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Proposed regulations under FATCA; goal of reducing taxpayer burden

Proposed regulations under FATCA

The IRS today released an advance version of proposed regulations (REG-132881-17) that are intended to simplify FATCA reporting and to reduce taxpayer burden.

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Specifically, the proposed regulations are being issued for purposes of:

  • Eliminating withholding on payments of gross proceeds
  • Deferring withholding on foreign passthru payments
  • Eliminating withholding on certain insurance premiums
  • Clarifying the definition of investment entity
  • Providing guidance concerning certain due diligence requirements of withholding agents and guidance on refunds and credits of amounts withheld

The proposed regulations [PDF 307 KB] were released for publication in the Federal Register in the afternoon of December 13, 2018, and with that action, are scheduled to appear in the Federal Register on December 18, 2018. Comments and requests for a public hearing are due by a date that is 60 days after December 18, 2018.

The purpose of this edition of TaxNewsFlash is to provide text of the proposed regulations. Initial impressions on these proposed regulations will be provided in a future edition of TaxNewsFlash.

Proposed effective date

Taxpayers may rely on the proposed regulations until final regulations are issued—except taxpayers may apply the modifications in the proposed regulations for all open tax years until final regulations are issued with respect to (1) the elimination of withholding on non-cash value insurance premiums, (2) the clarification of the definition of a “managed by” investment entity, and (3) the revised allowance for a permanent residence address subject to a hold mail instruction. 

The preamble continues to explain that concerning the revisions included in the proposed regulations that relate to credits and refunds of withheld tax, taxpayers may not rely on these proposed regulations until Form 1042 and Form 1042-S are updated for the 2019 calendar year.

Burden-reducing policies

The preamble to the proposed regulations explains that this release takes into account the burden-reducing policies described in Executive Orders 13777 and 13789 and the comments received. These regulations propose amendments to the regulations under chapters 3 and 4, including certain refund-related issues for which comments were received. The IRS and Treasury stated that they “continue to study other public comments.”

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