HIRE Act Affects Foreign Trusts and Imposes Additional Requirements on U.S. Persons with Foreign Accounts

On March 18, President Obama signed the Hiring Incentives to Restore Employment Act (H.R. 2847) (the "Act"), which includes several unrelated revenue raising provisions affecting foreign entities and individuals with certain foreign assets that were originally proposed as part of the Foreign Account Tax Compliance Act of 2009.

These provisions create significant changes in the rules governing foreign trusts and their trustees, resulting in a new category of deemed distributions of foreign trust property and a broader application of the rules that treat contributors to foreign trusts as the owner of the trust for income tax purposes. In addition, there are a number of provisions that increase withholding obligations on foreign banks, trusts and other entities and impose additional reporting requirements on US persons with certain foreign assets.