President Obama signed into law on March 18 2010 a jobs Bill to encourage employers to provide jobs to displaced workers through tax incentives. The job-creation measures will be offset by new foreign account compliance rules to prevent offshore tax evasion.
The US Senate passed the Bill on March 17 after the US House of Representatives modified and approved it two weeks before.
The Bill, entitled the Hiring Incentives to Restore Employment (Hire) Act, includes a comprehensive set of measures including increased reporting requirements for offshore financial institutions that are intended to curb US tax evasion and bank secrecy.
The House did not modify these provisions, so they remain unchanged from the original Senate version of the Bill.
The Senate also approved the House's proposal to delay the implementation of the worldwide allocation of interest expense by one year, to 2021.
Other significant provisions include an exemption of the payroll tax for wages paid by employers to new employees that have been unemployed for an extended period and a new $1,000 income tax credit for the employer if the employee is retained for 52 weeks.
Revenue offsets
The revenue raising provisions in the Bill include measures on foreign account compliance that were first introduced in the Foreign Account Tax Compliance (FATCA) legislation, including reporting and disclosure requirements.
The new provisions require foreign financial institutions to report certain account information to the US Department of Treasury about US account holders or have to pay a 30% withholding tax on income from US financial accounts.
Additionally, the financial institutions have to request waivers of any applicable foreign secrecy laws from account holders. If the account holder denies the request the financial entity is required to close the account.
These reporting requirements will not apply to account holders that are publicly traded companies, tax-exempt corporations, banks, real estate investment trusts or regulated investment companies.
Unlike the reporting requirements contained in the Fatca legislation, the Hire Act does not include a disclosure requirement for advisers that provide material assistance or advice about the acquisition of an interest in a foreign entity
The Bill also proposes to increase revenue by expanding the applicability of the penalty provisions by including understatements attributable to undisclosed foreign financial assets. The penalty would also be increased from 20% to 40% for these types of understatements. Additionally, the Bill would extend the statute of limitations on assessments to six years for significant omissions of income.
These proposals are expected to raise $8.7 billion over 10 years.
