|Name of Act
|Name of Provision
|10yr Revenue Estimate ($millions)
|6229 and 6501
|The Hiring Incentives to Restore Employment Act
|Modification of statute of limitations for significant omission of income in connection with foreign assets
|**See sec. 1471
*Notes on Effective Date
The provision applies to returns filed after the date of enactment (March 18, 2010) as well as for any other return for which the assessment period specified in section 6501 has not yet expired as of the date of enactment (March 18, 2010).
**Notes on Revenue Estimate
See section 1471, provision: Reporting on certain foreign accounts.
Modification of statute of limitations for significant omission of income in connection with foreign assets
Explanation of Provision610
The provision authorizes a new six-year limitations period for assessment of tax on understatements of income attributable to foreign financial assets. The present exception that provides a six year period for substantial omission of an amount equal to 25 percent of the gross income reported on the return is not changed.
The new exception applies if there is an omission of gross income in excess of $5,000 and the omitted gross income is attributable to an asset with respect to which information reports are required under section 6038D, as applied without regard to the dollar threshold, the statutory exception for nonresident aliens and any exceptions provided by regulation. If a domestic entity is formed or availed of to hold foreign financial assets and is subject to the reporting requirements of section 6038D in the same manner as an individual, the six-year limitations period may also apply to that entity. The Secretary is permitted to assess the resulting deficiency at any time within six years of the filing of the income tax return.
In providing that the applicability of section 6038D information reporting requirements is to be determined without regard to the statutory or regulatory exceptions, the statute ensures that the longer limitation period applies to omissions of income with respect to transactions involving foreign assets owned by individuals. Thus, a regulatory provision that alleviates duplicative reporting obligations by providing that a report that complies with another provision of the Code may satisfy one’s obligations under new section 6038D does not change the nature of the asset subject to reporting. The asset remains one that is subject to the requirements of section 6038D for purposes of determining whether the exception to the three-year statute of limitations applies.
The provision also suspends the limitations period for assessment if a taxpayer fails to provide timely information returns required with respect to passive foreign investment corporations 611 and the new self-reporting of foreign financial assets. The limitations period will not begin to run until the information required by those provisions has been furnished to the Secretary. The provision also clarifies that the extension is not limited to adjustments to income related to the information required to be reported by one of the enumerated sections.
610- This provision was subsequently amended by section 218 of the ll Act of ll, Pub. L. No. 111–226, to provide a reasonable cause exception under which the suspension of a limitations period under section 6501(c)(8) may not apply to the entire return. See Part Twelve for a description of the provision.
-Return to Explanation of Provision
611- Sec. 1295(b), (f).
-Return to Explanation of Provision