Round two of FATCA Guidance: Notice 2011‐34: what's new and what remains on the wish list for non‐US investment funds

Purpose – The purpose of this paper is to highlight areas of particular interest to non‐US investment funds in the second installment of the US Treasury Department's written guidance under the Foreign Account Tax Compliance Act (FATCA). Design/methodology/approach – The paper explains the background to FATCA and the Treasury Department's guidance on procedures for identifying US accounts among pre‐existing individual accounts, “pass‐thru payments” to “recalcitrant account holders” or non‐compliant foreign financial institutions (FFIs), FFIs deemed to be FATCA‐compliant, and centralized compliance options for certain affiliated groups of FFIs; explains next steps and offers future guidance. Findings – FATCA was enacted in March 2010 to ensure that there is no gap in the ability of the US government to determine the ownership of US assets in foreign accounts and to prevent offshore tax abuses by US persons – in particular to prevent a US person from escaping US tax liability by owning US assets through foreign accounts. Practical implications – Various industry groups are expected to press Treasury for guidance that would alleviate the FATCA burdens on widely held investment vehicles and funds that prohibit investment by reportable US account holders. In the interim, non‐US funds should begin to decide whether to permit reportable US account holders and to determine who will be responsible for performing the due diligence required to identify US account holders. Originality/value – The paper provides practical guidance from experienced financial services lawyers.