SECTION 2. SCOPE OF THE

OFFSHORE VOLUNTARY COMPLIANCE INITIATIVE

.01 With respect to unreported income or false deductions associated with the use of offshore payment cards or offshore financial arrangements, the Service:

(1) will not impose the civil fraud penalty under section 6663, the fraudulent failure to file penalty under section 6651(f), and information return civil penalties for failure to comply with sections 6035, 6038, 6038A, 6038B, 6038C, 6039F, 6046, 6046A, and 6048; and (2) will, in appropriate circumstances, impose the delinquency penalty under section 6651, the accuracy–related penalty under section 6662, or both penalties against taxpayers that participate in the Offshore Voluntary Compliance Initiative.

.02 The Financial Crimes Enforcement Network (FinCEN) will not impose civil

penalties for failure to timely file a Report of Foreign Bank and Financial Accounts (FBAR) against eligible taxpayers that participate in the Offshore Voluntary Compliance Initiative. For more information, see FinCEN’s website at www. fincen.gov and look under Regulatory/BSA Guidance.

.03 The Service will treat the request to participate in the Offshore Voluntary Compliance Initiative as a request to make a voluntary disclosure pursuant to its Voluntary Disclosure Practice as described in IR–2002–135, Dec. 11, 2002. See also Treasury Directive 15–41, dated December 1, 1992 (delegating to the Service the authority to investigate the criminal FBAR penalty).

.04 Any contact or communication by the Service with a taxpayer regarding the taxpayer’s request to participate in the Offshore Voluntary Compliance Initiative is not an examination of books and records for purposes of section 7605(b) or Rev. Proc. 94–68, 1994–2 C.B. 803. The Service may audit the returns of any taxpayer that participates in the Offshore Voluntary Compliance Initiative, and may propose adjustments for items that are not resolved under the Offshore Voluntary Compliance Initiative.