Non-QI Related proposals include the following:

1. Require Reporting of Certain Transfers of Money or Property to Foreign Financial Accounts: A U.S. individual would be required to report, on the individual’s income tax return, any transfer of money or property made to, or receipt of money or property from, any foreign bank, brokerage, or other financial account by the individual, or by any entity of which the individual owns, actually or constructively, more than 50 percent of the ownership interest. Transfers to accounts held at qualified intermediaries and receipts from accounts held by U.S. persons at qualified intermediaries would not be required to be reported. In addition, individuals would be exempt from the reporting requirement if the cumulative amount or value of transfers and the cumulative amount or value of receipts that would otherwise be reportable on the individual’s income tax return for a given year were each less than $10,000. Failure to report a covered transfer would result in the imposition of a penalty equal to the lesser of $10,000 per reportable transfer or 10 percent of the cumulative amount or value of the unreported covered transfers. No penalty would be imposed for a failure to report due to reasonable cause. The proposal would be effective for transfers made after December 31 of the year of enactment.
   
2. Require Disclosure of Foreign Bank Account Report (FBAR) Accounts to Be Filed With Tax Return: Individual taxpayers required to file an Foreign Bank Account Report (FBAR) would be required to disclose certain information on their income tax returns. The information would be disclosed on a schedule that would be considered part of the individual’s income tax return. The schedule would be consistent with the information disclosure obligations of the FBAR itself, and would require the taxpayer to provide information such as the account number, financial institution, and maximum value during the year. The disclosures would be required when the income tax return is due, even if the FBAR is not required to be filed until a later date. The tax return disclosure would not replace or mitigate the individual’s obligation to separately file an FBAR with the Treasury Department as required. The penalties imposed for failing to file an FBAR would continue to apply. Failure to disclose the foreign accounts with the income tax return would not be subject to those penalties, although it could give rise to penalties and other consequences imposed under the Code, including extension of the statute of limitations. The proposal would be effective for taxable years beginning after December 31 of the year of enactment.
   
   
3. Require Third-Party Information Reporting Regarding the Transfer of Assets to Foreign Financial Accounts and the Establishment of Foreign Financial Accounts: Any U.S. financial intermediary and any qualified intermediary that transfers money or property with a value of more than $10,000 to a foreign bank, brokerage, or other financial account on behalf of a U.S. person would be required to file an information return regarding such transfer. Any U.S. financial intermediary and any qualified intermediary that receives a transfer of money or property with a value of more than $10,000 from a foreign bank, brokerage, or other financial account on behalf of a U.S. person would be required to file an information return regarding such transfer. Any U.S. financial intermediary and any qualified intermediary that opens a foreign bank, brokerage, or other financial account on behalf of a U.S. person would be required to file an information return with the IRS regarding such account, including reporting any amounts of money or property transferred by the financial intermediary to such account.
   
   Exceptions to the reporting requirement would be provided for 1) accounts opened and amounts transferred to, from, or on behalf of, publicly traded companies and their subsidiaries, 2) accounts opened at and transfers made to qualified intermediaries on behalf of a U.S. person or 3) transfers received by or on behalf of a U.S. person from accounts held by a U.S. person at a qualified intermediary. The proposal would be effective for amounts transferred and accounts opened beginning after December 31 of the year of enactment.
   
   
4. Require Third-Party Information Reporting Regarding the Establishment of Offshore Entities: Any U.S. person, or any qualified intermediary, that forms or acquires a foreign entity on behalf of a U.S. individual would be required to file an information return with the IRS regarding the foreign entity that is formed or acquired. The proposal would be effective for entities formed or acquired after December 31 of the year of enactment.
   
   
5. Negative Presumption for Foreign Accounts With Respect to Which an FBAR Has Not Been Filed: A rebuttable evidentiary presumption would be applicable in a civil administrative or judicial proceeding providing that any foreign bank, brokerage, or other financial account in which a citizen or resident of the United States, or a person in and doing business in the United States, has a financial interest in or signature or other authority over the account contains enough funds to require that an FBAR be filed. An exception would apply for accounts held through a qualified intermediary. The rebuttable evidentiary presumption would not apply in criminal proceedings. The proposal would be effective for FBARs due to be filed beginning after the date of enactment.
   
   
6. Negative Presumption Regarding Failure to File An FBAR For Accounts With Nonqualified Intermediaries: A rebuttable evidentiary presumption would be applicable in a civil administrative or judicial proceeding providing that failure to file an FBAR with respect to any foreign bank, brokerage, or other financial account held with a nonqualified intermediary is willful if the account has a balance of greater than $200,000 at any point during the calendar year. The evidentiary presumption would not apply to accounts in which the person has signature or other authority by virtue of being an officer or employee of a corporation, but otherwise has no more than a de minimis financial interest in that corporation. The evidentiary presumption would not apply in criminal proceedings. The proposal would be effective for FBARs due to be filed beginning after the date of enactment.
   
   
7. Negative Presumption Regarding Withholding On FDAP Payments to Certain Foreign Entities: Any withholding agent making a payment of FDAP income to a foreign entity would be required to treat the payment as made to an unknown person (and therefore subject to 30 percent gross-basis withholding tax), unless the foreign entity provides documentation of the entity’s beneficial owners. Exceptions would be provided for payments to publicly traded companies and their subsidiaries, foreign governments, and pension funds. The proposal would be effective for payments made after December 31 of the year of enactment.
   
   
8. Extend Statute of Limitations for Certain Reportable Cross-Border Transactions and Foreign Entities: This would extend the statute of limitations from 3 years to 6 years from the date all required information reporting is made with respect to cross border transactions (e.g. reorganizations, formations, acquisitions and dispositions of foreign entities, etc) and reporting obligations related to ownership of foreign entities, including reporting obligations relating to PFICs and QEFs. The Treasury Department would receive regulatory authority to provide exceptions from these rules. The proposal would be effective for returns due to be filed after the date of enactment.
   
   
9. Double Accuracy-Related Penalties On Understatements Involving Undisclosed Foreign Accounts: The 20-percent accuracy-related penalty imposed on (i) substantial understatements of income tax, (ii) understatements resulting from negligence or disregard of rules or regulations, or (iii) a reportable transaction understatement, would be doubled to 40 percent when the understatement arises from a transaction involving a foreign account that the taxpayer failed to disclose properly under the proposed requirement that taxpayers disclose FBAR-related information on their income tax returns. In addition, in the case of a reportable transaction understatement, the reasonable cause exception would not be available with respect to this increased penalty. The proposal would be effective for taxable years beginning after December 31 of the year of enactment.
   
   
10. Improve the Foreign Trust Reporting Penalty: The penalty provision would be amended to impose an initial penalty of the greater of $10,000 or 35 percent of the gross reportable amount (if the gross reportable amount is known). The additional $10,000 penalty for continued failure to report would remain unchanged. Thus, even if the gross reportable amount is not known, the IRS may impose a $10,000 penalty on a person who fails to report timely or correctly as required, and may impose a $10,000 penalty for each 30-day period (or fraction thereof) that the failure to report continues. If the person subsequently provides enough information for the IRS to determine the gross reportable amount, the total penalties would be capped at that amount and any excess penalty already paid would be refunded. Accordingly, a person can stop the compounding of penalties by cooperating with the IRS so that it can determine the gross reportable amount. The proposal would be effective for information reports required to be filed after December 31 of the year of enactment.
    

For more information on this or other tax matters, please contact your J.H. Cohn professional at 877-704-3500.

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