Industry lobbies for FATCA changes

The PEGCC is urging regulators to streamline the reporting requirements for fund managers subject to the Foreign Account Tax Compliance Act.

The Private Equity Growth Capital Council (PEGCC)  has sent a 12-page letter to US officials urging for changes to the Foreign Account Tax Compliance Act (FATCA). 

The private equity trade group is calling for more flexibility around firms' ability to deal with foreign investors unwilling or unable to meet FATCA requirements.  

The bill, signed into law in 2010, requires foreign financial institutions (FFI) to enter into reporting agreements with the Internal Revenue Service by 2014. FFIs could include foreign funds and domestic funds with foreign investors.

The main goal of the letter was to encourage regulators to create a centralised compliance process for firms. Currently FATCA calls for FFIs and all the holding companies that house investments to enter into separate agreements. 

The letter proposed that fund families (i.e., funds with multiple entities required to comply) be allowed to enter into FFI agreements on a consolidated basis where one entity is authorised by the others to act on their behalf, in effect binding them all to a single FFI. They also recommended allowing this entity to comply with the reporting requirements for the entire group.

“Given the enormous undertaking required to administer FATCA, we believe that it is imperative that the procedures under FATCA be streamlined without sacrificing the scope and accuracy of the information made available to the IRS,” said in the letter Steve Judge, PEGCC's president and chief executive. 

The PEGCC also lobbied on the behalf of non-compliant fund investors, defined as “recalcitrant account holders” or those who do not enter into an agreement with the IRS. The PEGCC asked for “alternative means of incentivising investors” rather than the current provisions of terminating the FFI agreement or having a FFI release an investor's interest in a fund.

The PEGCC backs FATCA’s overarching policies of transparency and compliance but wants the implementation to be more administrable, Judge added in the letter.