S AMDT 1934

S 1934 IS

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

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

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.

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