Guidance Outlines Phased Implementation of Various FATCA Requirements
Notice 2011-53; 2011-32 IRB 124
- Institutional AuthorsInternal Revenue Service
- Cross-Reference
- Code Sections
- Subject Areas/Tax Topics
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 2011-15397
- Tax Analysts Electronic Citation2011 TNT 136-9
Part III -- Administrative, Procedural, and Miscellaneous
I. BACKGROUND AND PURPOSE
On March 18, 2010, the Hiring Incentives to Restore Employment Act of 2010, Pub. L. 111-147 (H.R. 2847) (the Act) added chapter 4 (Chapter 4) to Subtitle A of the Internal Revenue Code (Code). Chapter 4 (comprising sections 1471 through 1474 of the Code) imposes information reporting requirements on foreign financial institutions (FFIs) with respect to U.S. accounts and imposes withholding, documentation, and reporting requirements with respect to certain payments made to certain foreign entities.
On August 29, 2010, the Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) released Notice 2010-60, 2010-37 I.R.B. 329, providing preliminary guidance regarding the implementation of Chapter 4 and requesting comments on issues addressed in that notice and otherwise relevant to the implementation of Chapter 4. On April 8, 2011, Treasury and the IRS released Notice 2011-34, 2011-19 I.R.B. 765, which modified and supplemented the guidance in Notice 2010-60. Unless otherwise defined, terms used in this notice have the same meanings as set forth in sections 1471 through 1474, Notice 2010-60, and Notice 2011-34.
Treasury and the IRS have received numerous comments concerning the practical difficulties in implementing aspects of the Chapter 4 rules within the time frames provided in the Act and under Notice 2010-60 and Notice 2011-34. The challenges identified relate to the time to develop compliance, reporting, and withholding systems necessary to comply with Chapter 4 and the implementing notices. In addition, a number of stakeholders have noted that complying with certain provisions may require coordination with a number of foreign governments. Treasury and the IRS have met with stakeholders and foreign governments to understand the specific administrative and legal challenges that must be addressed and the time necessary to do so. While the Act provides that the provisions of Chapter 4 are effective beginning in 2013, Treasury and the IRS have determined that because Chapter 4 creates the need for significant modifications to the information management systems of FFIs, withholding agents, and the IRS, it is reasonable for regulations to provide for a phased implementation of the various provisions of Chapter 4.
In light of these considerations, this notice describes the timeline for the implementation of Chapter 4 and discusses certain substantive and procedural matters that will be addressed in regulations issued by Treasury and the IRS. As described below, those regulations will provide that certain obligations of participating FFIs will commence in 2013. Further, those regulations will provide that the section 1471(a) withholding obligations of withholding agents with respect to amounts described in section 1473(1)(A)(i) (U.S. source FDAP payments) will begin on January 1, 2014. FFIs that would otherwise be subject to Chapter 4 withholding will be identified as participating FFIs and therefore should not be subject to such withholding if they have registered as participating FFIs and entered into FFI Agreements by June 30, 2013. The section 1471(b)(1)(D) withholding obligations of participating FFIs with respect to pass-thru payments will be specified in future regulations, but will begin no earlier than January 1, 2015.
II. PHASED IMPLEMENTATION TIMELINE
A. Participating FFIs: Registration and Due Diligence
1. Registration of FFIs Beginning in 2013
a. New Accounts
i. Certain Pre-Existing Private Banking Accounts (Equal to or Greater than $500,000)
B. Reporting
1. New Accounts, Documented U.S. Accounts, and Private Banking Accounts
(i) the name, address, and U.S. TIN of each specified U.S. person who is an account holder and, in the case of any account holder that is a U.S. owned foreign entity, the name, address, and U.S. TIN of each substantial U.S. owner of such entity;
(ii) the account balance as of December 31, 2013, or, if the account was closed after the effective date of the FFI's FFI Agreement, the balance of such account immediately before closure; and
(iii) the account number.
The reporting described above is intended to provide participating FFIs greater flexibility to satisfy the reporting requirements of section 1471(c) and section IV.B of Notice 2011-34, and is not intended to change the information that generally must be reported as set forth in Notice 2011-34. Accordingly, reporting in 2014 will be made on the same forms as will be used in subsequent years to report all required information, and participating FFIs may elect for 2014 to report any or all of the additional information described in section IV.B of Notice 2011-34 with respect to U.S. accounts. With respect to a participating FFI that elects reporting under section 1471(c)(2) for such accounts, the FFI may report only the items listed in (i) and (iii), above, for its report filed by September 30, 2014.
In accordance with its normal practice, the IRS will assess the accuracy of the reported information and communicate with the FFI to resolve discrepancies in the information, such as those regarding U.S. TINs. Unresolved discrepancies could result in an account being treated as held by a recalcitrant account holder.
For each account for which the participating FFI is not able to report the information above, because, for example, the account holder has not waived any applicable reporting restrictions, the FFI will report the account among its recalcitrant account holders with U.S. indicia in accordance with section IV.F of Notice 2010-60 and as prescribed in future guidance. The reporting with respect to recalcitrant account holders identified by June 30, 2014, will be required to be filed with the IRS by September 30, 2014.
C. Withholding
1. Withholdable payments
III. TIMELINE FOR PUBLISHED GUIDANCE
Treasury and the IRS anticipate issuing proposed regulations incorporating the guidance provided in Notice 2010-60 as amended and supplemented by Notice 2011-34 and this Notice and providing further guidance on implementing Chapter 4 by December 31, 2011. After consideration of comments, Treasury and the IRS anticipate publishing final regulations in the summer of 2012. In conjunction with these regulations, Treasury and the IRS also anticipate issuing draft versions followed by final versions of the associated FFI Agreement and reporting forms for use by withholding agents and participating FFIs in the summer of 2012.
IV. MISCELLANEOUS
A. Qualified Intermediary and Other Withholding Agreements Expiring in 2012
All qualified intermediary agreements, withholding foreign partnership agreements, and withholding foreign trust agreements of entities qualifying as FFIs that expire on December 31, 2012, will be automatically extended until December 31, 2013. Any FFI that enters into an FFI Agreement on or before December 31, 2013, will be considered to have renewed its qualified intermediary agreement, withholding foreign partnership agreement, or withholding foreign trust agreement, as the case may be.
B. Clarification of the Scope of Grandfathered Obligations
Section 501(d)(2) of the Act provides that Chapter 4 shall not require any amount to be deducted or withheld from any payment under any obligation outstanding on March 18, 2012, or from the gross proceeds of any disposition of such an obligation. Section I of Notice 2010-60 defined the term "obligation" for this purpose to mean any legal agreement that produces or could produce withholdable payments, but not including any instrument treated as equity for U.S. tax purposes, or any legal agreement that lacks a definitive expiration or term. Questions have been raised regarding whether legal agreements that give rise to passthru payments other than withholdable payments are excluded from the definition of "obligation" for this purpose. Treasury and the IRS intend to issue regulations clarifying that, for purposes of section 501(d)(2) of the Act, the term "obligation" means any legal agreement that produces or could produce passthru payments (including withholdable payments), but not including any instrument treated as equity for U.S. tax purposes, or any legal agreement that lacks a definitive expiration or term.
DRAFTING INFORMATION
The principal author of this notice is John Sweeney of the Office of Associate Chief Counsel (International). For further information regarding this notice, contact Mr. Sweeney at (202) 622-3840 (not a toll-free call).
- Institutional AuthorsInternal Revenue Service
- Cross-Reference
- Code Sections
- Subject Areas/Tax Topics
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 2011-15397
- Tax Analysts Electronic Citation2011 TNT 136-9