IRS Issues Supplemental Guidance on U.S. FATCA Reporting Requirements for Foreign Financial Institutions

IRS Issues Supplemental Guidance on U.S. FATCA Reporting Requirements for Foreign Financial Institutions

The IRS has issued supplemental guidance (Notice 2011-34) on expanded information reporting requirements for foreign financial institutions (FFIs) and some of their U.S. accounts, and on withholding, documentation, and reporting requirements for some payments made to foreign entities. The preliminary guidance (Notice 2010-60) was published in August 2010 and focused on the implementation of the foreign tax compliance offset provisions. Additional comments are requested on the issues covered in Notice 2011-34 and other priority issues that may arise in connection with future guidance. Notice 2011-34 addresses various priority concerns identified by commentators following the publication of Notice 2010-60. The supplemental guidance modifies the procedures provided in the earlier notice for a participating FFI to identify U.S. accounts among its preexisting individual accounts and describes a new procedure for participating FFIs to certify their completion of the requirements for determining the status of their preexisting individual accounts. Notice 2011-34 includes guidance on the definition of passthrough payment and the obligation of participating FFIs to withhold on passthrough payments and provides an exemption from passthrough payment withholding for grandfathered obligations. The notice also describes categories of FFIs that will be deemed compliant under section 1471(b)(2). Unless provided otherwise, a deemed-compliant FFI will be required to apply for deemed-compliant status with the IRS, obtain an FFI identification number from the IRS, and certify every three years to the IRS that it meets the requirements for such treatment. The supplemental guidance modifies some of the provisions in Notice 2010-60 on the obligation of participating FFIs to report on U.S. accounts. In response to commentators who pointed out that some FFIs do not retain records of their periodic (such as monthly or quarterly) account balance determinations, Treasury intends to issue regulations limiting account balance reporting obligations to year-end account balances or values. Notice 2011-34 also addresses the treatment of qualified intermediaries under section 1471. All FFIs currently acting as QIs will have to consent to include in their QI agreements the requirement that they become participating FFIs unless they qualify as deemed-compliant FFIs under section 1471. Treasury and the IRS intend to provide transition rules to accommodate this change, which will apply as of January 1, 2013. FFIs applying for QI status after this date will be required to satisfy the requirements of section 1471. Notice 2011-34 includes guidance on the application of section 1471 to expanded affiliated groups of FFIs. Each FFI affiliate in an FFI group will have to be a participating FFI or a deemed-compliant FFI, and each FFI affiliate in the group that is to become a participating FFI will be required to execute an FFI agreement that will apply to all its worldwide branches and offices. Moreover, each participating FFI affiliate will be responsible for its own due diligence, withholding and reporting obligations, and return filing requirements under its FFI agreement.

For related coverage, see Doc 2011-7622 <a href="/lr/resolve//18p9y"> <img src="//s3.amazonaws.com/binary.taxnotes.com/image/etl/doclink.gif" border="0" alt="2011 WTD 69-1: News Stories"/></a> <a href="//s3.amazonaws.com/pdfs.taxnotes.com/2011/2011-7622-1.pdf" title="PDF: 2011-7622"><img src="//s3.amazonaws.com/binary.taxnotes.com/image/etl/pdficon_small.gif" width="14" height="14" border="0"/></a> or 2011 WTD 69-1 <a href="/lr/resolve//18p9y"> <img src="//s3.amazonaws.com/binary.taxnotes.com/image/etl/doclink.gif" border="0" alt="2011 WTD 69-1: News Stories"/></a>. For Notice 2010-60, 2010-37 IRB 329, see Doc 2010-19071 <a href="//s3.amazonaws.com/pdfs.taxnotes.com/2010/2010-19071-1.pdf" title="PDF: 2010-19071"><img src="//s3.amazonaws.com/binary.taxnotes.com/image/etl/pdficon_small.gif" width="14" height="14" border="0"/></a> or 2010 WTD 167-26 <a href="/lr/resolve//191lm"> <img src="//s3.amazonaws.com/binary.taxnotes.com/image/etl/doclink.gif" border="0" alt="2010 WTD 167-26: Internal Revenue Bulletin"/></a>. Obsoleted by T.D. 9610, Doc 2013-1257 <a href="//s3.amazonaws.com/pdfs.taxnotes.com/2013/2013-1257-1.pdf" title="PDF: 2013-1257"><img src="//s3.amazonaws.com/binary.taxnotes.com/image/etl/pdficon_small.gif" width="14" height="14" border="0"/></a>.

Supplemental Notice to Notice 2010-60 Providing Further Guidance and Requesting Comments on Certain Priority Issues Under Chapter 4 of Subtitle A of the Code

The IRS has issued supplemental guidance on expanded information reporting requirements for foreign financial institutions and some of their U.S. accounts, and on withholding, documentation, and reporting requirements for some payments made to foreign entities.

The IRS has issued supplemental guidance (Notice 2011-34) on expanded information reporting requirements for foreign financial institutions (FFIs) and some of their U.S. accounts, and on withholding, documentation, and reporting requirements for some payments made to foreign entities. The preliminary guidance (Notice 2010-60) was published in August 2010 and focused on the implementation of the foreign tax compliance offset provisions. Additional comments are requested on the issues covered in Notice 2011-34 and other priority issues that may arise in connection with future guidance. Notice 2011-34 addresses various priority concerns identified by commentators following the publication of Notice 2010-60. The supplemental guidance modifies the procedures provided in the earlier notice for a participating FFI to identify U.S. accounts among its preexisting individual accounts and describes a new procedure for participating FFIs to certify their completion of the requirements for determining the status of their preexisting individual accounts. Notice 2011-34 includes guidance on the definition of passthrough payment and the obligation of participating FFIs to withhold on passthrough payments and provides an exemption from passthrough payment withholding for grandfathered obligations. The notice also describes categories of FFIs that will be deemed compliant under section 1471(b)(2). Unless provided otherwise, a deemed-compliant FFI will be required to apply for deemed-compliant status with the IRS, obtain an FFI identification number from the IRS, and certify every three years to the IRS that it meets the requirements for such treatment. The supplemental guidance modifies some of the provisions in Notice 2010-60 on the obligation of participating FFIs to report on U.S. accounts. In response to commentators who pointed out that some FFIs do not retain records of their periodic (such as monthly or quarterly) account balance determinations, Treasury intends to issue regulations limiting account balance reporting obligations to year-end account balances or values. Notice 2011-34 also addresses the treatment of qualified intermediaries under section 1471. All FFIs currently acting as QIs will have to consent to include in their QI agreements the requirement that they become participating FFIs unless they qualify as deemed-compliant FFIs under section 1471. Treasury and the IRS intend to provide transition rules to accommodate this change, which will apply as of January 1, 2013. FFIs applying for QI status after this date will be required to satisfy the requirements of section 1471. Notice 2011-34 includes guidance on the application of section 1471 to expanded affiliated groups of FFIs. Each FFI affiliate in an FFI group will have to be a participating FFI or a deemed-compliant FFI, and each FFI affiliate in the group that is to become a participating FFI will be required to execute an FFI agreement that will apply to all its worldwide branches and offices. Moreover, each participating FFI affiliate will be responsible for its own due diligence, withholding and reporting obligations, and return filing requirements under its FFI agreement.

Section 1471 -- Foreign Financial Institution Withholding

Section 1472 -- Foreign Entity Withholding

Section 1473 -- Foreign Financial Institution Withholding Definitions

Section 1474 -- Foreign Institution Withholding Special Rules

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IRS Issues Supplemental Guidance on U.S. FATCA Reporting Requirements for Foreign Financial Institutions