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HIRE Act Reporting Provisions Delayed One Year

Last March, President Obama signed into law the HIRE Act, which greatly expanded the reporting obligations of U.S. taxpayers holding offshore assets.  These provisions apply if you hold more than $50,000 of “foreign financial assets,” consisting of:

  • Any ownership of non-U.S. securities, no matter how you hold them.  This appears to represent a crackdown on the use of “bearer shares,” discussed later in this chapter.
  • Any financial instrument or contract held for investment from a foreign issuer.  This appears to target U.S. investors holding non-U.S. life insurance or annuity contracts.
  • Any interest in any foreign entity.  Reporting provisions in current law impose an obligation for U.S. persons who acquire or dispose of a 10% or greater interest in a foreign corporation or partnership to disclose that transaction.  However, no disclosure for smaller interests was required—until now.

It wasn’t clear until very recently when these reporting requirements would become effective.  The original legislation called for reporting of assets held in 2010 or thereafter.  However, recent guidance issued by the IRS delays the deadline one year, until January 1, 2011.  That means you do NOT need to worry about these reporting robligations for your 2010 tax return.

However, the new offshore reporting requirements issued last month by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) are effective immediately, and apply retroactively to 2010.

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