The IRS released Announcement 2012-42 today, delaying the deadlines for certain steps in FATCA implementation and better aligning the deadlines in regulations with those under the model intergovernmental agreements, while maintaining incentives for countries to elect to enter into these agreements. Announcement 2012-42 was issued in response to numerous comments received from financial institutions, trade associations and foreign governments regarding the proposed regulations for implementing FATCA (see BakerHostetler's FATCA site for the comment letters and proposed regulations, as well as to other FATCA resources). In addition to releasing the announcement, the IRS released a helpful table summarizing the new deadlines.
UPDATED DUE DILIGENCE DEADLINES
Significantly, the IRS is requiring new account opening procedures to begin on January 1, 2014 (or the effective date of an FFI agreement, whichever is later). Additionally, many other due diligence deadlines and withholding deadlines were postponed by six months from those in the proposed regulations. The new deadlines under the final regulations for withholding agents and participating FFIs will be as follows:
Participating FFIs must complete due diligence with respect to preexisting accounts belonging to prima facie FFIs, by June 30, 2014 (or six months after the effective date of an FFI agreement, whichever is later). Withholding agents other than participating FFIs have until June 30, 2014;
Participating FFIs must complete due diligence with respect to preexisting accounts of entities other than prima facie FFIs, by December 31, 2015 (or two years after the effective date of the FFI agreement, whichever is later). Withholding agents other than participating FFIs have until December 31, 2015;
For preexisting high value accounts of individuals, participating FFIs must complete due diligence by the later of December 31, 2014, or one year after the effective date of the FFI agreement; and
For all other preexisting individual accounts other than high value accounts, participating FFIs must complete due diligence by the later of December 31, 2015 or two years after the effective date of the FFI agreement.
OTHER UPDATED DEADLINES
In addition to the new account opening procedure deadlines and due diligence deadlines listed above, the announcement postpones withholding on gross proceeds to December 31, 2016. January 1, 2017, and postpones information reporting with respect to calendar years 2013 and 2014 for participating FFIs until March 31, 2015. The proposed regulations currently provide for calendar year 2013 and 2014 reporting by September 30, 2014 and March 31, 2015, respectively. The model intergovernmental agreements provide for calendar year 2013 and 2014 reporting by September 30, 2015.
The announcement also means that similar changes to the commencement of withholding will be made in final regulations. Withholding on payments made by a withholding agent other than an FFI to a prima facie FFI is postponed until the earlier of July 1, 2014 or the receipt of documentation establishing that the payee is a nonparticipating FFI, and it appears the other withholding deadlines in the proposed regulations will be postponed under similar principles.
In addition, the announcement noted that the following types of obligations will be treated as exempted "grandfathered" obligations: (1) any obligation that produces or could produce a foreign passthru payment and that cannot produce a withholdable payment, provided that the obligation is outstanding as of six months after the date final regulations defining passthru payments are filed with the Federal Register; (2) any instrument that gives rise to a withholdable payment solely because the instrument is treated as giving rise to a dividend equivalent pursuant to section 871(m), provided that the instrument is outstanding six months after the date on which instruments of that type first become subject to such treatment; and (3) any obligation to make a payment with respect to, or repay, collateral posted to secure obligations under a notional principal contract that is a grandfathered obligation.