Under a new section, 6038D of the Internal Revenue Code, an individual holding an interest in a foreign financial asset in any taxable year is required to attach a disclosure statement to his or her tax return if the aggregate value of all such assets exceeds US$50,000.

Foreign financial assets include:

• Foreign financial accounts
• Foreign stock and securities
• Interests in foreign entities and
• Other financial instruments and contracts

Non-disclosures for any taxable year, would subject the individual to a penalty of US$10,000.

Furthermore, under the amendments of the HIRE Act

(i) the underpayment penalty applicable to understatements attributable to undisclosed foreign financial assets is 40%; and

(ii) the statute of limitations on assessments is extended to six years for significant omissions of income attributable to foreign financial assets.

This new reporting requirement is a separate from, and in addition to the Foreign Bank Account Reporting (FBAR) form (Form TDF 90-22.1).