IRS yesterday issued Notice 2011-53. This Notice is the third that addresses the US law that was enacted back in March 2010 - the Hiring Incentives to restore Employment Act. Title V of that Act was about making sure that Americans could not hide assets
in foreign bank accounts and essentially evade US tax laws.
Title V has become more commonly known as FATCA in the industry and its provisions have been the subject of hot debate and lobbying both by the industry and more recently by governments.
The prior two Notices, 2010-60 and 2011-34 outlined the way in which the IRS expects to implement the law. These are the basis for "final regulations".
However, IRS does not have much room to manoeuvre as the deadline for the regulations to start (Jan 1st 2013) was embedded in the Statute.
Many banks, brokers, funds and others affected by the impending regulations had lobbies hard on everything from "repeal it" to requests for "carve outs or limited exemptions. More recently, there have been calls for some kind of phased implementation to
allow firms to assess the nature and scope of changes they need to make both to client facing procedures such as account opening, to back office systems which, in some cases, may need to be re-built.
Notice 2011-53 released yesterday evening essentially spreads the implementation period out across 2013 to 2015 with different bits of the regulation coming into force at different times.
For those who still believe that this is some arcane backwater of regulation that has no real interest value, remember that, under these new regulations, if an account holder fails to provide required documentation (recalcitrant accounts), the account would
be withheld 30% on dividends, interest AND gross proceeds. If the account holder is prepared to suffer this punitive penalty, the regulations also provide for the account to be closed by the financial institution. No small impact then and something everyone
needs to get their head around.