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IRS Issues Additional FATCA Guidance.
(Parker Tax Publishing May 23, 2014)

The IRS announced that calendar years 2014 and 2015 will be regarded as a transition period for purposes of IRS enforcement and administration with respect to the implementation of FATCA. Notice 2014-33 (5/2/14).

The Foreign Account Tax Compliance Act (FATCA) was enacted by the Hiring Incentives to Restore Employment Act in 2010. FATCA is contained in Chapter 4 of Subtitle A of the Code and consists of Code Secs. 1471 1474. In 2013, the IRS issued final regulations, which provided for a phased implementation of the requirements of FATCA, beginning on January 1, 2014, and continuing through 2017. The implementation of these regulations was subsequently extended by six months in Notice 2013-43. Under the revised timeline, withholding agents generally are required to begin withholding on withholdable payments made after June 30, 2014, to payees that are foreign financial institutions (FFIs) or certain non-financial foreign entities (NFFEs) with respect to obligations that are not grandfathered obligations, unless the payments can be reliably associated with documentation on which the withholding agent can rely to treat the payments as exempt from withholding. In March 2014, the IRS published temporary regulations that revised and further clarified the final regulations.

On May 2, 2014, the IRS issued Notice 2014-33, in which it announced that calendar years 2014 and 2015 will be regarded as a transition period for purposes of IRS enforcement and administration with respect to the implementation of FATCA by withholding agents, foreign financial institutions (FFIs), and other entities with Chapter 4 responsibilities, and with respect to certain related due diligence and withholding provisions under chapters 3 and 61, and Code Sec. 3406, that were revised in regulations issued earlier this year.

The IRS also announced its intention to further amend the regulations under Code Secs. 1441, 1442, 1471, and 1472, as applicable, to provide: (1) that a withholding agent or FFI may treat an obligation (which includes an account) held by an entity that is opened, executed, or issued on or after July 1, 2014, and before January 1, 2015, as a preexisting obligation for purposes of Code Secs. 1471 and 1472, subject to certain modifications; (2) additional guidance under Code Sec. 1471 concerning the requirements for an FFI (or a branch of an FFI, including a disregarded entity owned by an FFI) that is a member of an expanded affiliated group of FFIs to be treated as a limited FFI or limited branch, including the requirement for a limited FFI to register on the FATCA registration website; (3) a modification to the standards of knowledge for withholding agents under Reg. Sec. 1.1441-7(b) for accounts documented before July 1, 2014; and (4) a revision to the definition of a reasonable explanation of foreign status in Reg. Sec. 1.1471-3(e)(4)(viii). Before the issuance of these amendments, the IRS said, taxpayers may rely on the provisions of Notice 2014-33 regarding the proposed amendments to the regulations.

For a discussion of the FATCA requirements, see Parker Tax ΒΆ203,180. (Staff Editor Parker Tax Publishing)

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Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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