The IRS and Treasury Department announced on July 12 a six-month extension to the start of some withholding and account due diligence requirements under the Foreign Account Tax Compliance Act (FATCA) (P.L. 111-147). The extension will enable the U.S. to enter into FATCA agreements with more foreign jurisdictions, a Treasury official said during a conference call with reporters. An online FATCA registration site will open by August 19, 2013, the official added.

Phased Implementation

FATCA requires foreign financial institutions (FFIs) to report information about financial accounts held by U.S. taxpayers, as well as accounts held by foreign entities in which U.S. taxpayers hold a substantial ownership interest. The IRS issued final regulations in January 2013 (T.D. 9610). The final regulations provide for a phased implementation of FATCA beginning January 1, 2014, and continuing through 2017.

Extension

Under the extension, withholding agents generally will be required to begin withholding on withholdable payments made after June 30, 2014. Other key FATCA deadlines, including expected timelines for the implementation of withholding on gross proceeds from sales of U.S. securities and pass-through payment withholding, remain unchanged, the Treasury Department explained. The first report of information under FATCA continues to be due in 2015, and will include information about accounts maintained during 2014, the Treasury Department reported.

Intergovernmental Agreements

The U.S. has developed model intergovernmental agreements to implement FATCA. Under the first model agreement, FFIs report the information required by FATCA to their respective governments, which then provides this information to the IRS. Under the second model agreement, the foreign jurisdiction directs its FFIs to report the information required by FATCA directly to the IRS.

The intergovernmental agreements have been popular, the Treasury official reported. The U.S. has signed FATCA agreements with Mexico, Canada, the United Kingdom, Japan, Germany and a number of other jurisdictions. The six-month delay will not impact the momentum for negotiations with other counties, the Treasury official said. The official declined to predict how many more FATCA agreements will be signed during the extension.

The administration is confident that the intergovernmental agreements are within the department’s existing authority, the Treasury official said, in response to a question about whether FATCA authorizes the agreements. Earlier in July, Rep. Bill Posey, R-Fla., urged the Treasury Department to impose a moratorium on the negotiation of additional intergovernmental agreements pending review by lawmakers.

For more information about the final FATCA regulations, see our January International Tax Alert, Treasury Issues Final FATCA Regulations for Foreign Account Reporting.

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