SECTION 4. UPDATES FROM

DRAFT FFI AGREEMENT

The FFI agreement contains a number of changes to provisions of the draft FFI agreement that needed to be corrected or further clarified.

First, several of the cross-references in the FFI agreement (notably, in section 2 of the FFI agreement) are modified in anticipation of the publication of two sets of temporary regulations to which the updated cross-references relate. One set of temporary regulations will provide further clarifications and modifications to the final chapter 4 regulations (temporary chapter 4 regulations), and a second set of temporary regulations will provide coordinating rules under chapters 3, 4, and 61 of the Code (temporary coordination regulations). Both sets of temporary regulations are expected to be published in early 2014. Second, the FFI agreement contains revisions to correct minor technical errors in the draft FFI agreement. For example, an incorrect reference to an escrow procedure due to a change in circumstances of an account holder or payee is removed. Similarly, the 30-day period for such change of circumstances in the draft FFI agreement is corrected to a 90-day period in the FFI agreement. The FFI agreement corrects section 6.05(A)(1) of the draft FFI agreement to remove the separate subsection for pooled reporting for a reporting

Model 2 FFI. The types of income previously described in section 6.05(A)(1)(ii) of the draft FFI agreement were not chapter 4 reportable amounts and would not be reported on Form 1042–S.

Third, revisions are made to further clarify the FFI agreement and conform it to the temporary chapter 4 regulations. For example, the terms chapter 4 withholding rate pool (including the U.S. payee pool) and chapter 4 reporting pool are defined and clarified. In addition, as contemplated in Notice 2013–69, the FFI agreement provides that, with respect to calendar years 2015 and 2016, participating FFIs that are required to report foreign reportable amounts paid to nonparticipating FFIs shall report this information on Form 8966. To the extent provided in section 6.04, a participating FFI may report all such payments made to nonparticipating FFIs.

Finally, the FFI agreement also provides for a 2-year transition period during which a reporting Model 2 FFI may elect to apply the due diligence procedures described in the FFI agreement in lieu of those in Annex I of an applicable Model 2 IGA and the FFI agreement is also revised to reflect that this election is made by the reporting Model 2 FFI and not the reporting Model 2 IGA jurisdiction.