The IRS released Announcement 2012-42 today, delaying the deadlines for certain steps in FATCA implementation, and better aligning the deadlines in regulations with those under the model intergovernmental agreements. Announcement 2012-42 was issued in response to numerous comments received from financial institutions, trade associations, and foreign governments regarding the proposed regulations for implementing FATCA (see BakerHostetler’s FATCA site at www.bakerlaw.com/internationaltax/fatca for the comment letters and proposed regulations, in addition to other FATCA resources). In addition to releasing the announcement, the IRS also released a helpful table summarizing the new deadlines.
Significantly, the IRS is instead requiring new account opening procedures to begin on January 1, 2014 (or the effective date of an FFI agreement, whichever is later). In addition, many other due diligence deadlines and withholding deadlines were postponed by 6 months from those in the proposed regulations. The new deadlines for withholding agents and participating FFIs are as follows:
- For preexisting accounts of FFIs, due diligence must be completed by June 30, 2014 (or 6 months after the effective date of an FFI agreement, whichever is later);
- For preexisting accounts of entities other than prima facie FFIs, due diligence must be completed by December 31, 2015 (or two years after the effective date of the FFI agreement, whichever is later);
- For preexisting high value accounts of individuals, participating FFIs must complete due diligence by the later of December 31, 2014, or one year after the effective date of the FFI agreement; and
- For all other preexisting individual accounts other than high value accounts, participating FFIs must complete due diligence by the later of Decemer 31, 2015 or two years after the effective date of the FFI agreement.
In addition to the new account opening procedure deadlines and due diligence deadlines listed above, the announcement postponed withholding on gross proceeds to December 31, 2016. In addition, the announcement noted that the following types of obligations will be treated as grandfathered obligations: (1) any obligation that produces or could produce a foreign passthru payment and that cannot produce a withholdable payment, provided that the obligation is outstanding as of 6 months after the date final regulations defining passthru payments are filed with the Federal Register; (2) any instrument that gives rise to a withholdabel payment solely because the instrument is treated as giving rise to a dividend equivalent pursuant to section 871(m), provided that the instrument is outstanding 6 months after the date on which instruments of that type first become subject to such treatment; and (3) any obligation to make a payment with respect to, or repay, collateral posted to secure obligations under a swap.
For more information on FATCA implementation timelines and requirements, please contact Paul Schmidt at (202)861-1760, Allen Littmen at (202)861-1686, Scott Dayan at (202)861-1584, or Michael Nydegger at (202)861-1688.