PEGCC Comment Letter on Proposed FATCA Regulations
Letter: “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.”
Washington, D.C., April 30, 2012 – Today the Private Equity Growth Capital Council filed comments on proposed regulations for the implementation of the Foreign Account Tax Compliance Act (FATCA). The FATCA legislation requires that Foreign Financial Institutions (FFI) enter into reporting agreements with the IRS and provide the IRS with relevant information. The PEGCC is interested in the FATCA regime because many of our member firms have many entities in their funds families that are expected to become participating FFIs.
The PEGCC supports FATCA’s overarching policies of ensuring transparency and compliance with the tax laws, and the PEGCC is committed to working with regulators to further those policies. The comment letter addresses areas where the FATCA regulations could be streamlined to achieve the regulatory goals more effectively and reduce burdens on private equity firms. A central goal of the comment letter to is encourage regulators to create a centralized compliance option for investment fund families. The PEGCC recommends that the regulators change the proposed rule to:
-allow fund families to enter into FFI agreements on a consolidated basis, where one entity (the “Compliance Member”) is authorized by other entities within the family to act on their behalf and to bind them all to the terms of a single FFI agreement;
-allow the Compliance Member to comply with the FATCA reporting requirements on behalf of the members of its group on a centralized basis, such that the Compliance Member would interact directly with the IRS on behalf of the group and would take legal and financial responsibility for the group’s compliance with FATCA;
-not require investment funds (particularly private equity funds, which are subject to practical and legal constraints regarding the redemption of their investors’ interests) to incur the potentially severe financial hardship of redeeming investors that are recalcitrant account holders as a condition of avoiding a default under an FFI agreement, but rather use alternative means of incentivizing investors not to become recalcitrant account holders;
-rationalize the rules for information reporting in tiered partnership structures and adapt them better to investment fund structures; and
-integrate FATCA reporting for partnerships with current obligations of some foreign partnerships to file Form 1065 and related Schedules K-1.
“The PEGCC fully supports FATCA’s overarching policies of ensuring transparency and compliance with the tax laws, and we are committed to working with the Treasury Department and the IRS to further those policies. There are, however, several aspects of the recently issued proposed regulations under FATCA that we believe should be revised to make the implementation of FATCA more administrable without impacting its substantive goals,” said PEGCC President and CEO, Steve Judge in the letter. “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.”
About Private Equity
The private equity industry in the U.S. comprises nearly 2,400 investment firms. They operate nearly 14,800 U.S.-based businesses in all 50 states and all Congressional districts. These companies employ approximately 8.1 million people. In 2010 alone, U.S. private equity firms invested nearly $150 billion in over 1,200 U.S.-based companies. The private equity industry has distributed over $1 trillion to its limited partner investors over the past three decades.
About the Private Equity Growth Capital Council
The Private Equity Growth Capital Council (PEGCC) is an advocacy, communications and research organization and resource center established to develop, analyze and distribute information about the private equity and growth capital investment industry and its contributions to the national and global economy. Established in 2007 and formerly known as the Private Equity Council, the PEGCC is based in Washington, D.C. The members of the PEGCC are 34 of the world’s leading private equity and growth capital firms united by their commitment to growing and strengthening the businesses in which they invest. More information about the PEGCC can be found at www.pegcc.org.
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