Press Room: Tax Release

February 26, 2014

Treasury Releases FATCA Coordination Guidance

In a final burst of activity, the U.S. Treasury on February 20, 2014, released almost 600 pages of tax guidance under Internal Revenue Code Chapter 4 – Foreign Account Tax Compliance Act (FATCA).

Most importantly, it included guidance relating to the coordination of the FATCA rules with pre-existing due diligence, reporting and withholding requirements under other provisions of the Internal Revenue Code (principally the Chapter 3 – Withholding on Non-Resident Aliens and Foreign Corporations, and the Chapter 61 – Information and Returns).

As of July 1, 2014, FATCA requires foreign financial institutions (FFIs) to report to the U.S. government their U.S. account holders.

The main thrust of these coordination regulations is to take some of the FATCA provisions and carry them through the provisions of Chapter 3 and Chapter 61. A sampling of some of the nuggets contained in these regulations include:

  • Withholding agents can rely on a withholding certificate that includes a foreign tax identification number as opposed to the sometimes difficult to obtain ITIN.
  • Withholding agents can accept forms W-8 – Certificates of Exemption from U.S. Withholding, when they have been faxed, scanned or emailed.
  • The validity of pre-existing forms that expired on December 31, 2013, has been extended from June 30, 2014, to January 1, 2015.

Though the thrust of the Regulations is to coordinate the various regimes, there are some intentional differences. For example, the 90-day grace period for withholding under FATCA for changes in circumstances relating to an account holder is not provided for in Chapter 3 withholding, reflecting the differing goals of Chapter 3 (collecting taxes) and Chapter 4 (collecting information).

This release completes the bulk of the Treasury’s FATCA regulatory guidance process. With the expected release shortly of the remaining forms, taxpayers will, hopefully, have sufficient guidance to allow them to meet the July 1 effective date for FATCA compliance.