[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 1934 Introduced in Senate (IS)]

111th CONGRESS
  1st Session
                                S. 1934

To amend the Internal Revenue Code of 1986 to prevent the avoidance of 
     tax on income from assets held abroad, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            October 27, 2009

 Mr. Baucus (for himself, Mr. Kerry, and Mrs. Shaheen) introduced the 
 following bill; which was read twice and referred to the Committee on 
                                Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to prevent the avoidance of 
     tax on income from assets held abroad, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE, ETC.

    (a) Short Title.--This Act may be cited as the ``Foreign Account 
Tax Compliance Act of 2009''.
    (b) Reference.--Except as otherwise expressly provided, whenever in 
this Act an amendment or repeal is expressed in terms of an amendment 
to, or repeal of, a section or other provision, the reference shall be 
considered to be made to a section or other provision of the Internal 
Revenue Code of 1986.
    (c) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title, etc.
           TITLE I--INCREASED DISCLOSURE OF BENEFICIAL OWNERS

Sec. 101. Reporting on certain foreign accounts.
Sec. 102. Repeal of certain foreign exceptions to registered bond 
                            requirements.
        TITLE II--UNDER REPORTING WITH RESPECT TO FOREIGN ASSETS

Sec. 201. Disclosure of information with respect to foreign financial 
                            assets.
Sec. 202. Penalties for underpayments attributable to undisclosed 
                            foreign financial assets.
Sec. 203. Modification of statute of limitations for significant 
                            omission of income in connection with 
                            foreign assets.
                 TITLE III--OTHER DISCLOSURE PROVISIONS

Sec. 301. Disclosure of assistance in acquiring or forming a foreign 
                            entity.
Sec. 302. Reporting of activities with respect to passive foreign 
                            investment companies.
Sec. 303. Secretary permitted to require financial institutions to file 
                            certain returns related to withholding on 
                            foreign transfers electronically.
             TITLE IV--PROVISIONS RELATED TO FOREIGN TRUSTS

Sec. 401. Clarifications with respect to foreign trusts which are 
                            treated as having a United States 
                            beneficiary.
Sec. 402. Presumption that foreign trust has United States beneficiary.
Sec. 403. Uncompensated use of trust property treated as a 
                            distribution.
Sec. 404. Reporting requirement of United States owners of foreign 
                            trusts.
Sec. 405. Minimum penalty with respect to failure to report on certain 
                            foreign trusts.
   TITLE V--DIVIDEND EQUIVALENT PAYMENTS RECEIVED BY FOREIGN PERSONS 
                          TREATED AS DIVIDENDS

Sec. 501. Dividend equivalent payments received by foreign persons 
                            treated as dividends.

           TITLE I--INCREASED DISCLOSURE OF BENEFICIAL OWNERS

SEC. 101. REPORTING ON CERTAIN FOREIGN ACCOUNTS.

    (a) In General.--The Internal Revenue Code of 1986 is amended by 
inserting after chapter 3 the following new chapter:

  ``CHAPTER 4--TAXES TO ENFORCE REPORTING ON CERTAIN FOREIGN ACCOUNTS

``Sec. 1471. Withholdable payments to foreign financial institutions.
``Sec. 1472. Withholdable payments to other foreign entities.
``Sec. 1473. Definitions.
``Sec. 1474. Special rules.

``SEC. 1471. WITHHOLDABLE PAYMENTS TO FOREIGN FINANCIAL INSTITUTIONS.

    ``(a) In General.--In the case of any withholdable payment to a 
foreign financial institution which does not meet the requirements of 
subsection (b), the withholding agent with respect to such payment 
shall deduct and withhold from such payment a tax equal to 30 percent 
of the amount of such payment.
    ``(b) Reporting Requirements, etc.--
            ``(1) In general.--The requirements of this subsection are 
        met with respect to any foreign financial institution if an 
        agreement is in effect between such institution and the 
        Secretary under which such institution agrees--
                    ``(A) to obtain such information from each holder 
                of each account maintained by such institution as is 
                necessary to determine which (if any) of such accounts 
                are United States accounts,
                    ``(B) to comply with such verification and due 
                diligence procedures as the Secretary may require with 
                respect to the identification of United States 
                accounts,
                    ``(C) in the case of any United States account 
                maintained by such institution, to report on an annual 
                basis (at such time and in such manner as the Secretary 
                may provide) the information described in subsection 
                (c) with respect to such account,
                    ``(D) to comply with requests by the Secretary for 
                additional information with respect to any United 
                States account maintained by such institution, and
                    ``(E) in any case in which any foreign law would 
                (but for a waiver described in clause (i)) prevent the 
                reporting of any information referred to in this 
                subsection or subsection (c) with respect to any United 
                States account maintained by such institution--
                            ``(i) to attempt to obtain a valid and 
                        effective waiver of such law from each holder 
                        of such account, and
                            ``(ii) if a waiver described in clause (i) 
                        is not obtained from each such holder, to close 
                        such account.
            ``(2) Termination of agreement.--Any agreement entered into 
        under this subsection may be terminated by the Secretary upon a 
        determination by the Secretary that the foreign financial 
        institution is out of compliance with such agreement.
    ``(c) Information Required To Be Reported on United States 
Accounts.--
            ``(1) In general.--The agreement described in subsection 
        (b) shall require the foreign financial institution to report 
        the following with respect to each United States account 
        maintained by such institution:
                    ``(A) The name, address, and TIN of each account 
                holder which is a specified United States person and, 
                in the case of any account holder which is a United 
                States owned foreign entity, the name, address, and TIN 
                of each substantial United States owner of such entity.
                    ``(B) The account number.
                    ``(C) The account balance or value (determined at 
                such time and in such manner as the Secretary may 
                provide).
                    ``(D) The gross receipts and gross withdrawals or 
                payments from the account (determined for such period 
                and in such manner as the Secretary may provide).
            ``(2) Election to be subject to same reporting as united 
        states financial institutions.--In the case of a foreign 
        financial institution which elects the application of this 
        paragraph--
                    ``(A) subparagraphs (C) and (D) of paragraph (1) 
                shall not apply, and
                    ``(B) the agreement described in subsection (b) 
                shall require such foreign financial institution to 
                report such information with respect to each United 
                States account maintained by such institution as such 
                institution would be required to report under sections 
                6041, 6042, 6045, and 6049 if--
                            ``(i) such institution were a United States 
                        person, and
                            ``(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 financial 
        institution nor any entity which is a member of the same 
        expanded affiliated group as such financial institution knows, 
        or has reason to know, that any information provided in such 
        certification is incorrect.
            ``(4) Separate requirements for qualified intermediaries.--
        In the case of a foreign financial institution which is treated 
        as a qualified intermediary by the Secretary for purposes of 
        section 1441 and the regulations issued thereunder, the 
        requirements of this section shall be in addition to 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 financial institution 
                elects to not have this subparagraph apply, such term 
                shall not include any depository account maintained by 
                such financial 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 depository 
                        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 existence on the date of the 
                        enactment of this section).
                For purposes of clause (ii), all financial institutions 
                which are members of the same expanded affiliated group 
                shall be treated as a single financial institution.
            ``(2) Financial account.--The term `financial account' 
        means, with respect to any financial institution--
                    ``(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 financial 
        account under subparagraph (C) with respect to any financial 
        institution shall be treated for purposes of this section as 
        maintained by such financial institution.
            ``(3) United states owned foreign entity.--The term `United 
        States owned foreign entity' means any foreign entity which has 
        one or more substantial United States owners.
            ``(4) Foreign financial institution.--The term `foreign 
        financial institution' means any financial institution which is 
        a foreign entity.
            ``(5) Financial institution.--Except as otherwise 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 investing, 
                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, partnership interests, or commodities.
    ``(e) Affiliated Groups.--
            ``(1) In general.--The requirements of subsections (b), 
        (c)(1), and (c)(3) shall apply--
                    ``(A) with respect to United States accounts 
                maintained by the foreign financial institution, and
                    ``(B) except as otherwise provided by the 
                Secretary, with respect to United States accounts 
                maintained by each other foreign financial 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 financial institution.
            ``(2) Expanded affiliated group.--For purposes of this 
        section, the term `expanded affiliated group' means an 
        affiliated group as defined in section 1504(a), determined--
                    ``(A) by substituting `more than 50 percent' for 
                `at least 80 percent' each place it appears, and
                    ``(B) without regard to paragraphs (2) and (3) of 
                section 1504(b).
        A partnership or any other entity (other than a corporation) 
        shall be treated as a member of an expanded affiliated group if 
        such entity is controlled (within the meaning of section 
        954(d)(3)) by members of such group (including any entity 
        treated as a member of such group by reason of this sentence).
    ``(f) Exception for Certain Payments.--Subsection (a) shall not 
apply to any payment if the beneficial owner of such payment is--
            ``(1) 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,
            ``(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 FOREIGN 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,
then the withholding agent with respect to such payment shall deduct 
and withhold from such payment a tax equal to 30 percent of the amount 
of such payment.
    ``(b) Requirements for Waiver of Withholding.--The requirements of 
this subsection are met with respect to the beneficial owner of a 
payment if--
            ``(1) such beneficial owner or the payee provides the 
        withholding agent with either--
                    ``(A) a certification that such beneficial owner 
                does not have any substantial United States owners, or
                    ``(B) the name, address, and TIN of each 
                substantial United States owner of such beneficial 
                owner,
            ``(2) the withholding agent does not know, or have reason 
        to know, that any information provided under paragraph (1) is 
        incorrect, and
            ``(3) the withholding agent reports the information 
        provided under paragraph (1)(B) to the Secretary in such manner 
        as the Secretary may provide.
    ``(c) Exceptions.--Subsection (a) shall not apply to--
            ``(1) except as otherwise provided by the Secretary, any 
        payment beneficially owned by--
                    ``(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 purposes of this section, 
the term `non-financial foreign entity' means any foreign entity which 
is not a financial institution (as defined in section 1471(d)(5)).

``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, compensations, 
                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 interest 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 percent of 
                        the profits interests or capital interests in 
                        such partnership, and
                            ``(iii) in the case of a trust, any 
                        specified 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 vehicles.--In the 
                case of any financial institution 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.--Except 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),
                    ``(C) any organization exempt from taxation under 
                section 501(a) or an individual retirement 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 political 
                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 `withholding agent' 
        means all persons, in whatever capacity acting, having the 
        control, receipt, custody, disposal, or payment of any 
        withholdable payment.
            ``(5) Foreign entity.--The term `foreign entity' 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 chapter is hereby made liable for such 
tax and is hereby indemnified 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 paragraph (2), the 
        determination of whether any tax deducted 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 
        chapter 3.
            ``(2) Special rule where foreign financial institution is 
        beneficial owner of payment.--
                    ``(A) In general.--In the case of any tax deducted 
                and withheld under section 1471(a) from a specified 
                financial institution payment--
                            ``(i) if the foreign financial institution 
                        referred to in subparagraph (B) with respect to 
                        such payment is entitled to a reduced rate of 
                        tax with respect to such payment 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 
                                refund 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 
                        institution 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 institution payment' means 
                any withholdable payment if the foreign financial 
                institution payee referred to in section 1471(a) with 
                respect to such payment is the beneficial owner of such 
                payment.
    ``(c) Confidentiality of Information.--
            ``(1) In general.--For purposes of this chapter, rules 
        similar to the rules of section 3406(f) shall apply.
            ``(2) Disclosure of list of qualified foreign 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 
        section 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.''.
            (2) Withholding of tax on dispositions of united states 
        real property interests.--Subsection (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 following new item:

``Chapter 4. Taxes To Enforce Reporting on Certain Foreign Accounts.''.

    (d) Effective Date.--
            (1) In general.--Except as provided in paragraph (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 obligation outstanding on the date of first 
        committee action, if such obligation--
                    (A) is in bearer form, or
                    (B) includes (on the date of the issuance of such 
                obligation) a provision under which the issuer would 
                (but for this paragraph) be obligated 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 Deduction 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 striking clause (iv).
                    (B) Subparagraph (B) of section 163(f)(2), as 
                redesignated by paragraph (1), is amended--
                            (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 regulations 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 subparagraph (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 subsection (a) 
                but for this subsection, and
                    ``(B) is paid on an obligation--
                            ``(i) which is in registered form, and
                            ``(ii) with respect to which the United 
                        States person who would otherwise be required 
                        to deduct and withhold tax from such interest 
                        under section 1441(a) receives a statement 
                        (which meets the requirements of paragraph (5)) 
                        that the beneficial 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 paragraphs (3) and (4) as paragraphs (2) 
        and (3), respectively.
            (2) Conforming amendments.--Paragraph (1) of section 
        3121(g) of such title is amended--
                    (A) by adding ``or'' at the end of subparagraph 
                (A),
                    (B) by striking ``; or'' at the end of subparagraph 
                (B) and inserting a period, and
                    (C) by striking subparagraph (C).
    (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 subchapter A of chapter 
61 is amended by inserting after section 6038C the following new 
section:

``SEC. 6038D. INFORMATION WITH RESPECT TO FOREIGN FINANCIAL ASSETS.

    ``(a) In General.--Any individual who, during any taxable year, 
holds any interest in a specified foreign financial asset shall attach 
to such person's return of tax imposed by subtitle A for such taxable 
year the information 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 financial asset' means--
            ``(1) any financial account (as defined in section 
        1471(d)(2)) maintained by a foreign financial institution (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 institution (as defined in 
        section 1471(d)(5))--
                    ``(A) any stock or security issued by a person 
                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 described 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 account is maintained 
        and the number of such account.
            ``(2) In the case of any stock or security, the name and 
        address of the issuer and such information as is necessary to 
        identify the class or issue of which such stock or security is 
        a part.
            ``(3) In the case of any other instrument, contract, 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 
        individual shall pay a penalty (in addition to the penalties 
        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 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 individual has an 
        interest in one or more specified foreign 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 subsection (a)) for purposes of assessing 
the penalties imposed 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 
individual.
    ``(g) 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. 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 
reasonable 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 appropriate exceptions from the application of this section in 
the case of--
            ``(1) classes of assets identified by the Secretary, 
        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.

SEC. 202. PENALTIES FOR UNDERPAYMENTS ATTRIBUTABLE TO UNDISCLOSED 
              FOREIGN FINANCIAL ASSETS.

    (a) In General.--Section 6662 is amended--
            (1) in subsection (b), by inserting after paragraph (5) the 
        following new paragraph:
            ``(6) Any undisclosed foreign financial asset 
        understatement.'', and
            (2) by adding at the end the following new subsection:
    ``(i) Undisclosed Foreign Financial Asset Understatement.--
            ``(1) In general.--For purposes of this section, 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 respect 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 taxpayer as required under the 
        provisions of those sections.
            ``(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 
        financial 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), respectively, 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--
                            ``(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 
                                information 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 
                                provided 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:
                    ``(B) Determination of gross income.--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 Disclose 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 Revenue Code of 1986 
        (determined without regard to 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 respect 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 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 section, 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 income in 
        excess of $100,000 for providing such aid, assistance or advice 
        during the calendar year.
    ``(d) Foreign Entity Transaction.--For purposes 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 connection with the formation of such entity) if any 
citizen or resident of the United States is required to file a report 
under section 6038, 6038B, 6046, 6046A, or 6048 in connection 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 required to meet such requirements,
            ``(2) exemptions from the requirements of this section, and
            ``(3) such rules as may be necessary or appropriate to 
        carry out the purposes of this section.''.
    (b) Clerical Amendment.--The table of sections for subchapter B of 
chapter 61 is amended by redesignating the item relating to section 
6116 as an item relating 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 provided after the date of the 
enactment of this Act.

SEC. 302. REPORTING OF ACTIVITIES WITH RESPECT TO PASSIVE FOREIGN 
              INVESTMENT COMPANIES.

    (a) In General.--Section 1298 is amended by redesignating 
subsection (f) as subsection (g) and by inserting 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 paragraph:
            ``(3) Special rule for returns filed by financial 
        institutions with respect to withholding on foreign 
        transfers.--Paragraph (2)(A) shall not apply to any return 
        filed by a financial 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 person'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 paragraph:
            ``(4) Special rule in case of discretion to identify 
        beneficiaries.--For purposes of paragraph (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 distributions 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 understandings 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 written, oral, or 
        otherwise) that may result in the income or corpus of the trust 
        being paid or accumulated to or for the benefit of a United 
        States person, 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 redesignating 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 person 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.

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.--Paragraph (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 reasonable 
                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 property treated as a 
        payment.--For purposes of this subsection, a loan of cash or 
        marketable securities (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 property'' 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 property, 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 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'' before ``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 determined by the Secretary, any 
        subsequent penalty imposed under this subsection with respect 
        to such failure 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 reportable amount the Secretary shall 
        refund such excess 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.

   TITLE V--DIVIDEND EQUIVALENT 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 redesignating subsection 
(l) as subsection (m) and by inserting after subsection (k) the 
following new subsection:
    ``(l) Treatment of Dividend Equivalent Payments.--
            ``(1) In general.--For purposes of this section, sections 
        881 and 4948(a), and chapters 3 and 4, a dividend equivalent 
        shall be treated as a dividend 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 determined 
                        by reference to, the payment of a dividend from 
                        sources within the United States, and
                            ``(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 determines 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 
                arrangement:
                            ``(i) The term (including provisions for 
                        early terminations and offsetting financial 
                        contracts).
                            ``(ii) The amount of each party's 
                        investment 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 (directly 
                        or indirectly) to the other party the security 
                        giving rise to dividends from sources within 
                        the United States.
                            ``(v) Whether there are terms that address 
                        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 Secretary 
                        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 taxpayer.
                    ``(D) Coordination with chapters 3 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 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.
                                 <all>