Foreign Account Tax Compliance Act of 2009 (FATCA) Near Passage

Tax Notes Today reports this morning that the Senate is poised to pass the Foreign Account Tax Compliance Act of 2009 (FATCA) as part of the larger bill now called Hiring Incentives to Restore Employment (HIRE) Act.

Tax Notes reports the key provisions of the FATCA subtitle would:

• impose a 30 percent tax withholding on payments either to foreign banks and trusts that fail to identify U.S. accounts and their owners and assets to the IRS, or to foreign corporations that do not supply the name, address, and tax identification number of any U.S. individual with at least 10 percent ownership in the firm (effective for payments made after December 31, 2012, with certain exceptions for grandfathered agreements);

• extend bearer-bond tax penalties to any such bonds marketed to offshore investors, and prevent the U.S. government from issuing bearer bonds (effective two years after the date of enactment);

• impose penalties as high as $50,000 on U.S. taxpayers who own at least $50,000 in offshore accounts or assets but fail to report the accounts on their annual income tax return (effective for tax years beginning after the date of enactment);

• levy a 40 percent penalty on the amount of any understatement attributed to undisclosed foreign assets (effective for tax years after the date of enactment);

• extend to six years the statute of limitations for "substantial" omissions -- exceeding $5,000 and 25 percent of reported income -- derived from offshore assets (effective for returns filed after the date of enactment, or for any return filed on or before that date if the section 6501 assessment period for that return has not expired as of the date of enactment);

• require shareholders in passive foreign investment companies to file annual returns (effective upon enactment);

• mandate that financial firms file electronic returns with respect to withholding taxes, even if they file fewer than 250 returns annually (effective for returns due after the date of enactment);

• codify Treasury regulations that treat foreign trusts as having U.S. beneficiaries if any current, future, or contingent beneficiary is a U.S. person;

• allow the Treasury Department to presume that a foreign trust has U.S. beneficiaries if a U.S. person directly or indirectly transfers property to the trust (effective for transfers of property after the date of enactment);

• establish a $10,000 minimum failure-to-file penalty for certain foreign-trust-related information returns (effective for notices and returns due after December 31, 2009); and

• subject dividend equivalent payments included in notional principal contracts and paid to overseas corporations to the same 30 percent withholding tax levied on dividends paid to foreign investors (effective for payments made on or after 180 days after enactment).

Addendum

The provisions of the HIRE Act are accessible at the Wikisource web site here. The particular provisions relevant to this discussion are in Title V Subtitle A, Foreign Account Tax Compliance Act (FATCA) here.