Tax Update: IRS Trims Back FATCA

On December 13, 2018, the Internal Revenue Service issued proposed regulations that eliminate certain types of withholding under Sections 1471-1474 of the tax code, which are commonly referred to as FATCA.  Under the proposed regulations, gross proceeds from the sale or other disposition of an asset will not be subject to FATCA withholding, and passthru payments will not be subject to FATCA withholding any earlier than two years after the publication of final regulations that define the term "foreign passthru payment."  The proposed regulations also eliminate FATCA withholding on certain insurance premiums and provide other helpful guidance.

The purpose of FATCA is to reduce U.S. tax evasion by requiring certain "foreign financial institutions" to report information about U.S. holders of their non-publicly traded debt and equity interests and other "financial accounts," and requiring certain other foreign entities to disclose information about their substantial U.S.