U.S. Treasury Extends Grandfather Rules for FATCA

Manal Corwin, Assistant Secretary of Treasury for International Affairs, announced on December 4 at an International Fiscal Association conference in New York City that final regulations under FATCA will grandfather from withholding obligations issued or entered into prior to January 1, 2014, as well as any collateral supporting such obligations. Previously, IRS Announcement 2012-42 had grandfathered obligations, that pay U.S. source income issued or entered into prior to January 1, 2013. Corwin also stated that collateral in pools that support grandfathered obligations and obligations that do not generate withholdable payments under FATCA, would also be grandfathered. U.S. banks and other financial institutions have worried that they would be required to withhold and gross-up for FATCA withholding taxes commencing in 2014 for obligations issued in 2013 under existing ISDA and other Master Agreements. There is no official statement or document as of yet.