IRS to Amend Administrative Rules Regarding Certifications and Reporting of FFIs

The IRS will extend the timeline for filing FATCA-related certifications that are required of certain participating foreign financial institutions ("FFIs") and for reporting Model 2 FFIs.

Notice 2016-08 states that the Treasury Department and the Internal Revenue Service (IRS) will "amend the regulations under chapter 4 (sections 1471-1474 of the Internal Revenue Code) to: (1) modify the date for submitting to the IRS the preexisting account certifications required of certain foreign financial institutions (FFIs); (2) specify the period and date for submitting to the IRS the periodic certification of compliance described in §1.1471-5(f)(1)(ii)(B) for a registered deemed compliant FFI; and (3) modify the transitional information reporting rules for accounts of nonparticipating FFIs to eliminate the requirement to report on gross proceeds for the 2015 year. The Treasury Department and the IRS also intend to amend the regulations under chapters 3 and 4 to specify the circumstances under which a withholding agent may rely on electronically furnished Forms W-8 and W-9 collected by intermediaries and flow-through entities."

Entities that have entered into an FFI agreement directly with the IRS are required to: (i) certify on a one-time basis that they have conducted due diligence for preexisting U.S. taxpayer accounts; and (ii) certify periodically that they have complied with the terms of their FFI agreement. Under the current rules, these certifications are to be filed at different times. Notice 2016-08 provides that the IRS will amend Treasury regulations to allow both certifications to be filed on or before July 1 of the fourth calendar year after the effective date of the applicable FFI agreement. For example, an FFI with an FFI agreement dated June 30, 2014 will be required to provide both certifications on or before July 1, 2018.

Notice 2016-08 also provides that local FFIs and restricted funds will provide a one-time certification with respect to their preexisting accounts during their first periodic certification of their status as registered deemed-compliant FFIs (rather than certifications at two separate times). The IRS will amend Treasury regulations to allow both certifications to be filed on or before July 1 of the fourth calendar year after the later of: (i) the date of registration as a deemed-compliant FFI or (ii) June 30, 2014.

The IRS intends to amend the regulations to provide that participating FFIs, reporting Model 2 FFIs and registered deemed-compliant FFIs are not required to report gross proceeds for the 2015 calendar year with respect to, or that were paid to, an account held by a nonparticipating FFI.

In order to "reduce burden," "avoid unnecessary overwithholding" and facilitate the collection of tax forms, Notice 2016-08 grants greater latitude to withholding agents to rely on Forms W-8 and W-9 that are received through electronic systems, that satisfy IRS requirements and that are maintained by certain nonqualified intermediaries and nonwithholding partnerships or trusts.