SECTION 5. HIGHLIGHTS OF

AMENDMENTS TO THE FFI AGREEMENT

Section 6 of this revenue procedure sets forth the FFI agreement applicable to FFIs with agreements effective on or after January 1, 2017. The FFI agreement is updated to be consistent with the final and temporary chapter 4 regulations and to provide further clarification of certain of the requirements in the 2014 FFI agreement. The following provides a highlight of the changes to the 2014 FFI agreement.

Under the final chapter 4 regulations, a U.S. branch of an FFI that is treated as a U.S. person (as defined in §1.1441– 1(b)(2)) is not required to be part of an FFI that is a participating FFI or registered deemed-compliant FFI when it is acting as an intermediary. Additionally, a U.S. branch that does not agree to be treated as a U.S. person is not required to be part of an FFI that is a participating FFI or registered deemed-compliant FFI if the branch, when acting as an intermediary, applies the rules in §1.1471–4(d)(2) (iii)(C). Section 1.1471–4(d)(2)(iii)(C) of the final chapter 4 regulations provides that such U.S. branches must report their U.S. accounts and accounts held by owner-documented FFIs under §1.1471– 4(d)(3), (d)(5), or (d)(6) and apply the withholding and due diligence rules in §1.1471–4(b) and (c)(2) to all of its accounts as if the U.S. branch were a participating FFI. Although such U.S. branch applies certain rules in §1.1471–4 as if it were a participating FFI, it is unnecessary for the U.S. branch to be registered and to agree to the terms of the FFI agreement. Accordingly, the FFI agreement removes the provisions on U.S. branches that were in the 2014 FFI agreement. See the preamble to the final chapter 4 regulations for a more detailed explanation of the changes to the regulations that apply to U.S. branches.

Section 1.02 of the FFI agreement is revised to clarify that a reporting Model 2 FFI does not need to apply the FFI agreement to all branches of the reporting Model 2 FFI, unless the reporting Model 2 FFI has other branches that need to be covered by the FFI agreement to be treated as participating FFIs (in which case all branches of the FFI other than

branches that are reporting Model 1 FFIs or U.S. branches must be registered to agree to the terms of the FFI agreement).

Allowances in the temporary chapter 4 regulations for combined reporting on Forms 1042-S and 8966 following a merger or bulk acquisition of an FFI’s accounts are incorporated by crossreference to such regulations in sections 6.02(B)(2) and 6.05(F) of the FFI agreement. Additionally, rules in the temporary chapter 4 regulations that clarify information reported by participating FFIs that are partnerships on Form 8966 on financial accounts held by their partners are added by cross-reference to such regulations in section 6.02(B) of the FFI agreement. In sections 8.03 and 8.04 of the FFI agreement, the timing of certifications and the scope of IRS inquiries are updated consistent with the final chapter 4 regulations. A coordination rule for reporting on ownerdocumented FFIs in the final chapter 4 regulations is added in section 9.02(B)(5) of the FFI agreement, and section 9 of the FFI agreement is reorganized for clarity.

Several revisions are made to the FFI agreement to reflect the expiration of transitional periods that were provided for in the 2014 chapter 4 regulations. Sections 1.02, 4.02(C), 6.05(E), 9.01, and 11.01(A) of the FFI agreement are revised, and sections 7.04(A) and 11.01(C) of the FFI agreement are removed, to coordinate with the expiration of limited FFI and limited branch statuses on December 31, 2016. Sections 4.02(C), 6.05(E), 7.04, 11.01(B), and 11.02(B)(6) of the FFI agreement are modified to apply to related entities or branches (as defined in section 2.67 of the FFI agreement) of reporting Model 2 FFIs due to the expiration of the transitional period for limited FFI and limited branch statuses. Section 6.02(B) (2) of the 2014 FFI agreement (relating to reporting of payments on U.S. accounts) is removed to coordinate with the expiration of the transitional reporting rules for 2014 and 2015, and section 6.02(B)(3) of the FFI agreement is renumbered as section 6.02(B)(2) of the FFI agreement.

Section 4.01(A) of the FFI agreement is revised to clarify that a participating FFI is required to withhold on a withholdable payment to a payee that is (or is presumed to be) a passive NFFE that has

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not identified its substantial U.S. owners or certified that it has no substantial U.S. owners, as required under §1.1471– 3(d)(12)(iii), with respect to an offshore obligation that is not an account. In addition, section 6.02(A)(3) of the FFI agreement is revised to remove a reference to a trustee-documented trust subject to a Model 1 IGA because a participating FFI when acting as a trustee of a trustee-documented trust would report such trustee-documented trust to the applicable Model 1 jurisdiction, not the IRS.

Additional revisions are made to the FFI agreement to correct and clarify certain provisions applicable to reporting Model 2 FFIs. In section 2.62 of the FFI agreement, the definition of a preexisting account is modified to include the definition of the term from the Model 2 IGA that is applied by a reporting Model 2 FFI. Under the 2014 FFI agreement, a reporting Model 2 FFI may apply the due diligence procedures in the FFI agreement or the procedures in Annex I of the applicable Model 2 IGA for the two year period after an applicable Model 2 IGA has been signed without being bound to such procedures. Section 3.01 of the FFI agreement is revised to extend such period to two years from the date the applicable Model 2 IGA enters into force (rather than the date of signature), but only with respect to accounts for which the due diligence procedures commenced prior to entry into force of the applicable Model 2 IGA.

The presumption rules for reporting Model 2 FFIs for entity accounts are updated in section 3.04(C) of the FFI agreement. Section 3.04(C) of the 2014 FFI agreement provides that, to the extent a reporting Model 2 FFI applies the due diligence procedures described in Annex I of the applicable Model 2 IGA, such FFI must apply the procedures of Annex I of the applicable Model 2 IGA to treat the account as held by a nonparticipating FFI or as a non-consenting U.S. account. Section 3.04(C) of the 2014 FFI agreement also provides that, with respect to a withholdable payment made to an entity payee, a reporting Model 2 FFI must apply the presumption rules of §1.1471– 3(f). A comment to the 2014 chapter 4 regulations suggested that an undocu

mented entity account should be treated as a non-consenting U.S. account and should not be subject to withholding. The Treasury Department and the IRS do not agree with this suggested treatment of undocumented accounts. Under Annex I of the Model 2 IGA, reporting Model 2 FFIs must apply the due diligence procedures described in Annex I to document the status of their account holders under the IGA as U.S. accounts, non-consenting U.S. accounts, or nonparticipating FFIs, and if such procedures are applied, cases in which an entity account is undocumented should not arise. If a reporting Model 2 FFI does not have information in its possession or that is publicly available based on which it can reasonably determine the status of an entity account holder, the FFI must obtain a selfcertification to establish the status of such entity (or in some cases, a selfcertification to establish the status of the controlling persons of a passive NFFE) consistent with Annex I of the applicable IGA. In cases where a reporting Model 2 FFI acts as an intermediary for a withholdable payment that is allocated to an entity account and is unable to document the account by obtaining such information or self-certification consistent with the procedures described in Annex I of the applicable IGA, the chapter 4 regulations and the FFI agreement provide presumption rules for withholdable payments made to such account (and if an FFI has many such undocumented accounts, the U.S. Competent Authority may determine that the FFI is significantly non-compliant with the requirements of the IGA). In such cases, the reporting Model 2 FFI must apply the presumption rules in §1.1471– 3(f) to treat such entity account as a nonparticipating FFI and provide sufficient information to the upstream withholding agent to withhold on the payment (or, if such reporting Model 2 FFI is a WP, WT, or a QI that assumes primary withholding responsibility on the payment for chapters 3 and 4, the WP, WT, or QI must withhold). Treating undocumented entity accounts as accounts of nonparticipating FFIs, and withholding on them accordingly, is consistent with the approach of the IGAs, which contemplate that nonparticipating FFIs remain subject to with

holding on withholdable payments received through a reporting Model 2 FFI.

The 2014 FFI agreement provides that a reporting Model 2 FFI may document account holders and payees with documentation that meets the requirements under Annex I of an applicable Model 2 IGA. However, the due diligence procedures in Annex I of the Model 2 IGA permits a reporting Model 2 FFI to rely on certain publicly available information to document certain account holders. Section 3.03(B)(2) of the FFI agreement is revised to cover publicly available information used to document an account, and provides that a reporting Model 2 FFI may rely on such information, to the extent permitted in Annex I of an applicable Model 2 IGA, until the date there is a change in circumstances that affects the account holder’s claim of chapter 4 status.

The FFI agreement includes new procedures for final certifications of compliance upon a termination of the FFI agreement. An FFI must provide to the IRS within six months of the date of termination a certification of compliance covering the period from the end of the most recent certification period (or, if the first certification period has not ended, the effective date of the FFI agreement) to the date of termination, irrespective of whether a periodic review has been completed for such period. The FFI agreement is also revised to make clear that an FFI’s obligations under the FFI agreement with respect to the period covered by the agreement when it was applicable will survive termination of the agreement. This revision is consistent with the QI, WP, and WT agreements, which provide that a termination of a QI, WP, or WT agreement does not affect the entity’s reporting, tax filing, withholding, depositing, or payment responsibilities arising in the calendar years for which the QI, WP, or WT agreement was in effect, including the pre-termination portion of the calendar year during which the termination occurred.

If a jurisdiction that is not treated as having an IGA in effect is later treated as having a Model 1 IGA in effect, each participating FFI (other than a participating FFI that is a branch) in such jurisdiction should modify its registration on the FATCA registration website to reflect an updated chapter 4 status consistent with

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including with respect to due diligence, reporting, and withholding, by applying the rules set forth in this agreement (applied by substituting the term “reporting Model 2 FFI” for “participating FFI” throughout the FFI agreement, except where the provisions of the FFI agreement explicitly refer to a reporting Model 2 FFI).