Hiring Incentives to Restore Employment Act/Title V/Subtitle A/Part IV

SEC. 531. CLARIFICATIONS WITH RESPECT TO FOREIGN TRUSTS WHICH ARE TREATED AS HAVING A UNITED STATES BENEFICIARY.

(a) In General- Paragraph (1) of section 679(c) is amended by adding at the end the following:

`For purposes of subparagraph (A), an amount shall be treated as accumulated for the benefit of a United States person even if the United States person's interest in the trust is contingent on a future event.'.

(b) Clarification Regarding Discretion To Identify Beneficiaries- Subsection (c) of section 679 is amended by adding at the end the following new paragraph:

`(4) SPECIAL RULE IN CASE OF DISCRETION TO IDENTIFY BENEFICIARIES- For purposes of paragraph (1)(A), if any person has the discretion (by authority given in the trust agreement, by power of appointment, or otherwise) of making a distribution from the trust to, or for the benefit of, any person, such trust shall be treated as having a beneficiary who is a United States person unless--

`(A) the terms of the trust specifically identify the class of persons to whom such distributions may be made, and

`(B) none of those persons are United States persons during the taxable year.'.

(c) Clarification That Certain Agreements and Understandings Are Terms of the Trust- Subsection (c) of section 679, as amended by subsection (b), is amended by adding at the end the following new paragraph:

`(5) CERTAIN AGREEMENTS AND UNDERSTANDINGS TREATED AS TERMS OF THE TRUST- For purposes of paragraph (1)(A), if any United States person who directly or indirectly transfers property to the trust is directly or indirectly involved in any agreement or understanding (whether written, oral, or otherwise) that may result in the income or corpus of the trust being paid or accumulated to or for the benefit of a United States person, such agreement or understanding shall be treated as a term of the trust.'.

SEC. 532. PRESUMPTION THAT FOREIGN TRUST HAS UNITED STATES BENEFICIARY.

(a) In General- Section 679 is amended by redesignating subsection (d) as subsection (e) and inserting after subsection (c) the following new subsection:

`(d) Presumption That Foreign Trust Has United States Beneficiary- If a United States person directly or indirectly transfers property to a foreign trust (other than a trust described in section 6048(a)(3)(B)(ii)), the Secretary may treat such trust as having a United States beneficiary for purposes of applying this section to such transfer unless such person--

`(1) submits such information to the Secretary as the Secretary may require with respect to such transfer, and

`(2) demonstrates to the satisfaction of the Secretary that such trust satisfies the requirements of subparagraphs (A) and (B) of subsection (c)(1).'.

(b) Effective Date- The amendments made by this section shall apply to transfers of property after the date of the enactment of this Act.

SEC. 533. UNCOMPENSATED USE OF TRUST PROPERTY.

(a) In General- Paragraph (1) of section 643(i) is amended--

(1) by striking `directly or indirectly to' and inserting `(or permits the use of any other trust property) directly or indirectly to or by', and

(2) by inserting `(or the fair market value of the use of such property)' after `the amount of such loan'.

(b) Exception for Compensated Use- Paragraph (2) of section 643(i) is amended by adding at the end the following new subparagraph:

`(E) EXCEPTION FOR COMPENSATED USE OF PROPERTY- In the case of the use of any trust property other than a loan of cash or marketable securities, paragraph (1) shall not apply to the extent that the trust is paid the fair market value of such use within a reasonable period of time of such use.'.

(c) Application to Grantor Trusts- Subsection (c) of section 679, as amended by this Act, is amended by adding at the end the following new paragraph:

`(6) UNCOMPENSATED USE OF TRUST PROPERTY TREATED AS A PAYMENT- For purposes of this subsection, a loan of cash or marketable securities (or the use of any other trust property) directly or indirectly to or by any United States person (whether or not a beneficiary under the terms of the trust) shall be treated as paid or accumulated for the benefit of a United States person. The preceding sentence shall not apply to the extent that the United States person repays the loan at a market rate of interest (or pays the fair market value of the use of such property) within a reasonable period of time.'.

(d) Conforming Amendments- Paragraph (3) of section 643(i) is amended--

(1) by inserting `(or use of property)' after `If any loan',

(2) by inserting `or the return of such property' before `shall be disregarded', and

(3) by striking `REGARDING LOAN PRINCIPAL' in the heading thereof.

(e) Effective Date- The amendments made by this section shall apply to loans made, and uses of property, after the date of the enactment of this Act.

SEC. 534. REPORTING REQUIREMENT OF UNITED STATES OWNERS OF FOREIGN TRUSTS.

(a) In General- Paragraph (1) of section 6048(b) is amended by inserting `shall submit such information as the Secretary may prescribe with respect to such trust for such year and' before `shall be responsible to ensure'.

(b) Effective Date- The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

SEC. 535. MINIMUM PENALTY WITH RESPECT TO FAILURE TO REPORT ON CERTAIN FOREIGN TRUSTS.

(a) In General- Subsection (a) of section 6677 is amended--

(1) by inserting `the greater of $10,000 or' before `35 percent', and

(2) by striking the last sentence and inserting the following: `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) Effective Date- The amendments made by this section shall apply to notices and returns required to be filed after December 31, 2009.