‘‘(ii) each holder of such account 
which is a specified United States person 
or United States owned foreign entity were 
a natural person and citizen of the United 
States. 
An election under this paragraph shall be made 
at such time, in such manner, and subject to 
such conditions as the Secretary may provide. 
‘‘(3) INFORMATION
SUPPLIED
BY
ACCOUNT 
HOLDERS.—The foreign financial institution may 
rely on a certification from an account holder as to 
whether an account is a United States account and 
for the information required under paragraph (1)(A) 
with respect to such account holder if neither the fi-
nancial institution nor any entity which is a member 
of the same expanded affiliated group as such finan-
cial institution knows, or has reason to know, that 
any information provided in such certification is in-
correct. 
‘‘(4) SEPARATE
REQUIREMENTS
FOR
QUALI-
FIED INTERMEDIARIES.—In the case of a foreign fi-
nancial institution which is treated as a qualified 
intermediary by the Secretary for purposes of sec-
tion 1441 and the regulations issued thereunder, the 
requirements of this section shall be in addition to 
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any reporting or other requirements imposed by the 
Secretary for purposes of such treatment. 
‘‘(d) DEFINITIONS.—For purposes of this section— 
‘‘(1) UNITED STATES ACCOUNT.— 
‘‘(A) IN
GENERAL.—The term ‘United 
States account’ means any financial account 
which is held by one or more specified United 
States persons or United States owned foreign 
entities. 
‘‘(B) EXCEPTION FOR CERTAIN ACCOUNTS 
HELD BY INDIVIDUALS.—Unless the foreign fi-
nancial institution elects to not have this sub-
paragraph apply, such term shall not include 
any depository account maintained by such fi-
nancial institution if— 
‘‘(i) each holder of such account is a 
natural person, and 
‘‘(ii) with respect to each holder of 
such account, the aggregate value of all de-
pository accounts held (in whole or in part) 
by such holder and maintained by the 
same financial institution which maintains 
such account does not exceed $10,000 
($50,000 if all such accounts were in exist-
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ence on the date of the enactment of this 
section). 
For purposes of clause (ii), all financial institu-
tions which are members of the same expanded 
affiliated group shall be treated as a single fi-
nancial institution. 
‘‘(2) FINANCIAL ACCOUNT.—The term ‘finan-
cial account’ means, with respect to any financial in-
stitution— 
‘‘(A) any depository account maintained by 
such financial institution, 
‘‘(B) any custodial account maintained by 
such financial institution, and 
‘‘(C) except as otherwise provided by the 
Secretary, any equity or debt interest in such 
financial institution (other than interests which 
are regularly traded on an established securities 
market). 
Any equity or debt interest which constitutes a fi-
nancial account under subparagraph (C) with re-
spect to any financial institution shall be treated for 
purposes of this section as maintained by such fi-
nancial institution. 
‘‘(3) UNITED STATES OWNED FOREIGN ENTI-
TY.—The term ‘United States owned foreign entity’ 
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means any foreign entity which has one or more sub-
stantial United States owners. 
‘‘(4) FOREIGN FINANCIAL INSTITUTION.—The 
term ‘foreign financial institution’ means any finan-
cial institution which is a foreign entity. 
‘‘(5) FINANCIAL INSTITUTION.—Except as oth-
erwise provided by the Secretary, the term ‘financial 
institution’ means any entity that— 
‘‘(A) accepts deposits in the ordinary 
course of a banking or similar business, 
‘‘(B) is engaged in the business of holding 
financial assets for the account of others, or 
‘‘(C) is engaged (or holding itself out as 
being engaged) primarily in the business of in-
vesting, reinvesting, or trading in securities (as 
defined in section 475(c)(2) without regard to 
the last sentence thereof), partnership interests, 
commodities (as defined in section 475(e)(2)), 
or any interest (including a futures or forward 
contract or option) in such securities, partner-
ship interests, or commodities. 
‘‘(e) AFFILIATED GROUPS.— 
‘‘(1) IN GENERAL.—The requirements of sub-
sections (b), (c)(1), and (c)(3) shall apply— 
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‘‘(A) with respect to United States ac-
counts maintained by the foreign financial insti-
tution, and 
‘‘(B) except as otherwise provided by the 
Secretary, with respect to United States ac-
counts maintained by each other foreign finan-
cial institution (other than any foreign financial 
institution which meets the requirements of 
subsection (b)) which is a member of the same 
expanded affiliated group as such foreign finan-
cial institution. 
‘‘(2) EXPANDED AFFILIATED GROUP.—For pur-
poses of this section, the term ‘expanded affiliated 
group’ means an affiliated group as defined in sec-
tion 1504(a), determined— 
‘‘(A) by substituting ‘more than 50 per-
cent’ for ‘at least 80 percent’ each place it ap-
pears, and 
‘‘(B) without regard to paragraphs (2) and 
(3) of section 1504(b). 
A partnership or any other entity (other than a cor-
poration) shall be treated as a member of an ex-
panded affiliated group if such entity is controlled 
(within the meaning of section 954(d)(3)) by mem-
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bers of such group (including any entity treated as 
a member of such group by reason of this sentence). 
‘‘(f) EXCEPTION
FOR CERTAIN PAYMENTS.—Sub-
section (a) shall not apply to any payment if the beneficial 
owner of such payment is— 
‘‘(1) any foreign government, any political sub-
division of a foreign government, or any wholly 
owned agency or instrumentality of any one or more 
of the foregoing, 
‘‘(2) any international organization or any 
wholly owned agency or instrumentality thereof, 
‘‘(3) any foreign central bank of issue, or 
‘‘(4) any other class of persons identified by the 
Secretary for purposes of this subsection as posing 
a low risk of tax evasion. 
‘‘SEC. 1472. WITHHOLDABLE PAYMENTS TO OTHER FOR-
EIGN ENTITIES. 
‘‘(a) IN GENERAL.—In the case of any withholdable 
payment to a non-financial foreign entity, if— 
‘‘(1) the beneficial owner of such payment is 
such entity or any other non-financial foreign entity, 
and 
‘‘(2) the requirements of subsection (b) are not 
met with respect to such beneficial owner, 
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‘‘(A) any corporation the stock of which is 
regularly traded on an established securities 
market, 
‘‘(B) any corporation which is a member of 
the same expanded affiliated group (as defined 
in section 1471(e)(2) without regard to the last 
sentence thereof) as a corporation described in 
subparagraph (A), 
‘‘(C) any foreign government, any political 
subdivision of a foreign government, or any 
wholly owned agency or instrumentality of any 
one or more of the foregoing, 
‘‘(D) any international organization or any 
wholly owned agency or instrumentality thereof, 
‘‘(E) any foreign central bank of issue, or 
‘‘(F) any other class of persons identified 
by the Secretary for purposes of this subsection, 
and 
‘‘(2) any class of payments identified by the 
Secretary for purposes of this subsection as posing 
a low risk of tax evasion. 
‘‘(d) NON-FINANCIAL FOREIGN ENTITY.—For pur-
poses of this section, the term ‘non-financial foreign enti-
ty’ means any foreign entity which is not a financial insti-
tution (as defined in section 1471(d)(5)). 
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‘‘SEC. 1473. DEFINITIONS. 
‘‘For purposes of this subchapter— 
‘‘(1) WITHHOLDABLE
PAYMENT.—The term 
‘withholdable payment’ means— 
‘‘(A) any payment of interest (including 
any original issue discount), dividends, rents, 
salaries, wages, premiums, annuities, compensa-
tions, remunerations, emoluments, and other 
fixed or determinable annual or periodical 
gains, profits, and income, if such payment is 
from sources within the United States, and 
‘‘(B) any gross proceeds from the sale of 
any property of a type which can produce inter-
est or dividends from sources within the United 
States. 
‘‘(2) SUBSTANTIAL UNITED STATES OWNER.— 
‘‘(A) IN GENERAL.—The term ‘substantial 
United States owner’ means— 
‘‘(i) with respect to any corporation, 
any specified United States person which 
owns, directly or indirectly, more than 10 
percent of the stock of such corporation 
(by vote or value), 
‘‘(ii) with respect to any partnership, 
any specified United States person which 
owns, directly or indirectly, more than 10 
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percent of the profits interests or capital 
interests in such partnership, and 
‘‘(iii) in the case of a trust, any speci-
fied United States person treated as an 
owner of any portion of such trust under 
subpart E of part I of subchapter J of 
chapter 1. 
‘‘(B) SPECIAL RULE FOR INVESTMENT VE-
HICLES.—In the case of any financial institu-
tion described in section 1471(d)(5)(C), clauses 
(i) and (ii) of subparagraph (A) shall be applied 
by substituting ‘0 percent’ for ‘10 percent’. 
‘‘(3) SPECIFIED UNITED STATES PERSON.—Ex-
cept as otherwise provided by the Secretary, the 
term ‘specified United States person’ means any 
United States person other than— 
‘‘(A) any corporation the stock of which is 
regularly traded on an established securities 
market, 
‘‘(B) any corporation which is a member of 
the same expanded affiliated group (as defined 
in section 1471(e)(2) without regard to the last 
sentence thereof) as a corporation described in 
subparagraph (A), 
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‘‘(C) any organization exempt from tax-
ation under section 501(a) or an individual re-
tirement plan, 
‘‘(D) the United States or any wholly 
owned agency or instrumentality thereof, 
‘‘(E) any State, the District of Columbia, 
any possession of the United States, any polit-
ical subdivision of any of the foregoing, or any 
wholly owned agency or instrumentality of any 
one or more of the foregoing, 
‘‘(F) any bank (as defined in section 581), 
‘‘(G) any real estate investment trust (as 
defined in section 856), 
‘‘(H) any regulated investment company 
(as defined in section 851), 
‘‘(I) any common trust fund (as defined in 
section 584(a)), and 
‘‘(J) any trust which— 
‘‘(i) is exempt from tax under section 
664(c), or 
‘‘(ii) 
is 
described 
in 
section 
4947(a)(1). 
‘‘(4) WITHHOLDING AGENT.—The term ‘with-
holding agent’ means all persons, in whatever capac-
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ity acting, having the control, receipt, custody, dis-
posal, or payment of any withholdable payment. 
‘‘(5) FOREIGN ENTITY.—The term ‘foreign en-
tity’ means any entity which is not a United States 
person. 
‘‘SEC. 1474. SPECIAL RULES. 
‘‘(a) LIABILITY FOR WITHHELD TAX.—Every person 
required to deduct and withhold any tax under this chap-
ter is hereby made liable for such tax and is hereby indem-
nified against the claims and demands of any person for 
the amount of any payments made in accordance with the 
provisions of this chapter. 
‘‘(b) CREDITS AND REFUNDS.— 
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), the determination of whether any tax de-
ducted and withheld under this chapter results in an 
overpayment shall be made as if such tax had been 
deducted and withheld under subchapter A of chap-
ter 3. 
‘‘(2) SPECIAL RULE WHERE FOREIGN FINAN-
CIAL INSTITUTION IS BENEFICIAL OWNER OF PAY-
MENT.— 
‘‘(A) IN GENERAL.—In the case of any tax 
deducted and withheld under section 1471(a) 
from a specified financial institution payment— 
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‘‘(i) if the foreign financial institution 
referred to in subparagraph (B) with re-
spect to such payment is entitled to a re-
duced rate of tax with respect to such pay-
ment by reason of any treaty obligation of 
the United States— 
‘‘(I) the amount of any credit or 
refund with respect to such tax shall 
not exceed the amount of credit or re-
fund attributable to such reduction in 
rate, and 
‘‘(II) no interest shall be allowed 
or paid with respect to such credit or 
refund, and 
‘‘(ii) if such foreign financial institu-
tion is not so entitled, no credit or refund 
shall be allowed or paid with respect to 
such tax. 
‘‘(B) SPECIFIED FINANCIAL INSTITUTION 
PAYMENT.—The term ‘specified financial insti-
tution payment’ means any withholdable pay-
ment if the foreign financial institution payee 
referred to in section 1471(a) with respect to 
such payment is the beneficial owner of such 
payment. 
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‘‘(c) CONFIDENTIALITY OF INFORMATION.— 
‘‘(1) IN GENERAL.—For purposes of this chap-
ter, rules similar to the rules of section 3406(f) shall 
apply. 
‘‘(2) DISCLOSURE OF LIST OF QUALIFIED FOR-
EIGN
FINANCIAL
INSTITUTIONS
PERMITTED.—The 
identity of a foreign financial institution which 
meets the requirements of section 1471(b) shall not 
be treated as return information for purposes of sec-
tion 6103. 
‘‘(d) REGULATIONS.—The Secretary shall prescribe 
such regulations or other guidance as may be necessary 
or appropriate to carry out the purposes of this chapter.’’. 
(b) COORDINATION WITH OTHER WITHHOLDING 
PROVISIONS.— 
(1) WITHHOLDING OF TAX ON NONRESIDENT 
ALIENS AND FOREIGN CORPORATIONS.—Subsection 
(c) of section 1441 is amended by adding at the end 
the following new paragraph: 
‘‘(13) 
WITHHOLDABLE
PAYMENTS
TAXED 
UNDER CHAPTER 4.—No tax shall be required to be 
deducted and withheld under subsection (a) from 
any amount with respect to which tax is required to 
be deducted and withheld under chapter 4.’’. 
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(2) WITHHOLDING OF TAX ON DISPOSITIONS OF 
UNITED STATES REAL PROPERTY INTERESTS.—Sub-
section (b) of section 1445 is amended by adding at 
the end the following new paragraph: 
‘‘(10) 
WITHHOLDABLE
PAYMENTS
TAXED 
UNDER CHAPTER 4.—No tax shall be required to be 
deducted and withheld under subsection (a) from 
any amount with respect to which tax is required to 
be deducted and withheld under chapter 4.’’. 
(c) CLERICAL AMENDMENT.—The table of chapters 
of such Code is amended by adding at the end the fol-
lowing new item: 
‘‘CHAPTER 4. TAXES TO ENFORCE REPORTING ON CERTAIN FOREIGN 
ACCOUNTS.’’. 
(d) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall apply to payments made after December 31, 
2010. 
(2) GRANDFATHERED TREATMENT OF CERTAIN 
OUTSTANDING
OBLIGATIONS.—The 
amendments 
made by this section shall not apply to any obliga-
tion outstanding on the date of first committee ac-
tion, if such obligation— 
(A) is in bearer form, or 
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(B) includes (on the date of the issuance 
of such obligation) a provision under which the 
issuer would (but for this paragraph) be obli-
gated to make additional payments under such 
obligation by reason of the amendments made 
by this section. 
SEC. 102. REPEAL OF CERTAIN FOREIGN EXCEPTIONS TO 
REGISTERED BOND REQUIREMENTS. 
(a) REPEAL OF EXCEPTION TO DENIAL OF DEDUC-
TION FOR INTEREST ON NON-REGISTERED BONDS.— 
(1) IN
GENERAL.—Paragraph (2) of section 
163(f) is amended by striking subparagraph (B) and 
by redesignating subparagraph (C) as subparagraph 
(B). 
(2) CONFORMING AMENDMENTS.— 
(A) Subparagraph (A) of section 163(f)(2) 
is amended by inserting ‘‘or’’ at the end of 
clause (ii), by striking ‘‘, or’’ at the end of 
clause (iii) and inserting a period, and by strik-
ing clause (iv). 
(B) 
Subparagraph 
(B) 
of 
section 
163(f)(2), as redesignated by paragraph (1), is 
amended— 
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(i) by striking ‘‘, and subparagraph 
(B),’’ in the matter preceding clause (i), 
and 
(ii) by amending clause (i) to read as 
follows: 
‘‘(i) such obligation is of a type which 
the Secretary has determined by regula-
tions to be used frequently in avoiding 
Federal taxes, and’’. 
(C) Sections 165(j)(2)(A) and 1287(b)(1) 
are each amended by striking ‘‘except that 
clause (iv) of subparagraph (A), and subpara-
graph (B), of such section shall not apply’’. 
(b) REPEAL OF TREATMENT AS PORTFOLIO DEBT.— 
(1) IN
GENERAL.—Paragraph (2) of section 
871(h) is amended to read as follows: 
‘‘(2) PORTFOLIO INTEREST.—For purposes of 
this subsection, the term ‘portfolio interest’ means 
any interest (including original issue discount) 
which— 
‘‘(A) would be subject to tax under sub-
section (a) but for this subsection, and 
‘‘(B) is paid on an obligation— 
‘‘(i) which is in registered form, and 
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‘‘(ii) with respect to which the United 
States person who would otherwise be re-
quired to deduct and withhold tax from 
such interest under section 1441(a) re-
ceives a statement (which meets the re-
quirements of paragraph (5)) that the ben-
eficial owner of the obligation is not a 
United States person.’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
871(h)(3)(A) is amended by striking ‘‘subparagraph 
(A) or (B) of’’. 
(c) REPEAL OF EXCEPTION TO REQUIREMENT THAT 
TREASURY OBLIGATIONS BE IN REGISTERED FORM.— 
(1) IN
GENERAL.—Subsection (g) of section 
3121 of title 31, United States Code, is amended by 
striking paragraph (2) and by redesignating para-
graphs (3) and (4) as paragraphs (2) and (3), re-
spectively. 
(2) CONFORMING
AMENDMENTS.—Paragraph 
(1) of section 3121(g) of such title is amended— 
(A) by adding ‘‘or’’ at the end of subpara-
graph (A), 
(B) by striking ‘‘; or’’ at the end of sub-
paragraph (B) and inserting a period, and 
(C) by striking subparagraph (C). 
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(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to obligations issued after the date 
which is 180 days after the date of the enactment of this 
Act. 
TITLE 
II—UNDER 
REPORTING 
WITH RESPECT TO FOREIGN 
ASSETS 
SEC. 201. DISCLOSURE OF INFORMATION WITH RESPECT 
TO FOREIGN FINANCIAL ASSETS. 
(a) IN GENERAL.—Subpart A of part III of sub-
chapter A of chapter 61 is amended by inserting after sec-
tion 6038C the following new section: 
‘‘SEC. 6038D. INFORMATION WITH RESPECT TO FOREIGN FI-
NANCIAL ASSETS. 
‘‘(a) IN GENERAL.—Any individual who, during any 
taxable year, holds any interest in a specified foreign fi-
nancial asset shall attach to such person’s return of tax 
imposed by subtitle A for such taxable year the informa-
tion described in subsection (c) with respect to each such 
asset if the aggregate value of all such assets exceeds 
$50,000 (or such higher dollar amount as the Secretary 
may prescribe). 
‘‘(b) SPECIFIED FOREIGN FINANCIAL ASSETS.—For 
purposes of this section, the term ‘specified foreign finan-
cial asset’ means— 
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‘‘(1) any financial account (as defined in section 
1471(d)(2)) maintained by a foreign financial insti-
tution (as defined in section 1471(d)(4)), and 
‘‘(2) any of the following assets which are not 
held in an account maintained by a financial institu-
tion (as defined in section 1471(d)(5))— 
‘‘(A) any stock or security issued by a per-
son other than a United States person, 
‘‘(B) any financial instrument or contract 
held for investment that has an issuer or 
counterparty which is other than a United 
States person, and 
‘‘(C) any interest in a foreign entity (as 
defined in section 1473). 
‘‘(c) REQUIRED INFORMATION.—The information de-
scribed in this subsection with respect to any asset is: 
‘‘(1) In the case of any account, the name and 
address of the financial institution in which such ac-
count is maintained and the number of such ac-
count. 
‘‘(2) In the case of any stock or security, the 
name and address of the issuer and such informa-
tion as is necessary to identify the class or issue of 
which such stock or security is a part. 
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‘‘(3) In the case of any other instrument, con-
tract, or interest— 
‘‘(A) such information as is necessary to 
identify such instrument, contract, or interest, 
and 
‘‘(B) the names and addresses of all 
issuers and counterparties with respect to such 
instrument, contract, or interest. 
‘‘(4) The maximum value of the asset during 
the taxable year. 
‘‘(d) PENALTY FOR FAILURE TO DISCLOSE.— 
‘‘(1) IN GENERAL.—If any individual fails to 
furnish the information described in subsection (c) 
with respect to any taxable year at the time and in 
the manner described in subsection (a), such person 
shall pay a penalty of $10,000. 
‘‘(2) INCREASE IN PENALTY WHERE FAILURE 
CONTINUES
AFTER
NOTIFICATION.—If any failure 
described in paragraph (1) continues for more than 
90 days after the day on which the Secretary mails 
notice of such failure to the individual, such indi-
vidual shall pay a penalty (in addition to the pen-
alties under paragraph (1)) of $10,000 for each 30- 
day period (or fraction thereof) during which such 
failure continues after the expiration of such 90-day 
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period. The penalty imposed under this paragraph 
with respect to any failure shall not exceed $50,000. 
‘‘(e) PRESUMPTION THAT VALUE
OF SPECIFIED 
FOREIGN
FINANCIAL
ASSETS
EXCEEDS
DOLLAR 
THRESHOLD.—If— 
‘‘(1) the Secretary determines that an indi-
vidual has an interest in one or more specified for-
eign financial assets, and 
‘‘(2) such individual does not provide sufficient 
information to demonstrate the aggregate value of 
such assets, 
then the aggregate value of such assets shall be treated 
as being in excess of $50,000 (or such higher dollar 
amount as the Secretary prescribes for purposes of sub-
section (a)) for purposes of assessing the penalties im-
posed under this section. 
‘‘(f) APPLICATION TO CERTAIN ENTITIES.—To the 
extent provided by the Secretary in regulations or other 
guidance, the provisions of this section shall apply to any 
domestic entity which is formed or availed of for purposes 
of holding, directly or indirectly, specified foreign financial 
assets, in the same manner as if such entity were an indi-
vidual. 
‘‘(g) REASONABLE CAUSE EXCEPTION.—No penalty 
shall be imposed by this section on any failure which is 
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shown to be due to reasonable cause and not due to willful 
neglect. The fact that a foreign jurisdiction would impose 
a civil or criminal penalty on the taxpayer (or any other 
person) for disclosing the required information is not rea-
sonable cause. 
‘‘(h) REGULATIONS.—The Secretary shall prescribe 
such regulations or other guidance as may be necessary 
or appropriate to carry out the purposes of this section, 
including regulations or other guidance which provide ap-
propriate exceptions from the application of this section 
in the case of— 
‘‘(1) classes of assets identified by the Sec-
retary, including any assets with respect to which 
the Secretary determines that disclosure under this 
section would be duplicative of other disclosures, and 
‘‘(2) nonresident aliens.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for subpart A of part III of subchapter A of chapter 61 
is amended by inserting after the item relating to section 
6038C the following new item: 
‘‘Sec. 6038D. Information with respect to foreign financial assets.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
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SEC. 
202. 
PENALTIES 
FOR 
UNDERPAYMENTS 
ATTRIB-
UTABLE TO UNDISCLOSED FOREIGN FINAN-
CIAL ASSETS. 
(a) IN GENERAL.—Section 6662 is amended— 
(1) in subsection (b), by inserting after para-
graph (5) the following new paragraph: 
‘‘(6) Any undisclosed foreign financial asset un-
derstatement.’’, and 
(2) by adding at the end the following new sub-
section: 
‘‘(i) UNDISCLOSED FOREIGN FINANCIAL ASSET UN-
DERSTATEMENT.— 
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘undisclosed foreign financial asset 
understatement’ means, for any taxable year, the 
portion of the understatement for such taxable year 
which is attributable to any transaction involving an 
undisclosed foreign financial asset. 
‘‘(2) 
UNDISCLOSED
FOREIGN
FINANCIAL 
ASSET.—For purposes of this subsection, the term 
‘undisclosed foreign financial asset’ means, with re-
spect to any taxable year, any asset with respect to 
which information was required to be provided under 
section 6038, 6038B, 6038D, 6046A, or 6048 for 
such taxable year but was not provided by the tax-
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payer as required under the provisions of those sec-
tions. 
‘‘(3) INCREASE IN PENALTY FOR UNDISCLOSED 
FOREIGN FINANCIAL ASSET UNDERSTATEMENTS.— 
In the case of any portion of an underpayment 
which is attributable to any undisclosed foreign fi-
nancial asset understatement, subsection (a) shall be 
applied with respect to such portion by substituting 
‘40 percent’ for ‘20 percent’.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 203. MODIFICATION OF STATUTE OF LIMITATIONS 
FOR SIGNIFICANT OMISSION OF INCOME IN 
CONNECTION WITH FOREIGN ASSETS. 
(a) EXTENSION OF STATUTE OF LIMITATIONS.— 
(1) IN
GENERAL.—Paragraph (1) of section 
6501(e) is amended by redesignating subparagraphs 
(A) and (B) as subparagraphs (B) and (C), respec-
tively, and by inserting before subparagraph (B) (as 
so redesignated) the following new subparagraph: 
‘‘(A) GENERAL
RULE.—If the taxpayer 
omits from gross income an amount properly 
includible therein and— 
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‘‘(i) such amount is in excess of 25 
percent of the amount of gross income 
stated in the return, or 
‘‘(ii) such amount— 
‘‘(I) is attributable to one or 
more assets with respect to which in-
formation is required to be reported 
under section 6038D (or would be so 
required if such section were applied 
without regard to the dollar threshold 
specified in subsection (a) thereof and 
without regard to any exceptions pro-
vided pursuant to subsection (h)(1) 
thereof), and 
‘‘(II) is in excess of $5,000, 
the tax may be assessed, or a proceeding in 
court for collection of such tax may be begun 
without assessment, at any time within 6 years 
after the return was filed.’’. 
(2) CONFORMING AMENDMENTS.— 
(A) 
Subparagraph 
(B) 
of 
section 
6501(e)(1), as redesignated by paragraph (1), 
is amended by striking all that precedes clause 
(i) and inserting the following: 
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‘‘(B) DETERMINATION
OF
GROSS
IN-
COME.—For purposes of subparagraph (A)—’’. 
(B) Paragraph (2) of section 6229(c) is 
amended by striking ‘‘which is in excess of 25 
percent of the amount of gross income stated in 
its return’’ and inserting ‘‘and such amount is 
described in clause (i) or (ii) of section 
6501(e)(1)(A)’’. 
(b) ADDITIONAL REPORTS SUBJECT TO EXTENDED 
PERIOD.—Paragraph (8) of section 6501(c) is amended— 
(1) by inserting ‘‘pursuant to an election under 
section 1295(b) or’’ before ‘‘under section 6038’’, 
(2) by inserting ‘‘1298(f),’’ before ‘‘6038’’, and 
(3) by inserting ‘‘6038D,’’ after ‘‘6038B,’’. 
(c) CLARIFICATIONS RELATED TO FAILURE TO DIS-
CLOSE FOREIGN TRANSFERS.—Paragraph (8) of section 
6501(c) is amended by striking ‘‘event’’ and inserting ‘‘tax 
return, event,’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to— 
(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 
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such amendments) for assessment of such taxes has 
not expired as of such date. 
TITLE III—OTHER DISCLOSURE 
PROVISIONS 
SEC. 301. DISCLOSURE OF ASSISTANCE IN ACQUIRING OR 
FORMING A FOREIGN ENTITY. 
(a) IN GENERAL.—Subchapter B of chapter 61 is 
amended by redesignating section 6116 as section 6117 
and by inserting after 6115 the following new section: 
‘‘SEC. 6116. DISCLOSURE OF ASSISTANCE IN ACQUIRING OR 
FORMING A FOREIGN ENTITY. 
‘‘(a) IN GENERAL.—Each material advisor with re-
spect to any foreign entity transaction shall make a return 
(in such form as the Secretary may prescribe) setting 
forth— 
‘‘(1) the identity of the foreign entity referred 
to in subsection (d), 
‘‘(2) the identity of the citizen or resident of 
the United States referred to in subsection (d), and 
‘‘(3) such other information as the Secretary 
may prescribe. 
Such return shall be filed not later than the date specified 
by the Secretary. 
‘‘(b) PENALTY FOR NONDISCLOSURE.—Any person 
who is required to file a return under subsection (a) with 
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respect to any foreign entity transaction and fails to file 
such return on or before the date prescribed therefor (or 
files false or incomplete information with respect to such 
transaction) shall pay a penalty equal to the greater of— 
‘‘(1) $10,000, or 
‘‘(2) 50 percent of the gross income derived by 
such person with respect to aid, assistance or advice 
which is provided with respect to such transaction 
before the date the return is filed under subsection 
(a). 
‘‘(c) MATERIAL ADVISOR.—For purposes of this sec-
tion, the term ‘material advisor’ means any person— 
‘‘(1) who provides any material aid, assistance, 
or advice with respect to carrying out one or more 
foreign entity transactions, and 
‘‘(2) who directly or indirectly derives gross in-
come in excess of $100,000 for providing such aid, 
assistance or advice during the calendar year. 
‘‘(d) FOREIGN ENTITY TRANSACTION.—For pur-
poses of this section, the term ‘foreign entity transaction’ 
means the direct or indirect acquisition of any interest in 
a foreign entity (including any interest acquired in connec-
tion with the formation of such entity) if any citizen or 
resident of the United States is required to file a report 
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under section 6038, 6038B, 6046, 6046A, or 6048 in con-
nection with such acquisition. 
‘‘(e) REASONABLE CAUSE EXCEPTION.—No penalty 
shall be imposed by this section on any failure which is 
shown to be due to reasonable cause and not due to willful 
neglect. 
‘‘(f) REGULATIONS.—The Secretary may prescribe 
regulations or other guidance which provide— 
‘‘(1) that only 1 person shall be required to 
meet the requirements of subsection (a) in cases in 
which 2 or more persons would otherwise be re-
quired to meet such requirements, 
‘‘(2) exemptions from the requirements of this 
section, and 
‘‘(3) such rules as may be necessary or appro-
priate to carry out the purposes of this section.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for subchapter B of chapter 61 is amended by redesig-
nating the item relating to section 6116 as an item relat-
ing to section 6117 and by inserting after the item relating 
to section 6115 the following new item: 
‘‘Sec. 6116. Disclosure of assistance in acquiring or forming a foreign entity.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to aid, assistance, and advice pro-
vided after the date of the enactment of this Act. 
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SEC. 302. 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.—Each person who 
is a shareholder of a passive foreign investment company 
shall file an annual report containing such information 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. 303. 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-
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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) 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. 
TITLE IV—PROVISIONS RELATED 
TO FOREIGN TRUSTS 
SEC. 401. 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-
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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, 
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such agreement or understanding shall be treated as 
a term of the trust.’’. 
SEC. 402. 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)), such trust shall be presumed to have 
a United States beneficiary for purposes of applying 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. 
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SEC. 403. UNCOMPENSATED USE OF TRUST PROPERTY 
TREATED AS A DISTRIBUTION. 
(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 401, 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-
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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. 404. 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 
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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. 405. 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. 
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TITLE 
V—DIVIDEND 
EQUIVA-
LENT PAYMENTS RECEIVED 
BY 
FOREIGN 
PERSONS 
TREATED AS DIVIDENDS 
SEC. 501. DIVIDEND EQUIVALENT 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— 
‘‘(A) IN
GENERAL.—The term ‘dividend 
equivalent’ means— 
‘‘(i) any payment made pursuant to a 
notional principal contract that (directly or 
indirectly) is contingent upon, or deter-
mined by reference to, the payment of a 
dividend from sources within the United 
States, and 
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‘‘(ii) any other payment determined 
by the Secretary to be substantially similar 
to a payment described in clause (i). 
‘‘(B) EXCEPTIONS.—Such term does not 
include any payment pursuant to any contract 
or other arrangement which the Secretary de-
termines does not have the potential for tax 
avoidance. In making such determination, the 
Secretary may take into account the following 
factors with respect to such contract or ar-
rangement: 
‘‘(i) The term (including provisions 
for early terminations and offsetting finan-
cial contracts). 
‘‘(ii) The amount of each party’s in-
vestment and the amounts of any collateral 
posted. 
‘‘(iii) Whether the price of the equity 
used to measure the parties’ entitlements 
or obligations is based on an objectively 
observable price. 
‘‘(iv) Whether either party sells (di-
rectly or indirectly) to the other party the 
security giving rise to dividends from 
sources within the United States. 
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‘‘(v) Whether there are terms that ad-
dress the hedge position of either party or 
other conditions which would compel either 
party to hold or acquire the security giving 
rise to dividends from sources within the 
United States. 
‘‘(vi) Such other factors as the Sec-
retary determines appropriate. 
‘‘(C) PAYMENTS DETERMINED ON GROSS 
BASIS.—The term ‘payment’ includes any gross 
amount which is used in computing any net 
amount which is transferred to or from the tax-
payer. 
‘‘(D) 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 pay-
ment of a dividend equivalent shall be treated 
as having control of such payment.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to payments made on or after the 
date that is 90 days after the date of the enactment of 
this Act. 
Æ 
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