The U.S. Treasury Department (“Treasury”) and the Internal Revenue Service (“IRS”) on February 8, 2012 issued proposed regulations addressing the implementation of the Foreign Account Tax Compliance Act (“FATCA,” which was enacted as part of the Hiring Incentives to Restore Employment Act on March 18, 2010). For a brief overview of FATCA, please refer to our prior releases on the subject from February 2012 entitled “FATCA Update for Latest Government Guidance” or from April 2010 entitled “Recent Enactments Affecting Offshore Funds Attack Offshore Tax Abuses, Raise Taxes on Investment Income and Gains.” The proposed regulations, which are nearly 400 pages in length, provide detailed guidance on the U.S. account identification, withholding and information reporting requirements which foreign financial institutions (“FFIs”), other non-financial foreign entities (“NFFEs”) and U.S. withholding agents are subject to under FATCA. Throughout 2010 and 2011, Treasury and the IRS issued preliminary guidance with respect to the implementation of FATCA in a series of notices (collectively, the “FATCA Notices”). Public comments with respect to the FATCA Notices were considered by Treasury and the IRS in developing the proposed regulations and the proposed regulations in certain cases amend, revise or eliminate the preliminary guidance that was provided under the FATCA Notices. The proposed regulations make progress in eliminating, reducing or delaying the impact of FATCA on many investment funds and financial institutions, but for entities not otherwise exempt from FATCA, the burdens associated with FATCA still remain.
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