November 22, 2011 –
IRS and Treasury On Track to Issue Proposed Regulations on the Foreign Account Tax Compliance Act

The Deputy Commissioner (“Commissioner”) of the Internal Revenue Service (“IRS”), Large Business and International Division recently announced that the IRS and the United States Department of Treasury (“Treasury”) are on track to issue proposed regulations (“Regulations”) to implement the Foreign Account Tax Compliance Act (“FATCA”).  The Commissioner stated that the IRS and Treasury are making a “tremendous effort” to issue the Regulations by the end of December and, if they are not issued by the last working day of December, they would be issued shortly thereafter in January.

According to the Commissioner, the IRS hopes to issue, along with the Regulations, a draft agreement for foreign financial institutions (“FFIs”) to start reporting U.S.-owned accounts to U.S. tax authorities under FATCA.  FATCA requires such reporting or FFIs may face a 30% withholding tax.  The Commissioner stated that if the draft agreement is not issued along with the Regulations, it would be issued soon afterwards.

According to the Commissioner, FFI registration should be a fairly simple, automated, electronic process in which an FFI would fill out a registration form on a Web portal and hit “submit.”  A unique employer identification number would then be generated so a participating FFI could perform its information reporting duties.  The Commissioner stated that the IRS is in “very good shape on [this]” and does not expect any delays in implementing FATCA.

Lastly, in another key point, the Commissioner stated that he expects that there will be bilateral agreements between the United States and other countries on the implementation of FATCA.