United States taxpayers seeking to use the streamlined foreign offshore procedures must satisfy the following requirements:

(1) The applicable non-residency requirement (for joint return filers, both spouses must satisfy the non-residency requirement); and

(2) Have failed to file an FBAR with respect to a foreign financial account; and

(3) The failure to file an FBAR must have resulted from non-willful conduct. Non-willful conduct is conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.

I. Non-residency requirement applicable to individuals who are U.S. citizens or lawful permanent residents (i.e., “green card holders”)

U.S. citizens or lawful permanent residents (including their estates) satisfy the non-residency requirement if, in at least one of the most recent three years for which a U.S. tax return due date (or extended due date) has passed, the individual:

(1) Did not have a U.S. abode, and

(2) The individual was physically outside the United States for at least 330 full days.

Under IRC Section 911 and its regulations, which apply here, neither temporary presence of an individual in the United States nor maintenance of a dwelling in the United States by an individual necessarily mean that person’s abode is in the United States.

The following is an example of a U.S. citizen who satisfies the non-residency requirement despite the fact that he moved back to the United States and acquired a U.S. abode during two of the most recent three years for which the U.S. tax return due date had passed.

Pierre was born in the United States but moved to France with his parents when he was five years-old. On January 1, 2012, Pierre returned to the United States and acquired a U.S. abode. The most recent three years for which Pierre’s U.S. tax return due date has passed are 2011, 2012, and 2013.

While Pierre might have had a U.S. abode during two of the most recent three years for which his tax return due date has passed (i.e., 2012 and 2013), that does not automatically mean that he had a U.S. abode for purposes of this snarly rule. Indeed, a person can have a U.S. abode for up to two years during the look-back period and still not be treated as having a U.S. abode.

As a preliminary matter, it is important to recognize that Pierre did not acquire his abode until 2012. In other words, there was one year during the look-back period for which Pierre did not have a U.S. abode and that was tax year 2011.

What significance does that have? In order for Pierre to satisfy the condition of not having a U.S. abode so that he can properly be classified as a non-resident, he must have been “abodeless” for at least one year during the three year look-back period. Because Pierre was “abodeless” for one year during the look-back period, he satisfies the non-residency requirement applicable to individuals who are U.S. citizens or lawful permanent residents.

II. Non-residency requirement applicable to individuals who are not U.S. citizens or lawful permanent residents

Individuals who are not U.S. citizens or lawful permanent residents (or estates of individuals who were neither U.S. citizens or lawful permanent residents) satisfy the non-residency requirement if, in at least one of the last three years for which the U.S. tax return due date (or extended due date) has passed, the individual did not satisfy the substantial presence test of IRC section 7701(b)(3).

III. Scope and Effect of Procedures

U.S. taxpayers – U.S. citizens, lawful permanent residents, and those satisfying the substantial presence test of IRC section 7701(b)(3) – eligible to use the Streamlined Foreign Offshore Procedures must:

(1) File delinquent or amended tax returns, together with all required information returns (e.g., Forms 3520, 5471, and 8938) for each of the most recent three years for which the U.S. tax return due date – or extended due date – has passed; and

(2) File any delinquent FBARs for each of the most recent six years for which the FBAR due date has passed.

Taxpayers who are eligible to use these Streamlined Foreign Offshore Procedures and who follow all of the instructions will not be subject to failure-to-file and failure-to-pay penalties, accuracy-related penalties, information return penalties, or FBAR penalties, even if their returns are subsequently selected for audit.

Immunity from penalties, even in the wake of an audit, comes with a few exceptions. It is a good idea to pay special attention because in the right circumstances, these exceptions could swallow up the rule. First, any previously assessed penalties relating to the years that are selected for audit will not be abated. Second, to the extent that the IRS determines an additional tax deficiency for a return submitted under these procedures, it can assert additional tax and penalties relating to that additional deficiency.

Finally, the IRS will unleash the full panoply of penalties if the examination results in a determination that the original tax noncompliance was due to fraud and/or that the FBAR violation was willful.

For returns filed under these procedures, retroactive relief will be provided for failure to timely elect income deferral on certain retirement and savings plans when deferral is permitted by treaty. The proper deferral election must be made with the submission.

IV. Transition rules for taxpayers who made submissions under the 2012 Streamlined Filing Compliance Procedures for Non-Resident, Non-Filer U.S. Taxpayers

The risk assessment process associated with the 2012 Streamlined Filing Compliance Procedures for Non-Resident, Non-Filer U.S. Taxpayers has been eliminated for all streamlined filers.

Taxpayers who have initiated participation in the 2012 Streamlined Filing Compliance Procedures prior to July 1, 2014, and have not already been notified of a high or low risk determination will not receive notice about their risk determination. Their returns will be processed without regard to any such assessment.

In accordance with Circular 230 Disclosure