New regulations effective March 29, 2011, can affect a signifi cant number of US persons with a fi nancial interest in, or signature authority over, foreign fi nancial accounts reported on the Form TD F 90-22, Report of Foreign Bank and Financial Accounts, commonly referred to as FBAR. As a result of the rule change, a US person is now required to fi le an FBAR by June 30, 2011, if the person (i.e., officer or employee) has signature authority over, but no fi nancial interest in, a foreign fi nancial account of any of the following entities (provided the aggregate value of those accounts and any other foreign financial accounts the US person has a financial interest in, or signature authority over, have an aggregate value at any time during 2010 of over $10,000):

  • a foreign subsidiary (even if the parent’s equity securities are listed on a US national securities exchange),
  • any subsidiary of a US non-ecxhange traded entity that has assets exceeding $10 million and has 500 or more shareholders of record, or
  • an entity that is not the employer of the offi cer or employee.

Round Two of FATCA Guidance: IRS Notice 2011-34 Addresses Priority Concerns, Revises Earlier Guidance, and Introduces New Concepts

On April 8, 2011, the Internal Revenue Service (IRS) issued Notice 2011-34 which provides supplemental guidance on the documentation, reporting and withholding requirements under the Foreign Account Tax Compliance Act (FATCA) of 2009. The following key points are addressed in Notice 2011-34:

  • Updated guidance for identifying US accounts among pre-existing individual accounts,
  • Initial guidance on pass-thru payments,
  • Clarifi cation of deemed compliant status for foreign fi nancial institutions (FFI),
  • Further guidance on the reporting on US accounts by FFIs,
  • Treatment of qualifi ed intermediaries,
  • Application of FATCA to expanded affi liated groups,
  • Clarifi cation on the effective date of FFI agreements.  

Future guidance is expected to include a draft FFI Agreement and draft information reporting and certifi cation forms. Notably, the IRS did not provide any signifi cant guidance on the application of FATCA to the insurance and alternative investment industries, nor did the Notice address the scope of the exemption for retirement plans or other employee benefi t plans.