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FACTA Requires U.S. Employees to Report Value of Non-U.S. Equity Compensation, Deferred Compensation and Pension Benefits on their U.S. Tax Returns

Temporary regulations issued under Section 6038D of the Internal Revenue Code (which was added by the Foreign Account Tax Compliance Act (FACTA)), require certain U.S. taxpayers to file a statement on IRS Form 8938 with their personal income tax returns reporting interests in ?Ç£specific foreign financial assets?Ç¥ if the aggregate value of those assets exceeds certain thresholds. The thresholds vary depending on the individual?ÇÖs filing status and whether the individual lives in or outside of the United States. Reportable assets include financial accounts maintained by non-U.S. financial institutions and non-U.S. financial assets held outside of the U.S., including stock or securities issued by a non-U.S. corporation, non-U.S. partnership interests, indebtedness issued by a non-U.S. person, and options to acquire any of the preceding items. Accordingly, stock purchase rights, stock options, restricted stock units, stock appreciation rights and performance shares issued by non-U.S. entities to U.S. taxpayers, are subject to the reporting requirements. The assets must be reported on the employee?ÇÖs 2011 tax return, which is generally due April 16, 2012. While it is the employee?ÇÖs obligation to comply with these reporting obligations, non-U.S. based employers may want to alert employees to the new requirements and will need to provide the information necessary for the employees to comply with the reporting requirements. The temporary regulations are available here. An IRS explanation of the reporting requirements is available here.

The lawyers of our Employee Benefits and Executive Compensation Practice Group are readily able to assist companies on a nationwide basis with implementing sophisticated benefit plans and providing answers to their most challenging compensation issues. Additionally, our lawyers are well aware of the daily employee benefits challenges facing companies of all sizes and are capable of helping in-house lawyers and human resources personnel with the day-to-day advice and guidance necessary to properly administer employee benefits plans.

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March 2012
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