1 Chapter 4 of subtitle A of the Internal Revenue Code of 1986, introduced as part of the Foreign Account Tax Compliance Act of 2009 (commonly known as FATCA).
2 They also include Australian banks and ADIs and some insurers. See sections 1471(d)(4), 1473(5), 7701(a)(30) and 1471(d)(5) of the Code.
3 Section 475(c)(2) of the Code defines a 'security' to mean any: '(A) share of stock in a corporation; (B) partnership or beneficial ownership interest in a widely held or publicly traded partnership or trust; (C) note, bond, debenture or other evidence of indebtedness; (D) interest rate, currency, or equity notional principal contract; (E) evidence of an interest in, or a derivative financial instrument in any security described in subparagraph (A), (B), (C) or (D) or any currency, including any option, forward contract, short position, and any similar financial instrument in such a security or currency; and (F) position which – (i) is not a security described in subparagraph (A), (B), (C), (D), or (E), (ii) is a hedge with respect to such a security, and (iii) is clearly identified in the dealer's records as being described in this subparagraph before the close of the day on which it was acquired or entered into (or such other time as the Secretary may by regulations prescribe).'
4 Proposed regulations issued by the IRS clarify that an entity is engaged primarily in the business of investing, reinvesting or trading if the entity's gross income attributable to such activities equals or exceeds 50 per cent of the entity's gross income during the last three-year period ending on 31 December or, if shorter, since its establishment. See s1.1471-5(e)(4) of the Proposed Regulations.
5 Section 1472(d) of the Code, which defines a NFFE to be 'any foreign entity which is not a financial institution'.
6 Section 1471(a) of the Code.
7 Section 1471(b)(1). Under s1471(b)(2) of the Code, the IRS can treat certain FFIs as though they are participating FFIs ('Deemed-compliant FFIs'). The proposed regulations set out a number of categories of deemed-compliant FFIs, including retirement funds, non-profit organisations and 'qualified collective investment vehicles' that are FFIs that are regulated in their country of incorporation as an investment fund, only have investors with interests in excess of $50,000 that are participating FFIs, registered deemed-compliant FFIs, or certain US persons or exempt beneficial owners, and if the FFI is a member of an expanded affiliated group, all other FFIs in the group are either participating or registered deemed-compliant FFIs.
8 Section 1471(b)(3) of the Code.
9 See s1471(e)(2) of the Code. Generally, one or more chains of corporations connected through stock ownership with a common parent holding at least 50 per cent of stock by vote/value and partnership or other entities controlled (directly or indirectly) by other members of the group.
10 However, under proposed regulations, a two-year transitional period (until 1 January 2016) will apply under which an FFI affiliate in a jurisdiction that prohibits reporting or withholding required by Chapter 4 of the Code will not prevent other FFIs in the same group from entering into an FFI agreement subject to certain conditions. See s 1471(e) of the Code and also s1.1471-4 of the Proposed Regulations.
11 Section 1472(a) of the Code.
12 Section 1472(b) of the Code. Generally, a 'Substantial United States owner' is a corporation, partnership or trust where specified US persons (being any US person other than certain excepted entities, such as listed companies, REITs, banks and regulated investment companies) own (directly or indirectly) more than 10 per cent of the stock (by vote or value)/profits or capital interests/beneficial interests. However, where an investor is a financial institution by virtue of being engaged primarily in the business of investing or trading in securities etc, then any ownership by a specified US person will make that investor a 'Substantial United States owner'.
13 Sections 1471(f)(1) and 1472(c)(1)(D) of the Code.
14 Section 1474(b) of the Code.
15 See s1473(1)(A) of the Code, and also ss 1.1471-2(a) and 1.1473-1 of the Proposed Regulations.
16 Section 1473(1)(B) of the Code.
17 Section 864(b)(2) of the Code.
18 Section 1471(d)(7) of the Code and the Proposed Regulations.
19 Section 1471(d)(6) of the Code.
20 See s1.1471-2(b) of the Proposed Regulations.
21 Including the United Kingdom, France, Germany, Italy and Spain. Although Australia is not yet a party to these discussions, it is possible that it will enter into similar discussions with the US Treasury and IRS at some stage, since it is a party to a double-tax treaty with the U.S.

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