Treasury Releases Last Substantial FATCA Rules Package

The U.S. Department of the Treasury and Internal Revenue Service ("IRS") released the last substantial package of regulations necessary to implement the Foreign Account Tax Compliance Act ("FATCA"). The proposed and temporary regulations make additions and clarifications to previously issued FATCA regulations and provide guidance to coordinate FATCA rules with preexisting due diligence, reporting and withholding requirements under other provisions of the Internal Revenue Code ("Code").The new regulations include over 50 separate amendments and clarifications to the FATCA regulations issued in January 2013. Many of the changes, including grandfathering rules and special direct reporting rules for Non-Financial Foreign Entities ("NFFEs"), were previewed in Notices and other interim guidance previously issued by the IRS. Many other changes are designed to "harmonize" the regulations with the Intergovernmental Agreements that have been negotiated with over 20 countries to date. These new regulations also make significant changes to provide for exception from FATCA withholding for certain existing securitization and other special purposes structures that were requested by banking, ISDA and other financial interests. Another group of regulations coordinate reporting under the FATCA regulations with preexisting reporting under the income tax regulations.

FATCA is expected to become operative on July 1, 2014. Despite numerous requests from several industry groups, the Treasury and the IRS have recently stated that they do not plan to delay the effective date of FATCA beyond that date.

See: Treasury Fact Sheet; Temporary Regulations; Coordination Regulations; Press Release.