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Evolution of FATCA
| January 19, 2012 |
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The IRS releases temporary and proposed regulations under IRC §
871(m) concerning “dividend equivalent” payments. Payments under “specified
notional principal contracts” (“SNPCs”) that are tied to U.S. source dividends
are subject to U.S. tax and withholding. The temporary regulations maintain the
status quo in the statute, which otherwise would have expired on March 18, 2012,
through the end of 2012. The proposed regulations list seven new or modified
types of SNPCs starting in 2013, and also provide that similar payments under
other “equity-linked instruments,” such as futures and forward contracts, are
subject to the same rules.
Read our client letter regarding the temporary
and proposed regulations
Read the temporary regulations
under IRC § 871(m)
Read the proposed regulations under IRC § 871(m) |
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| July 25, 2011 |
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The IRS issues a revised Notice 2011-53 which includes a delay in withholding
on NFFEs. The original notice referred only to withholding on FFIs.
Read the revised version of
Notice 2011-53
Read a
redlined version comparing the original and revised versions of Notice 2011-53 |
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| July 15, 2011 |
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The IRS releases Notice 2011-53, which describes the timeline for the
implementation of Chapter 4 and discusses certain substantive and procedural
matters that will be addressed in regulations issued by Treasury and the IRS.
The new dates affect when FFI agreements go into effect, when withholding
starts, and account due diligence deadlines.
See the revised dates and timeline under Notice 2011-53
Read the original text of Notice 2011-53
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| April 8, 2011 |
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The IRS publishes Notice 2011-34, which follows up on Notice 2010-60. The notice
contains important provisions regarding passthru payments and the procedures for
checking existing individual account.
Read Notice 2011-34
Read our client letter on Notice 2011-34 |
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| August 27, 2010 |
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The IRS issues Notice 2010-60, its first round of published guidance concerning
foreign financial institutions and non-financial foreign entities.
Read Notice 2010-60
Read our client letter on Notice 2010-60 |
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| May 20, 2010 |
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The IRS issues Notice 2010-46, “Prevention of Over-Withholding and U.S. Tax
Avoidance with Respect to Certain Substitute Dividend Payments,” to address
provisions in IRC § 871(l) included in HIRE. The notice modifies Notice 97-66 on
an interim basis and revokes it entirely effective September 14, 2010. The
notice states that regulations will be issued generally providing withholding
relief for securities lending transactions conducted through a “Qualified
Securities Lender” (“QSL”) subject to IRS or QI audit. Transactions not
conducted through a QSL would be subject to a more cumbersome “credit forward”
system to allow relief for withholding earlier in a chain of securities lending
transactions.
Read Notice 2010-46
Read our client letter on Notice 2010-46 |
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| April 7, 2010 |
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The IRS issues Announcement 2010-22, requesting comments regarding “guidance
projects and issues concerning the interpretation and implementation” of FATCA.
Read Announcement 2010-22.
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| March 18, 2010 |
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President Obama signs HIRE into law.
Read the FATCA provisions of HIRE
as enacted |
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| March 17, 2010 |
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The Senate concurs with the House amendment and sends HIRE to the president. |
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March 4, 2010
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The House agrees to the Senate FATCA language and passes HIRE, but with
amendments to other parts of the bill. The bill goes back to the Senate. |
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| February 24, 2010
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The Hiring Incentives to Restore Employment (“HIRE”) Act passes the Senate,
incorporating and further refining the provisions that originated in FATCA. HIRE
gives the IRS more discretion to define what kind of information is required
from FFIs and what constitutes a “financial account” that may be subject to the
disclosure rules.
Read the FATCA provisions of HIRE
Compare the FATCA language in HIRE
with the FATCA language in Extenders
Compare the FATCA language in HIRE with
the original FATCA text
Read excerpts of the JCT Report on HIRE |
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| February 1, 2010 |
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The Obama Administration releases its 2011 Green Book. It includes proposals
that mirror FATCA, signaling that the Administration is abandoning the proposals
in its previous Green Book and endorsing FATCA.
Read excerpts from the 2011 Green Book |
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December 9, 2009 |
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The Tax Extenders Act of 2009 (“Extenders”), which includes the provisions that
originated in FATCA, passes the House of Representatives. Extenders makes
numerous small but significant changes to FATCA, including changing the
effective date to the beginning of 2013, broadening the ability of IRS
regulation writers to exempt certain kinds of payments and entities, and
introducing the idea of a “recalcitrant account holder,” an account holder who
refuses to cooperate with requests for information. Withholdable payments by an
FFI to a recalcitrant account holder are subject to 30% withholding, and the FFI
can elect to push the withholding obligation upstream to a withholding agent
from whom it receives the withholdable payment.
Read the FATCA provisions of
Extenders
Compare Extenders with FATCA
Read excerpts of the JCT Report on
the FATCA language included in Extenders |
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| October 27, 2009 |
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The Foreign Account Tax Compliance Act (“FATCA”) is introduced simultaneously in
the House (H.R. 3933) and Senate (S. 1934). Taking a very different approach
from the Green Book, FATCA introduces a new 30% withholding tax on “foreign
financial institutions” (“FFIs”) and “nonfinancial foreign entities” (“NFFEs”)
as a way to force the disclosure to the IRS of U.S. account holders and
investors. Taking a cue from the QI program, FATCA requires FFIs to enter into
an agreement with the IRS to disclose their U.S. account holders and follow due
diligence rules to avoid the 30% withholding tax. NFFEs are required to disclose
any U.S. owners with a greater than 10% interest or they, too, will suffer 30%
withholding. Withholding applies to “withholdable payments,” defined as U.S.
source income and gross proceeds from the sale of securities that could generate
U.S. source income. FATCA’s original effective date is January 1, 2011.
Read the original text of FATCA
Read the JCT Report on FATCA |
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| May 11, 2009 |
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The Obama Administration releases its first “Green Book” containing budget
proposals for 2010. The Green Book proposes a number of measures to combat tax
evasion by wealthy U.S. investors who operate through non-U.S. financial
institutions and investment structures. One proposal would require qualified
intermediaries (“QI”) to be treated as U.S. payors for Form 1099 purposes,
greatly expanding their tax reporting obligations. To drive investors toward
QIs, another proposal would require 30% withholding on all payments of U.S.
source income paid to nonqualified intermediaries (“NQIs”). NQIs in non-treaty
jurisdictions would be subjected to a further 20% withholding tax on gross
proceeds from the sales of securities.
Read excerpts from the 2010 Green Book
Read the Joint Committee on
Taxation (“JCT”) report on the 2010 Green Book cross-border proposals |
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