Earlier today, Treasury and the IRS issued yet another correcting amendment to the previously-issued regulations implementing the Foreign Account Tax Compliance Act (FATCA). FATCA become effective on July 1, 2014, and generally requires participating foreign financial institutions (FFIs) to begin reporting information regarding their U.S. account holders to the U.S. by March 31, 2015. Since FATCA was passed by Congress and signed by the President in 2010, Treasury and the IRS have issued a massive amount of proposed, temporary, and final regulations to implement FATCA’s mandate.
According to the preamble to today’s correcting amendment, the change “affects FFIs that have entered into an agreement with the IRS to obtain status as a participating FFI and to, among other things, report certain information with respect to U.S. accounts that they maintain.” The preamble further sets forth why the correction was needed:
As published, the temporary regulations contain an error that is misleading with respect to the reporting requirements of participating FFIs (as defined in §1.1471-1(b)(91)) maintaining U.S. accounts during the 2014 calendar year. This correcting amendment modifies the last date in the first sentence in §1.1471-4T(d)(7)(iv)(B) to correct the relevant provision to meet its intended purpose.
Specifically, the amendment corrects Treas. Reg. 1.1471-4T(d)(7)(iv)(B), as follows:
(B) Special determination date and timing for reporting with respect to the 2014 calendar year. With respect to the 2014 calendar year, a participating FFI must report under paragraph (d)(3) or (5) of this section on all accounts that are identified and documented under paragraph (c) of this section as U.S. accounts or accounts held by owner-documented FFIs as of December 31, 2014, (or as of the date an account is closed if the account is closed prior to December 31, 2014) if such account was outstanding on or after the effective date of the participating FFI’s FFI agreement. * * *
Prior to today’s correcting amendment, participating FFIs were only permitted to treat accounts as “pre-existing” if they were opened prior to July 1, 2014. The amendment now allows participating FFIs to treat accounts as pre-existing if they were opened before the institution signed its FFI Agreement with the IRS. The change allows FFIs to have greater leeway in characterizing accounts as “pre-existing,” particularly for those institutions which registered as participating FFIs and entered into FFI Agreements after July 1, 2014.