The IRS releases final regulations under FATCA (officially published January 28). The regulations consist of 544 pages of explanatory preamble and operative rules. Still to come are numerous additional items, such as the FFI agreement, details about the FFI registration portal, and revised Forms W-8 to identify account holders.

Read the final regulations
Read our client letter regarding the final regulations

Ireland signs a Model 1 Reciprocal FATCA Intergovernmental Agreement.

Read the Ireland IGA and the Irish government statement

The United Kingdom issues draft FATCA regulations and guidance notes under its IGA with the United States. While the draft regulations are a fairly straightforward translation of the US-UK IGA into British regulatory form (with the addition of anti-avoidance and penalty provisions), the draft guidance notes contain much more insight into how HMRC expects FATCA to be implemented. The UK also releases a summary of responses to its public consultation and a "frequently asked questions" document regarding privacy issues.

Read our client letter regarding the UK draft guidance.
Read the UK draft regulations, draft guidance notes, summary of consultation responses , and Privacy FAQs.

Treasury informally clarifies a press report about changes to the grandfathering rules that will appear in the final regulations. These changes go even beyond what Announcement 2012-42 provided.

First, the general grandfathering rule sunset date will be extended to December 31, 2013. In other words, the December 31, 2012, date in the proposed regulations will become December 31, 2013, in the final regulations. Accordingly, all definite-tenure obligations entered into in 2013 will be grandfathered.

Second, the rule in Announcement 2012-42 with respect to collateral posted to secure obligations under notional principal contracts ("NPCs") will be extended to all transactions (not just NPCs) where collateral is posted. Therefore, if the secured obligation is entered into before the end of 2013, payments with respect to the collateral would be grandfathered, even if the collateral is an obligation entered into or materially modified after 2013. Collateral substituted after 2013 would fall into this category.

Third, in the "opposite" case where the secured obligation is entered into after 2013 (and therefore is not grandfathered) but the collateral is a grandfathered obligation, payments with respect to the collateral itself will still be grandfathered because of the status of the collateral. The non-grandfathered status of the secured obligation is not relevant. The special rule for collateral is intended to extend grandfathering relief —not carve back the grandfathering rule for the collateral itself.

Treasury chooses not to make a formal announcement of these changes.

Denmark announces it has signed a FATCA IGA. The agreement is similar to the United Kingdom IGA and is also a Model 1 reciprocal agreement. The Danish agreement is accompanied by a Memorandum of Understanding ("MOU") that reporting with respect to securities registered with the Danish Central Securities Depository ("DCSD") should be done by the custodians who hold the securities on behalf of customers, and not the DCSD (although the DCSD may do that reporting on behalf of the custodians if it wishes to do so). This is the first instance of a memorandum of understanding to accompany an IGA.

Read the Danish IGA and the MOU

Treasury releases Model 2 of the FATCA IGA. Model 2 requires that financial institutions report directly to the IRS, rather than their home countries as required by Model 1. While Model 2 is largely consistent with Model 1 and the IGA concluded with the United Kingdom, it contains a number of novel features, particularly for collective investment vehicles. Treasury also puts revised Model 1 agreements on its website, but makes no public announcement about the update. The update to Model 1 reflects most of the new features found in Model 2.

The U.S. Treasury announces that more than 50 countries are in discussions regarding IGAs. Only 17 are expected to have signed IGAs by the end of 2012, however.

The IRS publishes Announcement 2012-42, which postpones most of the deadlines under the proposed FATCA regulations, bringing those dates into line with the dates in the FATCA intergovernmental agreements (“IGAs”).  U.S. financial institutions, participating foreign financial institutions and reporting financial institutions in IGA countries now all must have new account procedures in place by January 1, 2014, must review preexisting high-value individual accounts by December 31 , 2014, and must review other preexisting accounts by December 31, 2015. The announcement also previews important guidance regarding how the grandfathering rules work for foreign passthru payments, derivatives and collateral.

Read our client letter on Announcement 2012-42
See Announcement 2012-42

The first signed FATCA Intergovernmental Agreement ("IGA") is announced with the United Kingdom. The agreement generally follows the reciprocal Model 1 agreement published on July 26. The UK IGA incorporate several new articles and the first example of a completed Annex II, listing entities and products that are exempt from FATCA.

The IRS releases a draft Form W-8EXP. Little of substance is changed on the form, but it incorporates the "checkbox" approach to capacity first seen on the draft Form W-8ECI.

The IRS releases a draft revised Form W-8ECI. The most noticeable feature of the new ECI form is the elimination of the line for the signer's "capacity," which often caused arguments on audit over whether a particular title was sufficient. In place of the capacity line is a simple checkbox where the signer certifies that he or she has the capacity to sign the form.

The IRS releases a draft revised Form W-8IMY. Although the draft is roughly what we expected, the IMY form includes a number of new features and as-yet unexplained items – and no instructions.

The United States and five other countries release two versions of the "Model 1" intergovernmental agreement ("IGA") under FATCA. The purpose of the IGA is to ease conflicts between local laws and FATCA. Model 1 is expected to be used for IGAs with France, Germany, Italy, Spain, and the United Kingdom. Other countries also might sign on to this model. One version of Model 1 calls for reciprocal information exchange between the U.S. and the partner country; the other version is non-reciprocal, requiring only that the partner country share information with the United States.

The IRS releases two unofficial drafts of forms to replace the current Form W–8BEN once FATCA goes into effect – concrete evidence of how dramatically the client onboarding process will change under FATCA. Both forms would be used to certify that the recipient of a payment of income is a non-U.S. person who is the beneficial owner of the payment. One of the forms is a slimmed-down Form W–8BEN designed solely for individuals. The other is new Form W–8BEN–E for entities.

The IRS holds a hearing on the proposed FATCA regulations. Twenty speakers give testimony to a mostly silent panel of IRS and Treasury personnel. The implementation timeline and proposed FATCA partnership agreements are among the most common themes in the testimony.

The IRS releases nearly 400 pages of proposed regulations under FATCA. The proposed regulations follow up on guidance previously issued in Notice's 2010-60, 2011-34 and 2011-53. IRS also releases joint statement indicating that it is pursuing FATCA partnerships with France, Germany, Italy, Spain and the United Kingdom. FATCA partnerships will help reduce or avoid local law restrictions on a foreign financial institution's ability to comply with FATCA.

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.

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.