Industry Comment

Information Reporting Program Advisory Committee (IRPAC) view on FATCA

Tuesday, November 01, 2011

Information Reporting Program Advisory Committee (IRPAC) has issued a report, as part of its annual report, addressing the current FATCA provisions.

The main areas covered in this report with regard to FATCA are:

• Short term debt

IRPAC recommended that interest, (including original issue discount), on short-term debt be excluded from the definitions of “withholdable payment” and “financial account” under FATCA, consistent with the terms and policies implemented by the exemption for such amounts under Chapter 3. This exemption will allow US Borrowers’ to preserve access to critical sources of funding

• Potential conflicts with foreign laws

IRPAC recommended that the IRS take into account the existence of legal constraints imposed on Foreign Financial Institutions under foreign law in a number of aspects and formulate guidance under FATCA.
 

• Notice 2011-53 Transitional relief

IRPAC recommended that the IRS issue further guidance that provides additional time for withholding agents to develop the required systems and provide rules for the identification of foreign financial institutions and procedures that withholding agents will be required to follow to verify an account holder is an FFI and its status as a participating FFI. IRPAC also recommended revising the forms to make them less confusing

• Due diligence requirements for existing accounts

IRPAC recommended that the account holder file searches for existing accounts be limited in scope to a reasonable number of calendar years prior to the date of the search.

Please click here to read the section of the report relevant for FATCA.