SECTION 2. BACKGROUND

.01 Section 6048, enacted in 1996, generally requires annual information reporting of a United States person’s transfers of money or other property to, ownership of, and distributions from, foreign trusts, and section 6677 imposes penalties on United States persons for failing to comply with section 6048. As relevant here, section 6048(a)(3)(B)(ii) provides an exception from reporting with respect to transfers to foreign compensatory trusts described in section 402(b), 404(a)(4), or 404A. In addition, section 6048(d)(4) authorizes the Secretary to suspend or modify any requirement under section 6048 if the United States has no significant tax interest in obtaining the required information. The Treasury Department and the IRS have previously issued guidance providing that reporting is not required under section 6048(c) with respect to distributions from certain foreign compensatory trusts, provided that the recipient of the distribution reports the distribution as compensation income on an applicable federal income tax return, and that information reporting under section 6048(a) through (c) is not required with respect to certain Canadian retirement plans. See Section V of Notice 97-34, 1997-1 C.B. 422; Rev. Proc. 201455, 2014-44 I.R.B. 753. Section 6048 information reporting is provided on Form 3520, Annual Return To Report Transac- tions With Foreign Trusts and Receipt of Certain Foreign Gifts, and Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner (Under section 6048(b)) . .02 Section 6038D, enacted in 2010, and the regulations thereunder generally require a specified person, which includes a U.S. citizen or resident alien, to report any interest in a specified foreign financial asset provided that the aggregate value of all such assets exceeds certain thresholds. See §1.6038D-2(a). Section 6038D(d) imposes a penalty for failing to comply. A specified foreign financial asset includes interests in certain foreign retirement, pension, and non-retirement savings funds or accounts. See §§1.6038D-3. Section 6038D information reporting is provided on Form 8938, Statement of Specified

Foreign Financial Assets . A specified person who is required to report information under section 6038D on Form 8938 may also be required to report similar identifying information under section 6048 on Form 3520 or Form 3520-A. For more information about section 6038D information reporting, see https://www.irs.gov/ businesses/corporations/basic-questionsand-answers-on-form-8938.