Broad Regulations for Foreign Financial Asset Reporting

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On December 14, 2011, the U.S. Department of the Treasury (Treasury) issued temporary and proposed regulations relating to information reporting of certain foreign financial assets required under Section 6038D of the Internal Revenue Code of 1986, as amended. These regulations may trigger increased reporting obligations for certain specified persons.

Section 6038D, enacted as part of the Foreign Account Tax Compliance Act (or FATCA) contained within the Hiring Incentives to Restore Employment Act of 2010 (or the HIRE Act, P.L. 111-147), requires individuals holding specified foreign assets in excess of certain thresholds to attach detailed information to their tax returns concerning such assets. For those familiar with Form TDF 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), the information required by FATCA is separate and distinct from the FBAR and covers a far broader range of foreign assets than the FBAR. To date, Treasury guidance concerning FATCA has focused on the obligations of foreign financial institutions with respect to U.S.-owned accounts maintained by such institutions and how such obligations are to be implemented. The regulations focus on the other major aspect of FATCA, which concerns the reporting obligations of the individuals who own such foreign financial accounts.

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