Additional FATCA Guidance Relevant To Private Investment Funds

Originally published on April 19, 2011

Introduction

On April 8, 2011, the Internal Revenue Service issued Notice 2011-34 (the "Notice"), which provides additional guidance regarding Sections 1471 through 1474 of the Internal Revenue Code (commonly referred to as the "Foreign Account Tax Compliance Act" or "FATCA"). Under FATCA, a private investment fund formed under the laws of a non-U.S. jurisdiction generally will be treated as a "foreign financial institution" (an "FFI") and will be required to enter into an agreement with the IRS (an "FFI Agreement") to comply with certain diligence, reporting and withholding obligations with respect to its account holders (i.e., the investors in the fund). An FFI that does not comply with FATCA will suffer a 30% withholding tax on any "withholdable payments" (as described below) that it receives. FATCA is generally not effective until January 1, 2013.