IRS Announces Relaxed Enforcement of FATCA for Financial Institutions for 2014-2015

The IRS announced that it will treat 2014 and 2015 as a transition period for purposes of IRS enforcement and administration of FATCA. During this period, the IRS will take into account the good faith efforts made by foreign financial institutions ("FFIs"), non-financial foreign entities, and withholding agents to comply with FATCA to modify account opening procedures, apply standards of knowledge under FATCA and identify and register each member of an expanded affiliated group. Notice 2014-33 did not postpone the July 1 start date for FATCA, as some bankers had requested, but it does ease certain aspects of the law temporarily. For example, the Notice provides that accounts of entities (but not individuals) opened on or after July 1, 2014 and before January 1, 2015, will be treated as "pre-existing accounts", which will reduce the burden on, and extend the time frame for, FFIs to document the status of new account holders under FATCA. Intergovernmental Agreements ("IGAs") that have been signed or agreed to in substance will be modified to reflect this change in the due diligence rules. The Notice also provides for transitional relief for FFIs in non-IGA countries that are unable to register as limited FFIs.

See: Notice 2014-33. See also: Cabinet FATCA Materials (for Cabinet subscribers only).For more information, please contact Daniel Mulcahy and Mark Howe.