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On February 8, 2011, the Internal Revenue Service ("IRS") announced a new offshore voluntary disclosure initiative ("2011 OVDI") for taxpayers with undeclared foreign accounts and/or unreported foreign income. Taxpayers who participate in the 2011 OVDI generally will avoid criminal prosecution and may substantially reduce their exposure to civil penalties.

Taxpayers who wish to participate in the 2011 OVDI must, among other things, file complete and accurate amended (or original) returns and FBARs (and other applicable information returns) for each year during the 2003-2010 period in which they have undisclosed foreign accounts and/or undisclosed foreign entities. This process (including the submission of all such returns) must be completed by August 31, 2011.

Participants in the OVDI generally must pay (i) all tax due with interest, (ii) an accuracy penalty equal to 20% of the underpayment of tax, with interest, for each year, and (iii) an "offshore" penalty equal to 25% of the highest aggregate balance in the undeclared foreign accounts (plus the value of the taxpayer's interests in certain foreign entities and other foreign assets) during the period covered by the voluntary disclosure. For some eligible participants, the 25% offshore penalty may be reduced to 12.5% or 5% depending on the facts.

While the penalty structure under the 2011 OVDI is extremely favorable in comparison with the civil penalties that could otherwise be imposed, there are cases in which such penalty structure would be relatively unfavorable, and the advantages and disadvantages, as well as other alternatives, must be carefully considered based on all of the facts and circumstances particular to such taxpayer.

Taxpayers who wish to participate in the 2011 OVDI must complete the process, including the filing of required returns, by August 31, 2011. Early action will be needed to meet this deadline.