The IRS issued a second notice giving guidance on various reporting requirements under the Foreign Account Tax Compliance Act (FATCA, part of P.L. 111-147) (Notice 2011-34). The notice responds to concerns raised by commenters following the issuance last August of Notice 2010-60, which contained preliminary guidance on implementation of the FATCA rules.
FATCA expanded the information reporting requirements for foreign financial institutions with respect to certain United States accounts. It also imposed withholding, documentation and reporting requirements with respect to certain payments made to certain foreign entities.
Notice 2011-34 provides the procedures for participating foreign financial institutions to follow in identifying U.S. accounts among their pre-existing individual accounts. It also defines what a pass-through payment is for FATCA purposes and provides guidance on withholding on pass-through payments.
The notice also lists certain categories of foreign financial institutions that will be deemed to be compliant. These include certain local banks and certain investment vehicles. However, to be deemed compliant, such foreign financial institutions will have to apply for deemed-compliant status, obtain a foreign financial institution identification number, and certify every three years to the IRS that they meet the requirements for such treatment.
The notice discusses foreign financial institutions’ obligations to report U.S. accounts. It also addresses the treatment of qualified intermediaries. Finally, the notice provides guidance on the application of Sec. 1471 to affiliated groups of foreign financial institutions.