Under FATCA, an Event of Default (EOD) will occur if an Entity fails to perform required material obligations with respect to the due diligence, verification, withholding, or reporting FATCA requirements, or if the IRS determines that the entity has failed to substantially comply with its FATCA requirements.
After the deadline for submitting the FATCA Certifications, the IRS will review the list of entities that have been identified as requiring a FATCA certification for the certification period. This review will include identifying Events of Default for which a Notice of Default (or notice of termination) will be issued.
An Event of Default for which a Notice of Default may be issued by the IRS includes when the Entity:
- Failed to complete and submit a required FATCA certification by the due date.
- Indicated that it unable to complete and submit a required certification.
- Indicated it was not required to submit a certification, contrary to the requirement indicated by its FATCA classification, country/jurisdiction of tax residence, or registration of any branches or sponsored entities for which the Financial Institution needs to certify.
- Completed and submitted a certification that had a “failure to certify” result.
What will the IRS do?
- Request the entity to remediate the EOD within a specified amount of time.
- Take into consideration terms of Intergovernmental Agreements (IGA) and regulations, and among other factors, may deliver a notice of termination that will lead to termination of the entity’s FATCA registration and cause its GIIN to be removed from the IRS FFI List.
The Responsible Officer (RO) is “Responsible”
- The RO must answer and submit to the IRS to confirm the entities’ compliance with FATCA requirements.
- The RO must respond to an EOD notice and provide information responsive to an IRS request for information or state the reason why the RO does not agree that an EOD has occurred.
Entities may Request Reconsideration or may Appeal a Notice of Default
- An entity may request reconsideration of a Notice of Default by responding to the applicable notice in writing to the e-mail or mail address provided in the notice. A request for reconsideration must be submitted to the IRS before a notice of termination is issued.
- An entity may appeal a notice of termination by responding to the applicable notice in writing to the e-mail or mail address provided in the notice. An appeal of a notice of termination must be submitted to the IRS within 90 days of issuance of the notice of termination.
Failure to submit a notice of reconsideration or notice of termination within the time provided constitutes a waiver of the entity’s ability to request reconsideration of or to appeal the IRS’s determination
If an entity fails to remediate its EOD and does not appeal the IRS’ decision to terminate, the IRS will initiate the process of terminating the entity’s FATCA status in the FATCA registration system. The entity’s registration will be terminated and its GIIN will be removed from the FFI List. The FATCA Certifications that were due on July 1, 2020 have been extended by the IRS until December 15, 2020 due to the Covid 19 Pandemic.
Will you be ready? Do you have a U.S. FATCA Specialist that can assist you with an EOD? ©
