A) the terms of the trust specifically 
identify the class of persons to whom such dis-
tributions may be made, and 
‘‘(B) none of those persons are United 
States persons during the taxable year.’’. 
(c) CLARIFICATION THAT CERTAIN AGREEMENTS 
AND UNDERSTANDINGS ARE TERMS OF THE TRUST.— 
Subsection (c) of section 679, as amended by subsection 
(b), is amended by adding at the end the following new 
paragraph: 
‘‘(5) CERTAIN
AGREEMENTS
AND
UNDER-
STANDINGS TREATED AS TERMS OF THE TRUST.— 
For purposes of paragraph (1)(A), if any United 
States person who directly or indirectly transfers 
property to the trust is directly or indirectly involved 
in any agreement or understanding (whether writ-
ten, oral, or otherwise) that may result in the in-
come or corpus of the trust being paid or accumu-
lated to or for the benefit of a United States person, 
such agreement or understanding shall be treated as 
a term of the trust.’’.
SEC. 532. PRESUMPTION THAT FOREIGN TRUST HAS 
UNITED STATES BENEFICIARY. 
(a) IN GENERAL.—Section 679 is amended by redes-
ignating subsection (d) as subsection (e) and inserting 
after subsection (c) the following new subsection: 
‘‘(d) PRESUMPTION THAT FOREIGN TRUST HAS 
UNITED STATES BENEFICIARY.—If a United States per-
son directly or indirectly transfers property to a foreign 
trust 
(other 
than 
a 
trust 
described 
in 
section 
6048(a)(3)(B)(ii)), the Secretary may treat such trust as 
having a United States beneficiary for purposes of apply-
ing this section to such transfer unless such person— 
‘‘(1) submits such information to the Secretary 
as the Secretary may require with respect to such 
transfer, and 
‘‘(2) demonstrates to the satisfaction of the 
Secretary that such trust satisfies the requirements 
of subparagraphs (A) and (B) of subsection (c)(1).’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to transfers of property after the 
date of the enactment of this Act. 
SEC. 533. UNCOMPENSATED USE OF TRUST PROPERTY. 
(a) IN GENERAL.—Paragraph (1) of section 643(i) 
is amended—
(1) by striking ‘‘directly or indirectly to’’ and 
inserting ‘‘(or permits the use of any other trust 
property) directly or indirectly to or by’’, and 
(2) by inserting ‘‘(or the fair market value of 
the use of such property)’’ after ‘‘the amount of 
such loan’’. 
(b) EXCEPTION
FOR COMPENSATED USE.—Para-
graph (2) of section 643(i) is amended by adding at the 
end the following new subparagraph: 
‘‘(E) EXCEPTION FOR COMPENSATED USE 
OF PROPERTY.—In the case of the use of any 
trust property other than a loan of cash or 
marketable securities, paragraph (1) shall not 
apply to the extent that the trust is paid the 
fair market value of such use within a reason-
able period of time of such use.’’. 
(c) APPLICATION TO GRANTOR TRUSTS.—Subsection 
(c) of section 679, as amended by section 531, is amended 
by adding at the end the following new paragraph: 
‘‘(6) UNCOMPENSATED USE OF TRUST PROP-
ERTY TREATED AS A PAYMENT.—For purposes of 
this subsection, a loan of cash or marketable securi-
ties (or the use of any other trust property) directly 
or indirectly to or by any United States person 
(whether or not a beneficiary under the terms of the
trust) shall be treated as paid or accumulated for 
the benefit of a United States person. The preceding 
sentence shall not apply to the extent that the 
United States person repays the loan at a market 
rate of interest (or pays the fair market value of the 
use of such property) within a reasonable period of 
time.’’. 
(d) CONFORMING AMENDMENTS.—Paragraph (3) of 
section 643(i) is amended— 
(1) by inserting ‘‘(or use of property)’’ after ‘‘If 
any loan’’, 
(2) by inserting ‘‘or the return of such prop-
erty’’ before ‘‘shall be disregarded’’, and 
(3) by striking ‘‘REGARDING LOAN PRINCIPAL’’ 
in the heading thereof. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to loans made, and uses of prop-
erty, after the date of the enactment of this Act. 
SEC. 534. REPORTING REQUIREMENT OF UNITED STATES 
OWNERS OF FOREIGN TRUSTS. 
(a) IN GENERAL.—Paragraph (1) of section 6048(b) 
is amended by inserting ‘‘shall submit such information 
as the Secretary may prescribe with respect to such trust 
for such year and’’ before ‘‘shall be responsible to ensure’’.
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 535. MINIMUM PENALTY WITH RESPECT TO FAILURE 
TO REPORT ON CERTAIN FOREIGN TRUSTS. 
(a) IN GENERAL.—Subsection (a) of section 6677 is 
amended— 
(1) by inserting ‘‘the greater of $10,000 or’’ be-
fore ‘‘35 percent’’, and 
(2) by striking the last sentence and inserting 
the following: ‘‘At such time as the gross reportable 
amount with respect to any failure can be deter-
mined by the Secretary, any subsequent penalty im-
posed under this subsection with respect to such fail-
ure shall be reduced as necessary to assure that the 
aggregate amount of such penalties do not exceed 
the gross reportable amount (and to the extent that 
such aggregate amount already exceeds the gross re-
portable amount the Secretary shall refund such ex-
cess to the taxpayer).’’ 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to notices and returns required to 
be filed after December 31, 2009.
Subtitle E—Substitute Dividends 
and Dividend Equivalent Pay-
ments Received by Foreign Per-
sons Treated as Dividends 
SEC. 541. SUBSTITUTE DIVIDENDS AND DIVIDEND EQUIVA-
LENT PAYMENTS RECEIVED BY FOREIGN 
PERSONS TREATED AS DIVIDENDS. 
(a) IN GENERAL.—Section 871 is amended by redes-
ignating subsection (l) as subsection (m) and by inserting 
after subsection (k) the following new subsection: 
‘‘(l) TREATMENT OF DIVIDEND EQUIVALENT PAY-
MENTS.— 
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, sections 881 and 4948(a), and chapters 3 and 
4, a dividend equivalent shall be treated as a divi-
dend from sources within the United States. 
‘‘(2) DIVIDEND EQUIVALENT.—For purposes of 
this subsection, the term ‘dividend equivalent’ 
means— 
‘‘(A) any substitute dividend, 
‘‘(B) any payment made pursuant to a 
specified notional principal contract that (di-
rectly or indirectly) is contingent upon, or de-
termined by reference to, the payment of a divi-
dend from sources within the United States, 
and 
‘‘(C) any other payment determined by the 
Secretary to be substantially similar to a pay-
ment described in subparagraph (A) or (B). 
‘‘(3) SPECIFIED
NOTIONAL
PRINCIPAL
CON-
TRACT.—For purposes of this subsection, the term 
‘specified notional principal contract’ means— 
‘‘(A) any notional principal contract if— 
‘‘(i) in connection with entering into 
such contract, any long party transfers the 
underlying security, 
‘‘(ii) in connection with the termi-
nation of such contract, any short party 
transfers the underlying security to any 
long party, 
‘‘(iii) the underlying security is not 
readily tradable on an established securi-
ties market, 
‘‘(iv) in connection with entering into 
such contract, the underlying security is 
posted as collateral by any short party to 
the contract, or
‘‘(v) such contract is identified by the 
Secretary as a specified notional principal 
contract, 
‘‘(B) in the case of payments made after 
the date which is 2 years after the date of the 
enactment of this subsection, any notional prin-
cipal contract unless the Secretary determines 
that such contract is of a type which does not 
have the potential for tax avoidance. 
‘‘(4) DEFINITIONS.—For purposes of paragraph 
(3)(A)— 
‘‘(A) LONG PARTY.—The term ‘long party’ 
means, with respect to any underlying security 
of any notional principal contract, any party to 
the contract which is entitled to receive any 
payment pursuant to such contract which is 
contingent upon, or determined by reference to, 
the payment of a dividend from sources within 
the United States with respect to such under-
lying security. 
‘‘(B) SHORT
PARTY.—The term ‘short 
party’ means, with respect to any underlying se-
curity of any notional principal contract, any 
party to the contract which is not a long party 
with respect to such underlying security.
‘‘(C) UNDERLYING SECURITY.—The term 
‘underlying security’ means, with respect to any 
notional principal contract, the security with re-
spect to which the dividend referred to in para-
graph (2)(B) is paid. For purposes of this para-
graph, any index or fixed basket of securities 
shall be treated as a single security. 
‘‘(5) 
PAYMENTS
DETERMINED
ON
GROSS 
BASIS.—For purposes of this subsection, the term 
‘payment’ includes any gross amount which is used 
in computing any net amount which is transferred to 
or from the taxpayer. 
‘‘(6) PREVENTION OF OVER-WITHHOLDING.—In 
the case of any chain of dividend equivalents one or 
more of which is subject to tax under this section or 
section 881, the Secretary may reduce such tax, but 
only to the extent that the taxpayer can establish 
that such tax has been paid with respect to another 
dividend equivalent in such chain. For purposes of 
this paragraph, a dividend shall be treated as a divi-
dend equivalent. 
‘‘(7) COORDINATION
WITH
CHAPTERS
AND 
4.—For purposes of chapters 3 and 4, each person 
that is a party to any contract or other arrangement 
that provides for the payment of a dividend equiva-