PUBLIC LAW 104-188—AUG. 20, 1996 110 STAT. 1907 the extent provided in regulations, the preceding sentence shall not apply if the foreign trust elects to be subject to rules similar to the rules of subsection (b)(2)(B). "(B) APPLICATION OF ACCUMULATION DISTRIBUTION RULES.—For purposes of applying section 668 in a case to which subparagraph (A) applies, the applicable number of years for purposes of section 668(a) shall be V2 of the number of years the trust has been in existence. "(d) SPECIAL RULES. — "(1) DETERMINATION OF WHETHER UNITED STATES PERSON MAKES TRANSFER OR RECEIVES DISTRIBUTION. — For purposes of this section, in determining whether a United States person makes a transfer to, or receives a distribution from, a foreign trust, the fact that a portion of such trust is treated as owned by another person under the rules of subpart E of part I of subchapter J of chapter 1 shall be disregarded. "(2) DOMESTIC TRUSTS WITH FOREIGN ACTIVITIES. — To the extent provided in regulations, a trust which is a United States person shall be treated as a foreign trust for purposes of this section and section 6677 if such trust has substantial activities, or holds substantial property, outside the United States. "(3) TIME AND MANNER OF FILING INFORMATION. —Any notice or return required under this section shall be made at such time and in such manner as the Secretary shall prescribe. "(4) MODIFICATION OF RETURN REQUIREMENTS.— The Secretary is authorized to suspend or modify any requirement of this section if the Secretary determines that the United States has no significant tax interest in obtaining the required information.". (b) INCREASED PENALTIES.— Section 6677 (relating to failure to file information returns with respect to certain foreign trusts) is amended to read as follows: "SEC. 6677. FAILURE TO FILE INFORMATION WITH RESPECT TO CERTAIN FOREIGN TRUSTS. "(a) CIVIL PENALTY. —In addition to any criminal penalty provided by law, if any notice or return required to be filed by section 6048— "(1) is not filed on or before the time provided in such section, or "(2) does not include all the information required pursuant to such section or includes incorrect information, the person required to file such notice or return shall pay a penalty equal to 35 percent of the gross reportable amount. If any failure described in the preceding sentence continues for more than 90 days after the day on which the Secretary mails notice of such failure to the person required to pay such penalty, such person shall pay a penalty (in addition to the amount determined under the preceding sentence) of $10,000 for each 30-day period (or fraction thereof) during which such failure continues after the expiration of such 90-day period. In no event shall the penalty under this subsection with respect to any failure exceed the gross reportable amount. "(b) SPECIAL RULES FOR RETURNS UNDER SECTION 6048(b).— In the case of a return required under section 6048(b)— "(1) the United States person referred to in such section shall be liable for the penalty imposed by subsection (a), and
�
