SECTION 8. FILING AND

REPORTING REQUIREMENTS

A. In general

Background . Section 301(e) of the Act amended section 6039G to impose a requirement on any individual to whom section 877A applies for any taxable year, to provide a statement that includes certain information as provided in section 6039G, including details of the individual’s income, assets, and liabilities. The Treasury Department and the IRS intend to issue regulations under section 877A that will require covered expatriates who are liable for tax under section 877A to report certain information in connection with their expatriation. Until the issuance of such regulations, covered expatriates must report information in compliance with the rules set forth in this notice and any other information that the IRS may require.

B. Income tax returns

Initial filing obligations for the year of expatriation. A covered expatriate must file a dual-status return if he or she was a U.S. citizen or long-term resident for only part of the taxable year that includes the day before the expatriation date. A dual-status return requires the covered expatriate to file a Form 1040NR with a Form 1040 attached as a schedule. See Treas.

Reg. § 1.6012–1(b)(2)(ii)( b ), Treas. Reg. § 1.871–13, and chapter 6 of IRS Publication 519 for the requirements for filing a dual-status return. If the covered expatriate’s expatriation date is January 1, then he or she will not be required to file a dual-status return.

Filing obligations for subsequent years. A covered expatriate must file Form 1040NR in accordance with Treas. Reg. §1.6012–1(b). If the covered expatriate is fully withheld upon at source for a particular taxable year and has no income effectively connected with the conduct of a trade or business in the United States for that year, then he or she will not be required to file a Form 1040NR for that year. See Treas. Reg. §1.6012–1(b)(2).

C. Form 8854

Certification of compliance with tax obligations for preceding five years. All U.S. citizens who relinquish their U.S. citizenship and all long-term residents who cease to be lawful permanent residents of the United States (within the meaning of section 7701(b)(6)) must file Form 8854 in order to certify, under penalties of perjury, that they have been in compliance with all federal tax laws during the five years preceding the year of expatriation. Individuals who fail to make such certification will be treated as covered expatriates within the meaning of section 877A(g) whether or not they also meet the tax liability test or the net worth test. For more information about the tax liability test, the net worth test, and the certification test, see section 2 of this notice.

Initial waiver of treaty benefits for el- igible deferred compensation items and annual reporting requirements . A covered expatriate who wishes to treat a deferred compensation item as an eligible deferred compensation item must make an irrevocable election on Form 8854 for the taxable year that includes the day before the expatriation date to waive any right to claim any withholding reduction under any treaty with the United States with respect to the eligible deferred compensation item. See section 5.B(2) of this notice. The covered expatriate must make a separate election for each deferred compensation item that he or she wishes to treat as an eligible deferred compensation item. The covered expatriate must also annually file

2009–45 I.R.B. 611 November 9, 2009

written statement to the covered expatriate setting forth the amount of the covered expatriate’s account balance on the day before the expatriation date.

Interest in nongrantor trust . In the case of an interest in a nongrantor trust of which the covered expatriate was a beneficiary on the day before the expatriation date, Form W–8CE provides notice to the trustee that the individual is a covered expatriate. The covered expatriate will be deemed to have waived treaty benefits with respect to future distributions from the trust unless the covered expatriate checks a box on Form W–8CE certifying that he or she will elect on Form 8854 to pay tax currently on the value of his or her interest in the trust as determined for purposes of section 877A and will request a letter ruling from the IRS as to the value of his or her interest in such trust, as provided in section 7.D of this notice. If the box is checked, the trustee must, within 60 days of receipt of Form W–8CE, provide the covered expatriate with the information needed to calculate the value of his or her interest in the trust as of the day before the expatriation date. The covered expatriate will be subject to 30 percent withholding under section 877A(f)(1)(A) on the taxable portion of each distribution from the trust on or after the expatriation date until such time as the trustee receives a copy of the letter ruling and the covered expatriate’s certification in writing under penalties of perjury that the tax owed on the value of the interest in the trust has been paid to the IRS. See section 7.D of this notice.