FATCA information reporting of foreign financial assets by U.S. entities
The IRS released Notice 2013-10 which states that future final regulations for U.S. domestic entities to report information of their interests in specified foreign financial assets (pursuant to section 6038D as added to the Code by FATCA) will not apply earlier than tax years beginning after December 31, 2012.
Section 6038D was added to the Internal Revenue Code by the Foreign Account Tax Compliance Act (hereinafter “the FATCA provisions”) and requires any U.S. individual that holds more than $50,000 (in the aggregate) in reportable foreign financial assets to report information about the accounts and/or assets on the individual’s annual U.S. tax return (by including Form 8938, Statement of Specified Foreign Financial Assets, with the tax return). The reporting threshold increases (from $50,000) for married individuals filing a joint income tax return and for those individuals living outside the United States. Reportable foreign assets include:
- Foreign financial accounts
- An interest in a foreign entity
- Any financial instrument or contract held for investment and issued by a foreign person
This reporting requirement does not replace or mitigate the individual’s annual obligation to separately report to the Treasury Department foreign financial accounts aggregating $10,000 or more on Form TD F 90-22.1 (generally referred to as the “FBAR”).
The FATCA provisions also provided Treasury with authority to issue regulations that apply the provisions to any domestic entity as if the entity were an individual, if it is formed or availed of for purposes of holding specified foreign financial assets. Temporary and proposed regulations (issued in December 2011) provided guidance to individuals subject to the reporting requirements for specified foreign financial assets. The 2011 proposed regulations also set out the conditions under which a domestic entity will be considered a specified domestic entity and, therefore, required to report specified foreign financial assets in which the entity holds an interest. These measures were proposed to apply to tax years beginning after December 31, 2011.
Notice 2013-10 states that Treasury and the IRS intend to extend the effective date for affected domestic entities to report interests in specified foreign financial assets to December 31, 2012, when final regulations are issued.
Thus, reporting by domestic entities of interests in specified foreign financial assets will not be required before the date specified by final regulations, which will not be earlier than tax years beginning after December 31, 2012.
For your convenience, Rev. Proc. 2013-10.pdf (12KB) can be accessed by clicking on the link.
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