SIFMA Submits Comments Regarding FFI Guidance in Notice 2013-69

SIFMA has submitted comments to the IRS and the U.S. Treasury Office of International Tax Counsel regarding Notice 2013-69, which provides guidance to foreign financial institutions ("FFIs") entering into FFI agreements with the IRS which are to be treated as participating FFIs ("PFFIs").

In the letter, SIFMA recommended that the IRS provide further guidance regarding the diligence procedures necessary to validate the status of direct reporting non-financial foreign entities ("NFFEs") and sponsored direct reporting NFFEs. Under Notice 2013-69, the Treasury and the IRS created these two new categories of NFFE, in which the NFFE would report its "substantial U.S. owners" directly to the IRS rather than to a U.S. or foreign withholding agent. Under the regulations, a withholding agent must validate the status of an electing direct reporting NFFE or withhold, upon U.S. source, payments to such entity. SIFMA explained, among other issues, that it is unclear how an NFFE elects into or out of such status, what the composition of the GIIN would be of electing NFFEs and whether a lead FFI will be able to register its direct reporting NFFEs or if there would need to be a new separate sponsor for sponsoring direct reporting NFFEs.

Additionally, SIFMA stated that the IRS should provide further guidance on how the harmonization rules work for purposes of Chapter 61, Chapter 3 and Chapter 4, including further guidance on coordination rules for section 3406 under Chapter 4 for 1099 reporting and backup withholding. SIFMA also raised several technical questions with respect to the provisions of the draft FFI Agreement that are set forth in Notice 2013-69.

Finally, SIFMA attached a previous comment letter from October that outlined various questions it had on the Notice and reiterated its request for a meeting on the issues that were raised in that letter and its current comment letter in order to assist SIFMA members in preparing for FATCA implementation.

See: SIFMA Comment Letter.See also: SIFMA Submits Supplemental Comments on Final FATCA Regulations (October 4, 2013); SIFMA Submits Comments on Cost Basis Reporting and Basis Determination (October 4, 2013).