Treasury and IRS Issue Proposed Regulations on Foreign Account Tax Compliance Act (FATCA)

On February 8, 2012 Treasury and the IRS issued much-anticipated proposed regulations which seek to implement the reporting and withholding regime under FATCA enacted March 18, 2010. The proposed regulations incorporate the guidance described in previously issued FATCA Notices including refinements developed in response to comments as well as provide guidance on topics that were not addressed in previously issued guidance.

Some of the topics addressed in the proposed regulations include: 

  • An expansion of the scope of “Grandfathered Obligations” 
  • Transitional rules for affiliates with legal prohibitions on compliance 
  • Additional categories of Deemed-Compliant FFIs ( Foreign Financial Institutions) 
  • Modification of due diligence procedures for the identification of accounts 
  • Guidance on procedures required to verify compliance 
  • Refinement of the definition of financial account 
  • Extensions of the transition period for the scope of information reporting 
  • Adjusted timing for withholding on “passthru” payments

Additionally, the Treasury Department and IRS are seeking comments with respect to the scope and ultimate implementation of withholding on foreign passthru payments to reduce taxpayer burden.

The Treasury Department also released a joint statement from the United States, France, Germany, Italy, Spain and the United Kingdom regarding a possible intergovernmental approach to improving international tax compliance and implementing FATCA. The joint statement can be found at   

As the proposed regulations, which amount to almost four hundred pages, continue to be evaluated, we will provide additional guidance and clarity as to how these rules affect our clients.

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