PRIA, Government Policy, Made Personal

Summary

If a person who must report certain foreign trust information files late, leaves out required facts, or gives wrong facts, they must pay a penalty. The penalty is the larger of $10,000 or 35% of the "gross reportable amount." If the failure continues more than 90 days after the IRS mails a notice, the filer must also pay $10,000 for each 30-day period (or part of a period) after those 90 days. If the IRS later figures the correct gross reportable amount, future penalties are cut so the total never goes above that amount, and any excess already paid is refunded. For the special kind of return that reports a U.S. person’s ownership, the U.S. person is the one who must pay, and the 35% rate is replaced by 5%. "Gross reportable amount" means one of three things depending on the case: the value of the property at the event date, the value of the trust assets treated as owned by the U.S. person at year end, or the total distributions. No penalty applies if the filer shows the failure was due to reasonable cause and not willful neglect; facing foreign penalties does not count as reasonable cause. Normal tax deficiency procedures do not apply to collecting these penalties.

Title 26, §6677

Internal Revenue Code, Source: USLM XML via OLRC

(a)Civil penalty

In addition to any criminal penalty provided by law, if any notice or return required to be filed by section 6048—

(1)is not filed on or before the time provided in such section, or

(2)does not include all the information required pursuant to such section or includes incorrect information,

the person required to file such notice or return shall pay a penalty equal to the greater of $10,000 or 35 percent of the gross reportable amount. If any failure described in the preceding sentence continues for more than 90 days after the day on which the Secretary mails notice of such failure to the person required to pay such penalty, such person shall pay a penalty (in addition to the amount determined under the preceding sentence) of $10,000 for each 30-day period (or fraction thereof) during which such failure continues after the expiration of such 90-day period. 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)Special rules for returns under section 6048(b)

In the case of a return required under section 6048(b)—

(1)the United States person referred to in such section shall be liable for the penalty imposed by subsection (a), and

(2)subsection (a) shall be applied by substituting “5 percent” for “35 percent”.

(c)Gross reportable amount

For purposes of subsection (a), the term “gross reportable amount” means—

(1)the gross value of the property involved in the event (determined as of the date of the event) in the case of a failure relating to section 6048(a),

(2)the gross value of the portion of the trust’s assets at the close of the year treated as owned by the United States person in the case of a failure relating to section 6048(b)(1), and

(3)the gross amount of the distributions in the case of a failure relating to section 6048(c).

(d)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.

(e)Deficiency procedures not to apply

Subchapter B of chapter 63 (relating to deficiency procedures for income, estate, gift, and certain excise taxes) shall not apply in respect of the assessment or collection of any penalty imposed by subsection (a).

Notes & Related Subsidiaries

Editorial Notes

Amendments

2010—Subsec. (a). Pub. L. 111–147, in concluding provisions, inserted “the greater of $10,000 or” before “35 percent” and substituted “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).” for “In no event shall the penalty under this subsection with respect to any failure exceed the gross reportable amount.” 1996—Pub. L. 104–188, § 1901(b), substituted “information” for “information returns” in section catchline and amended text generally, substituting present provisions for former provisions which related to civil penalty in subsec. (a) and nonapplicability of deficiency procedures in subsec. (b). 1976—Subsec. (a). Pub. L. 94–455 inserted “(or, in the case of a failure with respect to section 6048(c), equal to 5 percent of the value of the corpus of the trust at the close of the taxable year)” after “transferred to a trust”. 1974—Subsec. (b). Pub. L. 93–406 substituted “and certain excise” for “chapter 42”. 1969—Subsec. (b). Pub. L. 91–172 inserted reference to chapter 42 taxes.

Statutory Notes and Related Subsidiaries

Effective Date

of 2010 Amendment Pub. L. 111–147, title V, § 535(b), Mar. 18, 2010, 124 Stat. 115, provided that: “The

Amendments

made by this section [amending this section] shall apply to notices and returns required to be filed after December 31, 2009.”

Effective Date

of 1996 AmendmentAmendment by Pub. L. 104–188, to the extent related to section 6048(a) of this title, applicable to reportable events (as defined in such section) occurring after Aug. 20, 1996, to the extent related to section 6048(b) of this title, applicable to taxable years of United States persons beginning after Dec. 31, 1995, and to the extent related to section 6048(c) of this title, applicable to distributions received after Aug. 20, 1996, see section 1901(d) of Pub. L. 104–188, set out as a note under section 6048 of this title.

Effective Date

of 1976 AmendmentAmendment by Pub. L. 94–455 applicable to taxable years ending after Dec. 31, 1975, but only in the case of foreign trusts created after

May 21, 1974 and transfer of property to foreign trusts after

May 21, 1974, see section 1013(f)(1) of Pub. L. 94–455, set out as a note under section 679 of this title.

Effective Date

of 1974 AmendmentAmendment by Pub. L. 93–406 applicable, except as otherwise provided in section 1017(c) through (i) of Pub. L. 93–406, for plan years beginning after Sept. 2, 1974, but, in the case of plans in existence on Jan. 1, 1974, amendment by Pub. L. 93–406 applicable for plan years beginning after Dec. 31, 1975, see section 1017 of Pub. L. 93–406, set out as an

Effective Date

Transitional Rules note under section 410 of this title.

Effective Date

of 1969 AmendmentAmendment by Pub. L. 91–172 effective Jan. 1, 1970, see section 101(k)(1) of Pub. L. 91–172, set out as an

Effective Date

note under section 4940 of this title.

§6677 Failure to File Information with Respect to Certain Foreign Trusts

Summary

Title 26, §6677

Notes & Related Subsidiaries

Editorial Notes

Amendments

Statutory Notes and Related Subsidiaries

Effective Date

Amendments

Effective Date

Effective Date

Effective Date

Effective Date

Effective Date

Effective Date

Citations & Metadata