(8) Failure to notify Secretary of certain foreign transfers
(A) In general
In the case of any information which is required to be reported to the Secretary pursuant to an election under section 1295 (b) or under section 1298 (f), 6038, 6038A, 6038B, 6038D, 6046, 6046A, or 6048, the time for assessment of any tax imposed by this title with respect to any tax return, event, or period to which such information relates shall not expire before the date which is 3 years after the date on which the Secretary is furnished the information required to be reported under such section.
(B) Application to failures due to reasonable cause
If the failure to furnish the information referred to in subparagraph (A) is due to reasonable cause and not willful neglect, subparagraph (A) shall apply only to the item or items related to such failure.
Most tax practitioners understand the basic assessment statute of limitations rules in the Code: three years after the return is filed, six years after the return is filed for 25% omission of income, or forever in the case of fraud and/or failure to file. Practitioners may be less familiar with the raft of additional special assessment statutes of limitation rules found in the Code, but one of these additional rules demands special attention. That rule is section 6501(c)(8) which provides that in the case of any information on foreign activities which is required under section 6038, 6038A, 6038B, 6046, 6046A, or 6048, the time for assessment of any tax shall not expire until three years after the date on which the IRS is furnished the information required to be reported.
Until recently, section 6501(c)(8) was often overlooked both for assessment and financial statement tax provision purposes. As stated above, section 6501(c)(8) set forth an exception to the general rule. In March of 2010 the Hiring Incentives to Restore Employment Act (the “HIRE Act”), amended the section 6501(c)(8) exception to the general statute of limitations and it has been made applicable to the entire income tax return – not just the tax consequences related to the information required under the relevant foreign information reporting provision. The new section 6501(c)(8) is applicable to any tax return filed after March 18, 2010 and any other return for which the assessment period specified in section 6501 had not yet expired as of that date. As long as a failure to comply with one of the specified foreign information reporting requirements for a tax return exists, the limitations period for that tax return remains open indefinitely. The statute will not commence to run until the time at which the information required under the reporting provision is filed with the IRS and will not expire before three years after the filing of the required information.