[authors: Sherwin P. Simmons, II, Jonathan E. Gopman, Barbara E. Ruiz-Gonzalez, and Leanne Reagan]

On October 24, 2012, the Internal Revenue Service ("IRS") and the Department of Treasury ("Treasury") issued an announcement that extends certain timelines for the implementation of Foreign Account Tax Compliance Act (FATCA). Enacted by Congress in 2010, FATCA provisions target non-compliance by U.S. taxpayers using foreign accounts. See our Practice Update. FATCA requires withholding agents to withhold 30 percent of certain payments to a foreign financial institution ("FFI") unless the FFI has entered into an agreement with the IRS, and to report certain information with respect to U.S. accounts.

The IRS and Treasury released Announcement 2012-42 which provides guidance concerning certain grandfathered obligations and withholding on gross proceeds. The Announcement also extends the effective dates for FATCA reporting and includes a table to summarize the timing of certain due diligence requirements for withholding agents and financial institutions.

The effective date for the FFI Agreement has also been extended from July 1, 2013 to July 1, 2014. Treasury and the IRS will incorporate all of the due diligence timeline changes in the Announcement in the final regulations.

The final regulations will also include that a participating foreign financial institution (“PFFI”) will be required to file the information reports with respect to 2013 and 2014 calendar years no later than March 31, 2015.

The Announcement also delays withholding on withholdable payments to January 1, 2017.

Under the proposed FATCA regulations issued February 8, 2012, U.S. withholding agents and PFFIs have different requirements, and different timelines. The Announcement grants additional time to satisfy some of the requirements, as well as places all withholding agents on the same timeline with respect to most of the requirements.

The Announcement now provides that any account that is opened in 2013 to be treated as a pre-existing account, which means that transitional relief will apply, giving withholding agents, including FFIs, additional time to meet whatever documentation requirements will be set forth in the final regulations and FFI agreement.

The withholding agents remain responsible for gathering whatever new documentation will be required under the final regulations and FFI agreement when the withholding agent enters into a new account relationship.

Withholding agents, including participating foreign financial institutions ("PFFIs") PFFIs and registered FFIs deemed compliant, generally will be required to implement new account-opening procedures by January 1, 2014.

We will continue to provide updates with respect to developments with FATCA. If you have foreign financial assets, you may contact our FATCA team to discuss your particular facts and circumstances.