Appendix II: Tax Forms and Information
Returns Related to Offshore Insurance
Page 29 GAO-20-589 Abusive Tax Schemes
Table 4: Information Returns Used to Report Offshore Insurances
Location of offshore insurance information
Statement of Specified
Foreign Financial
Assets
This form is filled out by individual taxpayers
and is used to report all foreign financial
assets (including cash-value insurance
accounts) in which they have a financial
interest and which are valued over the various
reporting thresholds ($50,000 for unmarried
taxpayers living inside the U.S.; $200,000 for
same living abroad).
Taxpayers use three parts of the Form 8938 to report
information on their offshore cash-value life insurance
accounts. First, they use Part II, Other Foreign Assets
Summary, to report basic information on their insurance
account. Second, taxpayers use Part III, Summary of Tax
Items Attributable to Specified Foreign Financial Assets,
Section 2, Other Foreign Assets, to report information
about tax benefits related to the insurance account. Finally,
taxpayers use Part VI, Detailed Information for Each “Other
Foreign Asset”, to show more detailed information about
the character, dollar value, and geographic location of the
insurance account.
Foreign Account Tax
Compliance Act Report
This form is filed by certain foreign financial
institutions, to report information on their
institutions’ various U.S. financial accounts
and U.S. financial account owners, including
certain cash value insurance accounts.
Filers report various information about the cash-value
insurance account throughout Form 8966. For example,
filers report their own identifying information including their
global intermediary identification number (Line 4) and
country of origin (Line 3c) in Part I. In Parts II and III, filers
provide information on the owner of the account, including
country of origin (Line 3c) and Taxpayer Information
Number (Line 4). In Part IV, filers provide financial
information, including the cash-value insurance account’s
balance (Line 3a) and dividends (Line 4b).
Reportable Transaction
Disclosure Statement
This form is filed by taxpayers who participated
in a reportable transaction, including
transactions of interest such as that described
in Notice 2016-66. It is used to describe the
transaction in detail, including the expected tax
treatment and all potential tax benefits.
Filers report various information related to Section 831(b)
micro-captive insurance transactions of interest using Form
8886. For example, filers report their identifying number in
the header, the form number and year of the related tax
return (Line B); the reportable transaction number (Line
1c); and the type of entity they participated through (Line
5a). Taxpayers use Lines 7a and 7b to report the expected
tax treatment and benefits. They use Line 8a to describe
the character of related entities, including foreign entities.
Material Advisor
Disclosure Statement
This form is filed by material advisors to any
reportable transaction. A material advisor can
be an individual, trust, estate, partnership, or
corporation. They use the form to disclose
certain information about the reportable
transaction. Material advisors are those who
provide material aid, assistance, or advice with
any reportable transaction and directly or
indirectly receive or expect to receive gross
income in excess of the threshold amount for
this involvement.
Filers report various information related to one or more
reportable transaction(s). For example, filers report their
identifying number (Header block), the name of the
reportable transaction(s) (Line 1), a description of the type
of material aid provided (Line 6a), whether any foreign
entities or individuals were needed to achieve tax benefits
generated by the transaction and what their roles are
(Lines 7a-b), the types of financial instruments used in the
transaction (Line 9), the type of tax benefit(s) generated by
the transaction (Line 10), the Internal Revenue Code
section(s) used to claim tax benefits from the transaction
(Line 12), and a narrative description about the transaction
that includes some of the above components (Line 13).