On July 12, 2013, the IRS issued Notice 2013-43, revising the timelines for implementation of the Foreign Account Tax Compliance Act (“FATCA”) that was enacted as part of the Hiring Incentives to Restore Employment Act of 2010. (“the HIRE Act”).
Under FATCA, foreign financial institutions (“FFI’s") located in participating countries are required to report to the IRS certain information about financial accounts held by U.S. taxpayers or by foreign entities in which U.S. taxpayers hold substantial ownership interests. FFIs generally will include banks, broker-dealers, clearing organizations, trust companies, custodial banks and other custodians of assets. Other custodians of assets will include: retirement plans, mutual funds, fund of funds, private equity funds, venture capital funds, hedge funds and other managed funds or investment vehicles.
Under the original timeline for implementation, a fund deemed to be an FFI had to enter into an agreement with the U.S. Treasury by January 1, 2014, to become a participating FFI ("PFFI"). The FFI was to enter into this agreement through an online registration process.
In Notice 2013-43, online registration of FFI’s must be finalized by April 25, 2014. However, online applications will be processed beginning January 1, 2014. Additionally, the online registration service will be available for entering preliminary information beginning August 19, 2013. Withholding requirements by FFI’s have also been delayed by 6 months to July 1, 2014.
Notice 2013-43 also provides that a jurisdiction will be treated as having in effect an intergovernmental agreement (“IGA”) if the jurisdiction is listed on the Treasury Website as a list jurisdiction that is treated as having an IGA in effect. This list will include jurisdictions who have signed but not yet brought into force an IGA. In the meantime, Congressman Bill Posey (R-FL) has joined his colleague in the Senate, Rand Paul in calling for the repeal of FATCA and has condemned the IGA’s as an illegal usurping of Congress’s power. In a letter to Treasury Secretary Jacob Lew, Congressman Posey had the following to say:
“I further note that the IGA’s that are being entered into are not authorized, or even mentioned, in FATCA. Despite the absence of any specific legislative authorization, these IGA’s are not being submitted to the Senate as treaties or treaty amendments for its advice and consent, nor- apart from the enhanced reporting authority described above – is any request being made to Congress for the statutory authority to implement these IGA. If such authority exists, please provide a citation to the specific relevant statute.”
The reason the Treasury Department is not submitting IGA’s to the Senate as treaty amendments is because Senator Rand Paul (R-KY) has vowed to block any treaty provision from reaching the Senate floor for a vote. Senator Paul has also proposed legislation to repeal FATCA entirely. Congressman Posey alluded to this in his letter by saying, “Legislation to repeal FATCA was recently introduced in the Senate, and I expect a companion bill will soon be introduced in the House of Representatives.”
© 2013 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.
This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.