Friday, September 18, 2015

IRS Intends to Amend Sections 1471-1474 Regulations to Extend the Time that FATCA Transitional Rules Will Apply.

In Notice 2015-66 the Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) announced that they intend to amend regulations under sections 1471-1474 to extend the time that certain FATCA transitional rules will apply.  Specifically, the amendments will extend:

(1) the date for when withholding on gross proceeds and foreign passthru payments will begin;

(2) the use of limited branches and limited foreign financial institutions (limited FFIs); and

(3) the deadline for a sponsoring entity to register its sponsored entities and redocument such entities with withholding agents.

In addition, in order to reduce compliance burdens on withholding agents that hold collateral as a secured party, the notice announces that Treasury and the IRS intend to amend the regulations under chapter 4 to modify the rules for grandfathered obligations in relation to collateral.

The transitional rules provided in the notice facilitate an orderly transition for withholding agents and FFIs regarding FATCA compliance and respond to comments regarding how the phase-out of transitional rules may affect information reporting and withholding systems. 

In light of these comments and the successful engagement of Treasury and partner jurisdictions to conclude intergovernmental agreements to implement FATCA (IGAs), the notice provides additional time for withholding agents and FFIs to modify their systems in stages as necessary to address the phase-out of the above-mentioned transitional rules consistent with the information reporting and compliance objectives of FATCA.

 Finally, the notice also provides information on the exchange of information by Model 1 IGA jurisdictions with respect to 2014.

The notice will appear in IRB 2015-41 dated Oct. 13, 2015.

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