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Sec. 6677. Failure To File Information With Respect To Certain Foreign Trusts

I.R.C. § 6677(a) Civil Penalty
In addition to any criminal penalty provided by law, if any notice or return required to be filed by section 6048
I.R.C. § 6677(a)(1)
is not filed on or before the time provided in such section, or
I.R.C. § 6677(a)(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).
I.R.C. § 6677(b) Special Rules For Returns Under Section 6048(b)
In the case of a return required under section 6048(b)
I.R.C. § 6677(b)(1)
the United States person referred to in such section shall be liable for the penalty imposed by subsection (a), and
I.R.C. § 6677(b)(2)
subsection (a) shall be applied by substituting “5 percent” for “35 percent”.
I.R.C. § 6677(c) Gross Reportable Amount
For purposes of subsection (a), the term “gross reportable amount” means—
I.R.C. § 6677(c)(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),
I.R.C. § 6677(c)(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
I.R.C. § 6677(c)(3)
the gross amount of the distributions in the case of a failure relating to section 6048(c).
I.R.C. § 6677(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.
I.R.C. § 6677(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).
(Added Pub. L. 87-834, 7(g), Oct. 16, 1962, 76 Stat. 988, and amended Pub. L. 91-172, title I, 101(j)(53), Dec. 30, 1969, 83 Stat. 531; Pub. L. 93-406, title II, 1016(a)(21), Sept. 2, 1974, 88 Stat. 931; Pub. L. 94-455, title X, 1013(d)(2), Oct. 4, 1976, 90 Stat. 1616; Pub. L. 104-188, title I, Sec. 1901(b), Aug. 20, 1996, 110 Stat. 1755; Pub. L. 111-147, Sec. 535, Mar. 18, 2010, 124 Stat. 71.)
BACKGROUND NOTES
AMENDMENTS
2010--Subsec. (a). Pub. L. 111-147, Sec. 535(a), amended subsec. (a) by inserting “the greater of $10,000 or” before “35 percent” and by substituting “ for “In no event shall the penalty under this subsection with respect to any failure exceed the gross reportable amount.”.
1996--Section 6677 amended by Pub. L. 104-188, sec. 1901(b). Prior to the amendment, section read as follows:
Section 6677 Failure to file information returns with respect to certain foreign trusts
(a) Civil penalty
In addition to any criminal penalty provided by law, any person required to file a return under section 6048 who fails to file such return at the time provided in such section, or who files a return which does not show the information required pursuant to such section, shall pay a penalty equal to 5 percent of the amount transferred to a trust (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), but not more than $1,000, unless it is shown that such failure is due to reasonable cause.
(b)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).
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.
EFFECTIVE DATE OF 2010 AMENDMENTS
Amendments by Sec. 535(a) of Pub. L. 111-147 effective for notices and returns required to be filed after December 31, 2009.
EFFECTIVE DATE OF 1996 AMENDMENT
Section 1901(d) of Pub. L. 104-188 provided that:
“(1) Reportable events.--To the extent related to subsection (a) of section 6048 of the Internal Revenue Code of 1986, as amended by this section, the amendments made by this section shall apply to reportable events (as defined in such section 6048) occurring after the date of the enactment of this Act [Aug. 20, 1996].
“(2) Grantor trust reporting.--To the extent related to subsection (b) of such section 6048, the amendments made by this section shall apply to taxable years of United States persons beginning after December 31, 1995.
“(3) Reporting by United States beneficiaries.--To the extent related to subsection (c) of such section 6048, the amendments made by this section shall apply to distributions received after the date of the enactment of this Act [Aug. 20, 1996].”
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment 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 AMENDMENT
Amendment 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 AMENDMENT
Amendment 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.
[6678. Repealed. Pub. L. 99-514, title XV, 1501(d)(2), Oct. 22, 1986, 100 Stat. 2740]
Section, added Pub. L. 87-834, 19(e), Oct. 16, 1962, 76 Stat. 1058, and amended Pub. L. 88-272, title II, 204(c)(2), 221(b)(3), Feb. 26, 1964, 78 Stat. 37, 75; Pub. L. 94-455, title XIX, 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 96-167, 7(b)(2), Dec. 29, 1979, 93 Stat. 1277; Pub. L. 97-34, title VII, 723(a)(2), (b)(2), Aug. 13, 1981, 95 Stat. 343, 344; Pub. L. 97-248, title III, 309(b)(3), 311(a)(2), 312(b), 314(b), 315(c), Sept. 3, 1982, 96 Stat. 595, 600, 602, 605, 607; Pub. L. 97-448, title II, 201(i)(3), Jan. 12, 1983, 96 Stat. 2395; Pub. L. 98-67, title I, 105(b)(2), Aug. 5, 1983, 97 Stat. 381; Pub. L. 98-369, div. A, title I, 145(b)(3), 146(b)(3), 148(b)(3), 149(b)(2), (3), 155(b)(2)(B), title VII, 714(f), (q)(3), July 18, 1984, 98 Stat. 685, 686, 689, 690, 693, 961, 966; Pub. L. 99-514, title XVIII, 1811(c)(1), Oct. 22, 1986, 100 Stat. 2833, related to penalties for failure to furnish certain statements.
Effective Date of Repeal
Repeal applicable to returns the due date for which (determined without regard to extensions) is after Dec. 31, 1986, see section 1501(e) of Pub. L. 99-514, set out as an Effective Date note under section 6721 of this title.